march 5, 2014 the senior living industry and capital markets today and tomorrow

March 5, 2014

THE SENIOR LIVING INDUSTRY

AND CAPITAL MARKETS

TODAY AND TOMORROW

1937:HJ Sims refinanced Broward County Roads

2013:HJ Sims financed over $1 Billion in the senior living industry – 40 communities in 25 states

HJ SIMS BANKING TEAM

William B. SimsManaging Principal

•40 years financing senior living at HJ Sims•Son of Company founder

R. Jeffrey Sands, Esq.Principal / General Counsel

•Joined HJ Sims in 1995•Co-leader of Sims banking team•Formerly Managing Partner of the Hartford,

CToffice of the law firm of Wiggin & Dana

Aaron M. RulnickPrincipal

•Joined HJ Sims in 1997•Co-leader of Sims banking team•Prior to joining Sims was with LeadingAge

(formerly AAHSA)•Based in Potomac, Maryland



Anthony LuzziPresident – Sims Mortgage Funding

•Has been with HJ Sims for 30 years•Started Sims Mortgage Funding in 1984 as FHA

Mortgagee

Kerrie J. TomasiewiczExecutive Vice President – Sims Mortgage Funding

•25 years of experience with FHA mortgage insurance programs

•Approved Underwriter under the MultifamilyAccelerated Processing (MAP) and LEAN programs

Andrew J. PatykulaSenior Vice President – Sims Mortgage Funding

•9 years experience with FHA mortgage insurance programs

•Formerly a Fixed Income Trader with HJ Sims

HJ SIMS BANKING TEAMRoderic L. RolettExecutive Vice President

•Joined HJ Sims in 1987•Has 28 years experience in the senior living industry•Prior to joining Sims, he was a Vice President with

AMBAC and a Financial Guarantee Officer at AetnaLife and Casualty

Mark LandrevilleExecutive Vice President

•Joined HJ Sims in 2011•More than 30 years experience in investment and

commercial banking, almost exclusively in the seniorliving field

•Based in Sims’ Bloomington, Minnesota office

Andrew NesiExecutive Vice President

•Joined HJ Sims in 2011•Specialist in health care banking•Prior to joining Sims, he had a 25 year career in

commercial banking, most recently managing Bank ofScotland’s national senior living practice


Robert D. GallSenior Vice President

•Joined HJ Sims in 2000•Has completed more than 30 non-profit and

forprofit senior living and long term care financingstotaling over $1 billion

•Based in Orlando, Florida office

Xan SmithSenior Vice President

•Joined HJ Sims in 2011•More than 15 years experience in the senior

living industry•Formerly was CFO of Moorings Park, Naples,

FL and CFO of Air Force Village, San Antonio, TX

•Based in Houston, Texas


Curtis KingSenior Vice President

•Joined HJ Sims in 2007•Has completed more than 20 senior living and

long term care financings•Provides structuring, analysis and valuation for

Sims’ proprietary originations

Kerry MoynihanVice President

•Joined HJ Sims in 2011•Provides analytical and processing support for

HJ Sims’ non-profit business•Formerly worked in senior living industry lending

group at Bank of Scotland•Based in Sims’ Orlando, Florida office


Tyler HochVice President

•Joined HJ Sims in 2013•Specializes in qualifying and structuring

opportunities and financial analysis•Previously was a Director with Oppenheimer & Co.•Based in Sims’ Bloomington, Minnesota office

Elizabeth SimsAssistant Vice President

•Joined HJ Sims in 2013•Previously was with Entergy, where she worked on

energy market models and valuing energy assetsof the company

•Formerly worked for Goldman Sachs in commodity operations and for JP Morgan Private Bank

•Daughter of Bill Sims


Brett P. EdwardsAssistant Vice President

•Joined HJ Sims in 2010•Specializes in credit analysis, structuring and

financialmodeling of proposed financings

Mackenzie WelchSenior Associate

•Joined HJ Sims in 2011•Specializes in analytical support for structuring,

modeling and credit analysis for Sims’ not-for-profitGroup

Kelsey LescopAssociate

•Joined HJ Sims in 2014• Provides analytical and execution support on financings• Formerly was a Research Analyst at Dealogic, LLC,

performing market surveillance and analysis

SIMS’ DISTRIBUTION SYSTEM

Broadening Our Distribution System

• Importance

- Lower costs of capital

- Ability to close financings while other underwriters struggle

- Ability to provide subordinate debt and/or preferred equity

- Lessen need for equity and/or fund raising to close financings


Broadening Our Distribution System – 2013

• New branch office in Puerto Rico

• New expanded office space in New Jersey – 15 years as HJ Sims branch

• Added 7 new income advisors to existing branch offices

• Hired our first Director of Overall Marketing, Shauna Reilly


• Theme – “The Outcome Is Income”• Emphasis on accredited investors• Educated income advisors

RESULTS

• Lower capital costs• More structural choices• Greater covenant flexibility• Enhanced liquidity in dire markets


2014 OUTLOOK

2014 OUTLOOK

The Overall Environment

Interest Rates

Senior Living Industry

2014 OUTLOOK

The Overall Environment

• Last year’s advice

• This year

- Not as favorable as last year but still strong

- Watch for more new supply of communities, higher construction costs, rising capital costs

Interest Rates

2014 OUTLOOK

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 300

1

2

3

4

5

6

Tax Exempt MMD Yield Curve (BAA)

MMD BAA (1/31/2014)

MMD BAA (1/31/2013)

Maturity (Years)

Yiel

d (%

)

Source: Thompson-Reuters Municipal Markets Data as of 2/10/2014

Over the past year the yield curve has steepened. The MMD (BAA) 5-year has increased ap-proximately 0.14%, and The 30-year maturity is up approximately 1.02%.

Interest Rates

2014 OUTLOOK

1/7/2

013

1/22/2

013

2/6/2

013

2/21/2

013

3/8/2

013

3/23/2

013

4/7/2

013

4/22/2

013

5/7/2

013

5/22/2

013

6/6/2

013

6/21/2

013

7/6/2

013

7/21/2

013

8/5/2

013

8/20/2

013

9/4/2

013

9/19/2

013

10/4/2

013

10/19/2

013

11/3/2

013

11/18/2

013

12/3/2

013

12/18/2

013

1/2/2

014

1/17/2

014

2/1/2

0141

2

3

4

5

6

TREASURY YIELDS vs. TAX EXEMPT BOND YIELDS

10 - Year Treasury Note Yield 30 - Year Treasury Bond Yield MMD - BAA MMD - AAA

Date

Perc

ent

Source: Thompson-Reuters Municipal Markets Data as of 2/10/2014

Interest Rates

2014 OUTLOOK

4/3/2

013

4/23/2

013

5/13/2

013

6/2/2

013

6/22/2

013

7/12/2

013

8/1/2

013

8/21/2

013

9/10/2

013

9/30/2

013

10/20/2

013

11/9/2

013

11/29/2

013

12/19/2

013

1/8/2

014

1/28/2

014($40,000)

($36,000)

($32,000)

($28,000)

($24,000)

($20,000)

($16,000)

($12,000)

($8,000)

($4,000)

$0

$4,000

$8,000

Municipal Bond Fund Flows

Interest Rates

2014 OUTLOOK

19461950

19541958

19621966

19701974

19781982

19861990

19941998

20022006

20102014

0

2

4

6

8

10

12

14

16

Year

Ave

rage

Yie

ld

Bond Buyer Index Since 1946

Interest Rates

2014 OUTLOOK

18001805

18151825

18351845

18551865

18751885

18951905

19151925

19351945

19551965

1970

0

1

2

3

4

5

6

7

8

9

10

U.S. Interest Rates from 1800 - 1970

U.S. Government (LT)

Commercial Paper (ST)

New England Municipals (LT)

Best Grade Corperates (LT)

Year

Perc

ent

Interest Rates

2014 OUTLOOK

2014 OUTLOOK

Senior Living IndustryEntrance Fee CCRCs

• Strong housing markets –

• Improvement in stable housing markets

• Limited new supply

• 89% average occupancy

STATE EXAMPLE

Florida Sinai Residences

North Carolina SearStone

Texas EdenHill

2014 OUTLOOK

Senior Living IndustryRental Independent Living

• Remains strong

• Older entrance age – could become younger with recovering economy

• More healthcare needed


• 78% lowest quartile

2014 OUTLOOK

Senior Living IndustryAssisted Living

• Remains strong

• More healthcare

• Some oversupply concerns in strong markets



2014 OUTLOOK

Senior Living IndustryMemory Care

• Strongest segment



• Concerns about high resident pricing combined with active new development

2014 OUTLOOK

Senior Living IndustryNursing Homes

• Steady Medicaid reimbursement with improving state economies

• Post acute care = generous reimbursement and quality care at lower costs than hospitals

• Many Certificate of Need states = little new constructionOther states = construction around rehabilitation and hospice services

• Average occupancy = 89%• Lowest quartile = 72%• Greater product and service differentiation than other senior

living segments.

2014 OUTLOOK

Summary

• The senior living market remains strong

• Capital costs are historically low

• The 2014 outlook is favorable

R. Jeffrey SandsPrincipal/General Counsel

HJ Sims

CASE STUDIES

SIMS RECAPITALIZES A $100 MILLION PORTFOLIO IN COLORADO

MacKenzie

• 2 properties in Denver Colorado area• Springs – 95 IL / 48 AL/ 26 ALZ• Ft. Collins – 95 IL / 26 AL / 26 ALZ• Financed originally in 2006

– $75M of Senior Debt– $22M of subdebt and equity from Sims

• Opened in September, 2008 (Lehman)

MacKenzie

• Venture Partner went bankrupt• Sims took over

– Negotiated restructure with lenders at discount– Arranged for $65M on new senior debt in a very

difficult market– Funded $3M of new equity

MacKenzie

• 2013– Projects reached 100% occupancy– Refinanced senior debt with Fannie Mae

• $73M @ 3.5%, IO for 2 years, 10 year term• Negotiated with Fannie to allow subdebt

– Raised $14M of subdebt to repay working capital and clean up accrued interest on old debt.

– Valuation has increased to $120M

MacKenzie

• Result– Creative capital structure– Lower cost of capital by 50%– Room to grow– Saved original investor’s capital and returns

SIMS RAISES $6.2 MILLION OF SUBORDINATE DEBT FOR A START-UP SENIOR LIVING COMMUNITY IN

SCOTT DEPOT, WEST VIRGINIA

• 88 Unit new Assisted Living Facility• Secondary Market outside Charleston, WV• Challenge – How to put subdebt behind a HUD

Construction Loan of $11M?

Cathcart

• Structure– Create a Holding Company and have Sims loan the

money to the holding company– Holding Company then contributes proceeds as

“equity” to HUD Borrower– HUD approved transaction

Cathcart

• Capitalized interest on the loan (protect fill up)• Kept interest rate low with step ups over time • Amortize from cash flow with minimum

payment schedule• Key point

– Sims already a HUD approved Borrower so HUD felt comfortable that if there was a problem Sims could step in

Cathcart

• Win / Win– Gave Cathcart access to “debtequity” at a

reasonable rate– Provided investors with a relatively low leveraged

loan on a solid asset at an attractive return

Anthony LuzziPresident

Sims Mortgage Funding

CASE STUDIES

Sims Mortgage Funding - The Commercial

• We are a subsidiary of HJ Sims that originates and underwrites HUD-insured loans for healthcare and senior housing; multifamily rental housing (market rate and affordable); and, hospitals.

• Over 70% of our lending activity is in the healthcare and senior housing space; about 50% of our multifamily activity is for affordable housing preservation.

• We’ve closed over $720 million in HUD-insured loans over the past 5 years, from New England to the West Coast.

• SMF personnel average about 20 years of service with the company – senior executives even longer. We’re a cohesive, experienced team that generates significant repeat business.

• We’re recognized by our peers as thought-leaders in our industry by serving in leadership positions in national trade associations and advocacy groups.

HUD-Insured Financing – The Overview

• HUD-insured financing has gained much popularity over the past five years, mostly on account of the “Three Ls”.

• Lehman Brothers – their collapse in September 2008 led to a severe depletion of capital across all lending sources; HUD remained active in the healthcare and housing spaces.

• Low interest rates – fueled by historically low 10-Year UST yields. Borrowers had been locking in rates on HUD-insured loans as low as 2.50% before mortgage insurance premiums; rates have increased, but remain under 4% for refinance loans and under 5% for construction loans. Low rates also drove a major push to refinance existing properties already insured by HUD, creating record levels of closings over the past few years.

• Lean Program – HUD created a uniform template to process and underwrite Section 232 healthcare and senior housing loans on a timely and predictable basis. Lean replaced the old, mostly inefficient model of having local HUD field offices approve deals that is still in use for the multifamily mortgage insurance programs.

The Year in Review- Athena Health Care Systems MA Portfolio

• Athena currently owns, operates and/or and manages 33 skilled nursing facilities (SNFs) containing about 4,200 beds; 18 are located in Connecticut, 12 in Massachusetts and 3 in Rhode Island. In June 2012, the company was rated # 33 by Provider in their “Top 50” nursing home management company rankings. Twenty-six of their facilities have HUD-insured loans.

• Athena acquired 5 SNFs in Massachusetts in December 2010; in order to meet seller’s timeframe to complete the sale, Athena obtained a $53 million, three-year bridge loan from a major commercial lender and $12 million in subordinate debt issued by HJ Sims.

• The financing plan was to take out the 2010 bridge debt with long-term, HUD-insured loans before the bridge loan matured.

• Since the subordinate debt was placed in service in 2010, at the time of the bridge loan closing, we had to be sure that it was structured to meet HUD’s requirements before we closed the HUD-insured loans.

• Key to Success - we created a mandatory redemption provision in the subordinate loan structure that allowed a partial prepayment of that debt at the closing of the HUD-insured loans in order to meet HUD’s requirements related to overall debt limits.

• The Outcome - we obtained $51,086,500 in HUD-insured loans under the Lean program to take out the bridge; approximately $950,000 in subordinate debt was prepaid to meet HUD requirements. The HUD-insured loans were underwritten at 80% of value; an aggregate 2.39 DSC; 32-year fully amortizing terms; and, annual cap ex at an average of $815 per unit.

• The balance of HJ Sims subordinate debt remains in place and is scheduled to be redeemed by its 2019 final maturity date.

The Year in Review- Athena Health Care Systems MA Portfolio

The Year in Review- Essex Plaza I

• Essex Plaza I is a 451-unit elderly housing rental property located in downtown Newark, NJ. It has a Section 8 Housing Rental Assistance Contract that runs for 20 years starting in 2011.

• It underwent substantial rehabilitation in the late 1970s that was financed with a HUD-insured loan that had to be restructured in 1999 on account of a downturn in market conditions.

• This resulted in an “A” loan that was insured by HUD and a “B” loan that was held by HUD. As long as the B loan remained outstanding, there were limitations on how much cash could be distributed. This negatively affected the investment returns to ownership.

• Key to Success: developing a refinancing that would incentivize the owners and maintain the Project as affordable.

• The Outcome - we underwrote a new HUD-insured loan at 80% of market value that prepaid the A and B loans, provided $2 million for capital repairs and reserves, and generated an equity take-out that was distributed to the principals.

The Takeaways

• Now just five years old, the Lean program for healthcare properties remains an excellent vehicle to refinance existing debt used in connection with acquisitions or repositionings. HUD has restored contact underwriting staff to improve processing times, and a new Handbook is imminent.

• HUD’s multifamily mortgage insurance programs can provide cash incentives for owners to preserve affordable elderly rental and multifamily housing, whether the projects are Section 202 properties owned by not-for-profit organizations, or other types of age-restricted or multifamily properties that are owned by for-profit entities and financed with or without HUD mortgage insurance.

• HUD is moving to make its housing mortgage insurance programs more Lean-like through its Multifamily Transformation Project which is underway in the Southwest and Midwest regions.

• The political and budgetary environment for 2014 should be less turbulent than it was last year: no government shutdowns or exhaustion of HUD mortgage insurance commitment authority are anticipated.

Essex Plaza I

Athena Massachusetts Portfolio: Berkshire, Southeast, Southshore and Tremont

Aaron RulnickPrincipalHJ Sims

CASE STUDIES

Case Study

Rivers of Grosse Pointe

Artist Rendering of The Rivers of Grosse Pointe

142(d) Tax-Exempt Bonds and Taxable Bonds for Start-up Rental CCRC

Rivers of Grosse PointeProject• New development rental CCRC located in Grosse Pointe Woods, Michigan

– 77 independent living apartments; 80 assisted living units; and 86 skilled nursing beds

• Project also had 40 independent living cottages under a condo structure outside of CCRC financing

• Owned and operator by an organization that operated two successful skilled nursing facilities in the Detroit Metro area

Financing• To comply with 142(d) bond regulations and to maintain tax-exempt status, must rent

20% (16 units) of the Independent Living units to individuals who earn less than 50% of the median annual income of the surrounding area (Detroit MSA)

• Total financing of $36,570,000 consisting of the following:– $17,230,000 - Tax-Exempt Series 2013A - First Mortgage Bonds– $10,000,000 – Taxable Series 2013B – First Mortgage Bonds– $9,250,000 – Equity Contribution

• > 25% -- Owner wanted low leverage• Project was over 50% complete at the time of financing

Rivers of Grosse Pointe

Financing Highlights• HJ Sims was able to find a successful financing solution despite three major

challenges with the financing after the POS was mailed in June 2013:

1. Detroit filing for bankruptcy in July 2013

2. Fed Reserve Chairman making Fed Tapering comments which started 6 months of bond sell offs

3. Only IL designated as set aside thus creating $10 million of taxable bondsto sell

• Sims sold approximately $10 million (or more than 35%) of the total bond issue to its retail investors.

Construction Progress at Closing

Rivers of Grosse Pointe at Closing of Financing

Case Study

Sims Works With 20-year Client to Refinance Existing Bank Debt and Secure Long-term Financing

Maple Knoll Communities

Background Information

• Founded in 1848, Maple Knoll Communities, Inc. (“MKC”) is a Ohio-based not-for-profit 501(c) (3) organization

• MKC is based in the Greater Cincinnati metropolitan area

• Operates two Continuing care retirement communities:– Maple Knoll Village located on 54 acres in Springdale, Ohio– The Knolls at Oxford located on 85 acres in Oxford, Ohio

• Provides other senior services including:– Sycamore Senior Center– Maple Knoll HomeHealth– Manages several Affordable Housing communities

• Serves on average approximately 630 seniors in its owned facilities and another 240 seniors in the affordable housing corporations that it manages.

• Approximately 615 full and part-time employees.

Maple Knoll Communities, Inc.

Maple Knoll Village

Knolls at Oxford

Maple Knoll CommunitiesLong-term Relationship

• Sims has been serving as MKC’s investment banker for 20 years– In 1993, Sims financed a major expansion to the Maple Knoll campus and then

financed phases I and II of the Knolls of Oxford campus in 1999 and 2002 respectively.

– In 2007, Sims financed incremental expansions at both campuses. – The 1999, 2002 and 2007 financings were all financed with letter of credit enhanced

variable rate bonds with a syndicate of banks. – In 2010, Sims served as financial advisor to MKC to extend a portion of its letters of

credit with the balance of the outstanding bank debt converted to bank qualified bonds.

• The 2010 financing also included a reorganization of the banking syndicate to include a total of six banks.

• Banking landscape continued to change after the financial crisis, some of the banks expressed the desire for repayment.

• In 2012, Sims again was engaged to secure alternative financing for the organization to address the expiration of its letters of credit and bank qualified bonds and to facilitate the repayment of the three banks that decided to exit the bank syndicate to reduce their portfolio exposure to senior living.

Financing Challenges:

• Need to refinance a portion of the bank debt created an opportunity for MKC to reduce its exposure to variable rate debt by issuing long-term fixed rate bonds.

• Although some banks sought repayment, there was still significant interest from other members of the bank syndicate to maintain a relationship with MKC.

• Keeping some level of bank debt lowered overall cost of capital; however, created intercreditor challenges with bank syndicate and bondholders

• Adding to the overall complexity of the capital structure, Sims was tasked with preserving the Bank Qualified status of part of the debt and wrapping a series of swap termination penalties into new swap agreements

• Additionally, there was a significant uptick in market rates as speculation regarding the reduction of quantitative easing and outflows from the municipal bond funds created widespread volatility


Financing Solution:

• Sims was able secure both retail and institutional buyers for the fixed rate bonds when many of the traditional institutional investors had limited cash to invest

• Many other institutions did not want to be involved with a hybrid financing structure that included any bank debt

• Sims was able to implement a sophisticated capital structure that achieved MKC’s financing goals through the issuance of:– $30.92 million of fixed rate bonds to repay the banks exiting the syndicate

and to lock into longer-term and stable capital– $36.0 million of a combination of direct bank purchased bonds and a taxable

loan to secure a lower overall cost of capital– Structure also preserved MKC ability to re-issue up to $29.185 of bank

qualified bonds as part of its overall bank financing

• Sims also worked with the banks to structure a new replacement swap with a 7-year term to match the new term of the direct bank purchase bonds without requiring any cash termination payment to be funded by MKC


Mark LandrevilleExecutive Vice President

HJ Sims

CASE STUDIES

$47,795,000*City of Rochester, Minnesota

Health Care and Housing Facility Revenue BondsSeries, 2013A & 2013B

(The Homestead at Rochester, Inc. Project)

Sims Conference 2014

Overview

Facility Site

Overview

• State-of-the-art existing facility located on 7.8 acres in Rochester, MN called “The Homestead at Rochester” sponsored by Volunteers of America National Services

• CCRC Opened in 2006

• 77 Independent units with options for either entry fee or rental plans

• 44 Assisted Living units

• 16 Memory Care units

• Premier market area – city population of approx. 110,000 – MSA population of 210,000

• Located only 6 miles from the Mayo Clinic – largest medical center in the world

• Strong historical occupancy – Independent Living: 98.6%, Assisted Living: 92.2%, Memory Care: 98.1% (2013)

• 2013 historical DSCR of 1.71x

• Emphasis on expanding higher margin revenue opportunities

Overview

Overview

Fiscal Year Ended June 30,

2011 2012 2013

Average occupied units or beds:

Independent Living 100.0% 100.0% 98.6%

Assisted Living 93.3% 95.1% 92.2%

Memory Care 97.1% 97.3% 98.1%

Historic Utilization

Independent Living Expansion• Expansion will include 52 independent units: 46 one bedroom and 6 two bedroom

– One bedroom units will range from 760 – 1,140 sq. ft. – entry fees range from $36,480 - $54,720 with entrance deposits and $1,581 - $2,371 without entrance deposits

– Two bedroom units will range from 1,250 – 1,855 sq. ft. – rents range from $2,250 - $3,339 with entrance deposits and $2,600 - $3,858 without entrance deposits

• Projected distribution of entrance fee and non-entrance fee units are est. at 67% & 33%, respectively

• The Independent Living Units will not be state licensed for home care and any care that residents may request will be provided through state licensed home health agencies

• Median home sale price in Rochester - $168,000 w/ 65 avg. days on market (July 2013)

Skilled Nursing - TCU Expansion

• Project will include 56 skilled nursing beds that will be located in a separate building• No existing skilled nursing beds on campus• Medicare & Medicaid Certified• Right to operate the skilled nursing beds are being acquired through bed rights purchase

agreements with Eldercare of Minnesota, Inc. and Parker Oaks Communities, Inc. for a total of 46 beds

• Each wing of the Skilled Nursing building has been designed as a smallhouse/neighborhood model with most units opening onto the neighborhood. Each neighborhood also has its own individual dining area for the residents of that wing

Skilled Nursing Forecasted Payor Mix

Year End June 302015 2016 2017 2018

Private Pay 100.0% 56.2% 26.8% 26.8%

Medicare 0.0% 28.1% 50.0% 50.0%

Medicaid 0.0% 15.7% 23.2% 23.2%

Total 100% 100% 100% 100%

The Project

• The expansion will be approx. 140,400 sq. ft. and will have 52 independent living units and 56 skilled nursing beds. The Town Center will also be expanded. The Project unit mix is as follows:

Entrance Rent w/ Rent w/oIndependent Units Sq Ft Units/Beds Deposit Deposit DepositOne Bedroom 760 - 1,140 46 36,480-54,720 1,368-2,052 1,581-2,371Two Bedroom 1,250-1,855 6 60,000-89,040 2,250-3339 2,600-3,858Total/Weighted Avg. 944 52 $45,309 $1,699 $1,964

Skilled NursingPrivate 310-390 36Semi-Private 615-625 20Total/Weighted Avg. 453 56

Final Campus ConfiguraionTotal after

Existing Project ProjectIndependent Living UnitsOne Bedroom 24 46 70 Two Bedroom 53 6 59 Sub-Total 77 52 129

Assissted Living UnitsOne Bedroom 35 - 35 Two Bedroom 9 - 9 Sub-Total 44 - 44

Memory Support UnitsStudio 5 - 5 One Bedroom 11 - 11 Sub-Total 16 - 16

Skilled NursingPrivate - 36 36 Semi-Private - 20 20 Sub-Total - 56 56

Total Units 245

Overview

Proposed IL & SNF Project

Existing IL &AL

Existing HUD 202

The Project

Historic Statement of Revenues In Excess of Expenses

Company’s Historic Operating Data Year Ended June 30,

2011 2012 2013

Revenue (Net allowances) $4,013,000 $4,171,000 $4,208,000 Total Operating Expenses 3,462,000 3,362,000 3,716,000

Change in Net Assets 551,000 809,000 492,000 Add: Depreciation& Amortization 630,000 635,000 937,000 Interest 612,000 488,000 472,000 Net Operating Income Available

for Debt Service 1,793,000 1,932,000 1,901,000 Historic Debt Service $ 1,234,000 $ 1,109,000 $ 1,109,000 Historic Debt Service Coverage 1.45 1.74 1.71

Projected DSCR & Days Cash on Hand Analysis

Proforma Financial Summary Year Ended June 30,

2017 2018

Change in unrestricted net assets ($173,000) $24,000 Non-Cash Item Ad-backs:

Depreciation and amortization 1,759,000 1,695,000 Interest expense 3,216,000 3,215,000 Net Turnover Entrance Deposits 74,000 77,000

Net Income Available for Debt Service $4,876,000 $5,011,000

Add: Subordinate Mgmt Fee Component 294,000 301,000 Adjusted Income Available for Debt Service $5,170,000 5,312,000

Actual Annual Debt Service 3,213,000 3,213,000 Maximum Annual Debt Service 3,718,000 3,718,000 Actual Annual DSCR 1.52 1.56 Maximum Annual DSCR 1.31 1.35 Actual Annual DSCR – Subordinated Mgmt Fee 1.61 1.65 Maximum Annual DSCR – Subordinated Mgmt Fee 1.39 1.43

Daily operating expenses $32,000 $36,034

Days Cash on Hand 214 250

Final Sources & Uses of Funds

Sources of Funds: Par amount of Bonds $47,505,000 Less Original Issue Discount (699,000) Subordinated Note Payable (Land) 750,000 Interest Income on Trustee Held Funds 110,000 Company Cash 180,000 Total Sources of Funds $47,846,000 Uses of Funds:

Refunding of Prior Notes $17,783,000 Land 750,000 Construction Contracts 14,614,000 Architectural, Engineering, Survey, etc. 587,000 Development Contingency 511,000 Development Fee 777,000 Equipment and Furnishings 2,180,000 Marketing 374,000 City Expenses 323,000 Reserve Fund 3,610,000 Issuance Costs 1,116,000 Funded Interest on the Bonds 4,371,000 Bed Rights Acquisition Costs 795,000 Miscellaneous Costs 55,000 Total Uses of Funds $47,846,000

Sales Results Summary

MATURITY SCHEDULE

$1,000,000 3.375% Series 2013B Bonds Due December 1, 2017 – Price 100%, CUSIP 771906CW2

$4,110,000 Serial Series 2013A Bonds

Maturity Principal Amount

Interest Rate Price CUSIP

December 1, 2018 $515,000 3.625% 99.431% 771906CL6 December 1, 2019 535,000 4.125 99.340 771906CM4 December 1, 2020 555,000 4.500 99.404 771906CN2 December 1, 2021 580,000 4.875 99.180 771906CP7 December 1, 2022 610,000 5.125 99.108 771906CQ5 December 1, 2023 640,000 5.250 99.039 771906CR3 December 1, 2024 675,000 5.375 98.975 771906CS1

$8,265,000 6.375% Term Series 2013A Bonds Due December 1, 2033 – Price 98.608%, CUSIP 771906CT9 $2,550,000 6.500% Term Series 2013A Bonds Due December 1, 2035 – Price 98.559%, CUSIP 771906CU6 $31,580,000 6.875% Term Series 2013A Bonds Due December 1, 2048 – Price 98.371%, CUSIP 771906CV4

Institutional Sales: $29,550,000Retail Sales : $15,150,000Other: $2,805,000

NIC 6.87%

$31,910,000*City of Williston, North Dakota

Multifamily Housing Revenue BondsSeries, 2013

(Eagle Crest Apartments LLC Project)

Sims Conference 2014

Eagle Crest Apartments- Overview

Bakken Formation Information

Economic Impact Per Well over 28 years

Typical “Man Camp” Housing

Key Considerations

• Market & Demand Overview• Current vacancy rate for rental apartments in the PMA is near 0%• PMA population is expected to grow more than 100% between 2010 &

2020• PMA population increased by 19.2% between 2010 & 2012• Williston is in the center of the Bakken Formation • Williston Micropolitan Statistical Area was the fastest growing in the

U.S. in 2011 at 9.3%• Unemployment rate is 0.7% in Williams County• Est. absorption/capture rate of 3% over next 5 yrs – includes current &

forecasted development• Current AMI in Williams County is $72,100 vs. $52,762 for U.S.

Key Considerations - Continued

• Financial– Equity Contribution of $5,475,416 (includes cash for Operating Deficit Reserve Fund

and Deferred Developer Fee of $1,064,000)– Projected DSC of minimum 1.48x– Operating Deficit Reserve Fund $1,000,000 (Funded with developer equity)– Maximum Annual Debt Service Reserve Fund $2,948,869

Proforma Financial Information

2014 2015 2016 2017Net Income (Loss) (1,405,200)$ 824,100$ 949,400$ 1,113,100$ Add Back:Depreciation & Amortization 493,700 1,008,600 1,008,600 1,008,600 Interest Expense 2,197,900 2,405,000 2,405,000 2,370,500 Total Income Available for Debt Service 1,286,400$ 4,237,700$ 4,363,000$ 4,492,200$

Debt ServicePrincipal Payments -$ -$ 540,000$ 575,000$ Interest Payments 2,197,900 2,405,000 2,405,000 2,370,500 Funded Capitalized Interest (2,197,900) (1,290,000) - - Total Debt Service -$ 1,115,000$ 2,945,000$ 2,945,500$

Debt Service Coverage Ratio - 3.80 1.48 1.53

Eagle Crest Apartments-Market Overview

• Williams County - Primary Market Area – 2012 permanent population of approx. 27,000 – service population of approx. 51,000– 20.9% population growth from 2010-2012– Population expected to grow more than 100% between 2010 & 2020

• Largest increase in 25-44 & 55-74 yr old ages – most likely to rent their housing• Ages 25-34 est. to grow by 119% by 2020

– Located directly in the Bakken Oil Formation • Number of barrels of oil produced annually in the Bakken has increased from 618,852 barrels in

2000 to 215,490,552 in 2012, an increase of 34,721%• The number of oil wells has increased from 199 in 2000 to 5,128 in 2012, an increase of 2,477%.

As of April 2013, approx. 8,764 wells were in production, an increase of 482.1%• Bakken represents approx. 89% of oil production in the State of North Dakota

– Unemployment rate of 0.7%, compared to 2.8% & 7.6% in North Dakota & U.S., respectfully– Current AMI in Williams County is $72,100 vs. $52,762 for U.S.

• City of Williston– Permanent population of approx. 18,500 – service population of approx. 33,500– 20.9% population growth from 2010-2012– Williston Micropolitian Statistical Area was fastest growing in U.S. in 2011

Apartments Summary• 168 apartment units in four buildings:• Configuration & Fees per building:

– 5 one bedroom & two bath – $2,000 (unfurnished); $2,400 (furnished)– 32 two bedroom & two bath - $2,700 (unfurnished); $3,200 (furnished)– 5 three bedroom & two bath - $3,400 (unfurnished); $4,000 (finished)

• Unit Features– Bay windows & balconies– 9’ ceilings– Full-size in-unit laundry– Full kitchen appliance package w/ dishwasher & microwaves– Hardwood floors in kitchen, foyer and hallway– Walk-in closets

• Building Features & Amenities– Fully equipped exercise in each building– Lobby w/ fireplace– Elevators– Locker rooms on ground floor of each buildings with washrooms, full-height vented lockers, boot dryers

and commercial grade washer/dryer

Eagle Crest Apartments- Overview

Final Sources & Uses of Funds

Sources of Funds Par Amount of Bonds $31,910,000 Less Original Issue Discount (812,150) Land Contribution 2,885,000 Equity Contribution 1,318,283 Street Improvements Spent to Date 208,861 Deferred Developer Fee 1,064,000

Total Sources of Funds $36,573,994 Uses of Funds

Project Fund(1) $24,167,366 Capitalized Interest 3,370,852 Debt Service Reserve 2,937,675 Operating Deficit Reserve Fund 1,000,000 Costs of Issuance(2) 940,240 Land and Street Improvements to Date 3,093,861 Deferred Developer Fee(3) 1,064,000

Total Uses of Funds $36,573,994 _________________

(1) Includes construction, appliances, furnishing, owner’s contingency of approximately $200,000 and currently payable portion (20%) of developer fee payable at Bond closing.

(2) Includes Underwriter’s compensation that is payable on the date of issuance of the Bonds, certain legal fees and expenses, printing, appraisal fees, Trustee fees, Issuer fees and other certain other costs associated with issuance of the Bonds.

(3) Remaining 80% of Developer Fee is paid out of Project cash flow.

Sales Results Summary

• Sales Summary:– Institutional $24,370,000– Retail $7,540,000

• NIC: 7.925%

MATURITY SCHEDULE$5,440,000 6.250% Term Bond Maturing September 1, 2023; Yield 6.500%; CUSIP 970712 AA3$26,470,000 7.750% Term Bond Maturing September 1, 2038; Yield 8.000%; CUSIP 970712 AB1

Andrew NesiExecutive Vice President

HJ Sims

CASE STUDIES

Case Study

Mirabella

Debt Restructuring

Debt Restructuring – Mirabella

• Pacific Retirement Services—Medford, OR Based—Owns, Operates and/or Manages Over 50 Communities Primarily in

Washington, Oregon and California—Mirabella is an Upscale CCRC in Downtown Seattle

• Initial Move-in Pace Encouraging; Ultimately Not Sustainable Due to Sharp Decline in Seattle Real Estate Market and Spike in Local Unemployment

• For Mirabella to Survive Pricing Flexibility was Needed

• Most of Bank Group was Exiting or Cutting Back in Senior Living Finance

• Restructuring of $130 million in Debt Necessary. Sims Acted as Financial Advisor to PRS & Mirabella

Debt Restructuring – Mirabella

Keys to Success

• Negotiated Pricing Flexibility – Full Community at New Market Price Point Better Than Struggling Community Holding On To Prices From Another Time

• “Open Book” Financial Forecasting – Agree on Common Baseline Model From Independent Source; Various Scenarios Flow From Baseline

• Market Intelligence – Explore Multiple Refinancing Options and Update As Conditions Change

• Agree On Plan and Execute As Soon As Possible

Case Study

United Methodist Homes of New Jersey

Creative Refinancing

Background

• UMHNJ was Founded in 1907 and is One of the Largest Senior Living Providers in New Jersey

• In Order to Take Advantage of Low Short-Term Interest Rates UMHNJ Wanted to Finance Bond Principal Payments for the Next 7 years with a Bank Term Loan

• Challenge Was to Find a Bank Willing to Accept Master Trust Indenture Structure Rather Typical Bank Covenant Structure

• Sims Worked with Management to Canvas Local Bank Market and Received Competitive Term Sheets

• Bank Loan Closed Prior to Scheduled Bond Principal Payment with Interest Rate 2.00% Below Bond Rate



• Q1 2013 Interest Rates Were Broadly Trending Lower But Particularly for Investment Grade Borrowers

• UMHNJ Rated BB+ by S&P with Positive Outlook—No Change During Latest Annual Rating Review Despite

Strengthening Metrics and Improved Performance

• Based on Our Experience with Rating Agencies We Believed an Investment Grade Rating from Fitch Investors Was Possible

• Worked with Management in Preparing Rating Request, Participated in Site Visit and Follow Up Communications

• UMHNJ Received BBB- (Stable) Rating from Fitch

• Refinancing of UMHNJ’s High Interest Debt Will Save $5 million (Present Value Basis) Over Life of Bond Issue

Robert GallSenior Vice President

HJ Sims

CASE STUDY

Springs at South Biscayne

Tax-Exempt Bonds on a Senior and Subordinate Basis

Case Study


Project• New Development Assisted Living/Memory Care Community

– 95 Assisted Living units– 38 Memory Care units

• Located adjacent t0 the South Biscayne Church in North Port, FL• Approximately 107,000 square feet off of US 41 (Tamiami Trail)• City of North Port is located in Sarasota County in Southwest Florida

Sponsor• Omega Communities is the developer and owner of the Springs of South Biscayne and

specializes in the development of faith based senior living communities in affinity relationships with well established churches.

• South Biscayne Church, is one of the largest churches in the North Port area with a congregation over approximately 2,700 members.

• Omega surrounded itself with established service providers in the senior living industry with LCS Development (program management), Gilbane Building Company (general contractor), and Lawson Group Architects to assist in designing a premier senior living community.


Challenge• Received final construction contract to being marketing of bonds in mid-September 2013 • Bond market had been experiencing 17 weeks of outflows and 25 billion dollars at this time

causing liquidity and interest rate pressures• Needed to find a solution to meet interested institutions demand for less leverage

Financing• Utilized 20%/50% set aside for tax-exempt status of bonds under IRC 142(d)• Closed financing on January 31, 2014 on deadline of moratorium for reduced impact fees in the

City• Total financing of $30,100,000, consisting of the following:

– $21,800,000 - Tax-Exempt Series 2014A - First Mortgage Draw Down Bonds– $2,700,000 – Tax-Exempt Series 2014B – Subordinate Mortgage Bonds– $5,600,000 – Equity Contribution from the Borrower

Financing Highlight: The draw-down feature of the first mortgage bonds eliminated over $1.7 million of funded interest needed under a traditional fixed rate structure. In addition, the subordinate bonds enabled the project to reach certain credit metrics, helping to attract an institution to purchase the senior bonds on a draw down basis, limiting the need for the borrower to raise additional equity.

Ground Breaking of Springs at South Biscayne

Ground Breaking of Springs

Xan SmithSenior Vice President

HJ Sims

CASE STUDY

Case Study

Whitecliffs Senior Living

Bank Financing

White Cliffs Senior Living Background• White Cliffs is a 107 unit community consisting of 77 assisted living apartments

and 30 memory care units opening in the spring, 2014

Location• Kingman, Arizona a small city on the eastern edge of the Mojave Desert

approximately 85 miles southeast of Las Vegas, NV• Significant amount of retirees and snowbirds from the Northern states during the

Winter months

Developer• Link Development

—Oregon based development firm with a long standing history in senior living and multi family housing development

—Managed by Milestone Senior Living, headquartered in Vancouver, Washington which manages 18 communities in 9 states primarily in the western United States

—Experienced architect and general contractor—White Cliffs is a 107 unit community consisting of 77 assisted living

apartments and 30 memory care units opening in the spring, 2014

White Cliffs Senior Living

Financing Challenges• Small Market in a relatively remote area of Arizona• Local economy was hit hard during the recession

Market Opportunities• Very limited existing competition• Strong support for the project from the city• Site location is in close proximity to the local hospital system

Financing Solution• Using the HJ Sims specialized banking distribution team Sims found a bank that

was large enough to take on the full project and was able to understand the market opportunity

Bank Financing Terms• $ 12.1 Million Construction and Semi-Permanent loan equating to approximately

75% loan to cost• 30 month construction and interest only period followed by a 5 year term note

with a 25 year amortization• Interest only rate = 5.00%, Term note rate = 5.25%

march 5, 2014 the senior living industry and capital markets today and tomorrow

Documents

hj sims page

hj sims branch

sims bloomington

sims orlando

hj sims banking team

hj sims banking team

hj sims banking team

hj sims nonprofit business