Pacific Retirement ServicesStrategic Planning and Growth

Strategic Planning & GrowthPacific Retirement Services

§ 39 campuses§ 3,800+ units § 14 Market rate CCRCs§ 25 Affordable Housing

PRS Communities

2

West Coast Focus

§ Helping other not-for-profit retirement communities become successful through strategic repositioning and growth

§ Affiliations

§ Acquisitions

§ Development

§ Expansion

How Did PRS Grow Our Mission?

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§ Rogue Valley Manor (1955)§ Affiliations:

§ Trinity Terrace (1995)§ Cascade Manor (1996) § Holladay Park Plaza (1999)

§ Acquisitions:§ Capitol Lakes (2008)§ Middleton Glen (2008)

§ Development:§ University Retirement

Community at Davis (2000)§ Mirabella Seattle (2006)§ Mirabella Portland (2008)

Portfolio Growth

4

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1985 1990 1995 2000 2005 2010 2015

§ Community§ Opportunity§ Security§ Stability

Core Principles

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Affiliations

§ Customer has changed and we haven’t§ Occupancy dropping§ Deferred maintenance§ Financial challenges§ Covenant defaults

§ Operational challenges§ Operations vs. Marketing

§ Resident concerns§ Lack of economies

Similar Challenges

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§ Build a team committed to working together§ Operations§ Marketing§ Financing§ Development / Construction

§ Each community is unique§ Define the opportunities§ Put together a plan that is specific and

measureable

Similar Solutions

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§ Put together a well defined Strategic Plan § Include all stakeholders – residents, staff,

and board§ Empower the leadership to make change

and work the plan§ Continue looking ahead

Executing the Turnaround

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§ 4 of the Market Rate CCRCs are investment grade:§ Holladay Park Plaza: A§ Rogue Valley Manor: A-§ University Retirement Community at Davis: A-§ Trinity Terrace: BBB+

Overall Results From Turnarounds

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Case Study

§ Built in 1983§ Sponsored by the Presbyterian church§ Located on the west side of Fort Worth, TX§ Only entry fee CCRC in the market§ 4 year default history was known to

consumers§ 60% occupancy was scary to potential

purchasers

Affiliation with Trinity Terrace

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§ Financial default § Dated physical plant§ Poor reputation§ Market uneducated on CCRC concept§ Multiple contracts, rental - CCRC§ Lots of small apartments§ No air conditioning in the hallways

Challenges

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Opportunities

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§ Strong support from church sponsor§ Undeveloped land on the campus§ Self-managed since opening - no systems§ Apartment inventory availability§ Average entry fee about $75,000 non-

refundable§ 174 IL apartments, but only 40 two bedroom

or larger size units

§ Formed an obligated group with PRS to provided a balance sheet guarantee to secure reasonable debt terms

§ Banks offered to reduce debt load by $10 million in exchange for getting out

§ Worked with management staff§ Implement PRS Best Practices

§ Redesigned the campus§ Combine apartments to meet market demands§ Positioned campus to add more IL units

Solutions

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§ 80 new two bedroom and two bedroom den apartments (1,600 to 2,000 sf)

§ Addition of amenities including pool and fitness center, auditorium, marketing office and lobby.

The Second Tower (City Tower)

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§ 79 independent living units plus common areas§ 12 Brownstone, 45 IL Apts., and 22

Penthouse Apts. (up to 3,000 sq. ft)§ 15 healthcare private suites§ 9 assisted living apartments§ 17 memory care suites§ Underground parking (3 levels of parking) § ~325,078 total square feet§ New common areas

The Third Tower (River Tower)

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Trinity Tower (169 ILU) City Tower (80 ILU) Independent Living Consolidated

Strong and Stable Occupancy

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$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Net Income Available for Debt Service vs. Annual Debt Service

NIADS Annual Debt Service

0.01.02.03.04.05.06.07.08.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Debt Service Coverage Ratio

Strong Cash Flow & Debt Coverage

22

0

500

1,000

1,500

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Days' Cash on Hand

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Cash and Investment Balance

Unrestricted Cash and Investments Total Cash and Investments

Strong Liquidity Position

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§ Pay attention to the current market§ Understand your customer

§ Keep the facilities updated and marketable § Update your strategic plan and measure the

results§ Hire the expertise that you don’t have in house§ Make informed decisions about expansions§ Understand the financial impact of all decisions

before projects are approved§ Don’t wait to make necessary changes§ Celebrate change and continue to build your team

Lessons Learned

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Pacific Retirement ServicesStrategic Planning and Growth

Questions?