Visual effects of demographics and the housing cycle on the seniors housing and long-term care industry

1. Investment in the
Senior Living and
Long Term Care
Property Sector
Exploration of Risk and Return
The World Turned Upside Down

2. • Elaine Worzala, Professor and Director, Center for
Real Estate Development, Clemson University
o
• Judy Karofsky, President, Real Estate Insites,
LLC, Madison, WI
o
• Jeffrey A. Davis, Chairman, Cambridge Realty
Capital Companies, Chicago, IL
o
Funded by the
Real Estate Research Institute
2007 - 2008
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3. We are all
getting
older
Increasing
demand for
assisted living
We are
living
longer
Demographics
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4.  100,000
U.S. Population (in thousands)
80,000
60,000
40,000
20,000
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
65-74 75-84 85+
U.S. Population Over 65 U.S. Census Bureau
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5. 25.0%
% of Total U.S. Population
20.0%
15.0%
10.0%
5.0%
0.0%
00
10
20
30
40
50
60
70
80
90
00
10
20
30
40
50
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
65+ 85+
Growth of Population Over 65
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6. Housing
Increasing
demand
Personalized for
supportive
services assisted
living
Health
Care
Basic Human Needs
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7. Medicare
Women in
the
workforce
Increased
Divorce
demand for
rates assisted
living
Smaller
family size
Job
mobility
Legal/Societal Changes
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8. Recruitment
Increased
demand for
assisted living
Retention
Economic Development
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9. 19%
46%
18%
17%
Independent Living Units CCRC's Assisted Living Units Nursing Home Beds
Almost 4,000,000 Seniors
In professionally managed properties NIC
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10. Medical
Office
Hospitality
Multifamily
Hybrid Real Estate Type
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11. Age
Facility
Type
Region
Fragmented Industry
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12. Legal/ Variance
Location Physical Business
Attributes Political Dynamics in Cash
Model
Issues Flow
Variance in Cash Flow = Risk
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13. Proactive
management
Variance in
cash flow
Housing Services and
alternatives health care
Variance in Cash Flow = Risk
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14. Real Estate Considerations
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15. Area Competitive
market supply
Linkages
Location
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16. Need based
amenities
Lifestyle attractions
Physical Attributes
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17. Legal/Political
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18. Decision
Medical
Residents
professionals
Adult
Caregivers
children
Dynamics
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19. High-quality,
professional
staff and management
Labor cost
containment
and mitigation of
occupancy risk
Business Model
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20. Performance Benchmarks
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21. Data Sources
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22. 93.8%
Independent Living
90.7%
Assisted Living
94.0%
CCRC
92.9%
All Communities
2006
Median Occupancy Rates State of Seniors Housing
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23. Independent Living Only 95.0%
Independent and Assisted 95.7%
Assisted without Alzheimer's 93.3%
Assisted with Alzheimer's 94.4%
CCRC 90.7%
All Communities 94.4%
2007
Median Occupancy Rates State of Seniors Housing
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24. Independent Living Only 93.1%
Independent and Assisted 93.8%
Assisted without Alzheimer's 90.6%
Assisted with Alzheimer's 92.0%
CCRC 93.6%
All Communities 92.6%
2008
Median Occupancy Rates State of Seniors Housing
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25. 2007 2008
95.7%
95.0%
94.4% 94.4%
93.8%
93.6%
93.3%
93.1%
92.6%
92.0%
90.6% 90.7%
Assisted with Assisted Independent Independent CCRC All
Alzheimer's without and Assisted Living Only Communities
Alzheimer's
2007 - 2008
Median Occupancy Rates State of Seniors Housing
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26. 102.0%
All Stabilized Assisted Living Properties
100.0%
98.0%
96.0%
Median
94.0% Average
92.0%
90.0%
88.0%
4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08
Minneapolis-St. Paul Bloomington, MN-WI MSA
Occupancy Rates NIC MAP
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27. 100.0% All Stabilized Assisted Living Properties
98.0%
96.0%
94.0%
Median
Average
92.0%
90.0%
88.0%
86.0%
4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08
Kansas City, Minneapolis, St. Louis MSAs
Occupancy Rates NIC MAP
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28. 4th Quarter 2008
96.0% 94.0% 93.7%
93.1%
94.0%
92.0%
90.0%
88.0% 86.2%
86.0% 83.7%
84.0%
82.0%
80.0%
78.0%
Boston Minneapolis Houston Seattle Detroit
Assisted Living
National Occupancy Rates NIC MAP
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29. 55.9%
54.2% 55.1%
33.9%
31.1% 31.8%
2006 2007 2008
Independent Living Assisted Living
Turnover Rates State of Seniors Housing
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30. Assisted Living with Alzheimer's 17
21
All Assisted Living
38
Independent Living
77
CCRC
Months
Typical Length of Stay State of Seniors Housing
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31. Occupancy vs. Age
Assisted Living
93.0%
92.0%
91.0%
90.0%
89.0%
88.0%
87.0%
86.0%
85.0%
84.0%
2 to 10 Years Old 10 to 25 Years More than 25 Years
2007 2008
Median Occupancy Rates State of Seniors Housing
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32. Assisted Living Year End
100.0%
98.0%
100.0%
95.0%
88.2%
90.0% 85.3%
85.0%
80.0%
75.0%
Upper Quartile Lower Quartile
4Q2007 4Q2008
Overall Occupancy Decline NIC MAP
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33. $60,000
$57,614
$50,000
$40,000
$38,611
$38,402
Assisted with Alzheimers
$30,000 Independent and Assisted
Assisted without Alzheimer's
$20,000
$10,000
$0
2006 2007 2008
Median Total Revenue State of Seniors Housing
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34. $57,614
$55,545
$60,000
$49,576
$50,000
$38,402 $38,611
$37,206
$40,000 $34,911 $34,022
$32,212
$30,000
$20,000
$10,000
$0
Assisted with Independent and Assisted without
Alzheimers Assisted Alzheimer's
2006 2007 2008
Median Total Revenue State of Seniors Housing
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35. Minneapolis
$3,300
All Assisted Living Properties $3,232
$3,183
$3,200
$3,109
$3,091
$3,100 $3,061
$3,038 $3,038
$3,024
$3,000
$2,890
$2,900
$2,800
$2,700
4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08
Average Monthly Revenue
per Occupied Unit NIC MAP
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36. Minneapolis Metro Assisted Living
4th Quarter 2008
94.5% 94.7%
0.95
0.94 93.0%
0.93 92.1%
0.92
90.7%
0.91
0.9
0.89
0.88
Up to $2,470 $2,470 to $2,741 to $3,141 to $3,900 plus
$2,741 $3,141 $3,900
Average Unit Occupancy
by Revenue per Occupied Unit NIC Map
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37. $19,777
$20,000
$18,000
$15,956
$16,000
$13,423 $13,143
$14,000
$12,491
$11,795 Assisted Living with
$11,187
$12,000 $10,609 Alzheimer's
$10,000 $9,058 Assisted Living without
Alzheimer's
$8,000 Independent and Assisted
$6,000
$4,000
$2,000
$0
2006 2007 2008
Median Net Operating Income
Per Occupied Unit State of Seniors Housing
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38. $19,777
$20,000
$18,000 $15,956
$16,000
$13,423 $13,143
$14,000 $12,491
$11,795
$11,187
$12,000 $10,609
$9,058
$10,000
$8,000
$6,000
$4,000
$2,000
$0
Assisted Living with Assisted Living without Independent and
Alzheimer's Alzheimer's Assisted
2006 2007 2008
Median Net Operating Income
Per Occupied Unit State of Seniors Housing
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39. NOI vs. Age
$45.29 Assisted Living
50
$42.15
45
40 $34.01
$30.79
35 $28.84 $28.32
30
25
20
15
10
5
0
2 to 10 Years Old 10 to 25 Years More than 25 Years
2207 2008
Net Operating Income
Per Resident per Day State of Seniors Housing
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40. Observations
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41. Risky Business
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42. Real Estate Investment Mean “Risk”
Net lease properties 2.04
Warehouse market
Regional mall
Apartment market
Power retail center
Diversified public real estate investment trusts
Diversified private real estate investment trusts
Age restricted apartments (over 55)
Central business district offices
Strip mall
Flexible R&D
Private commingled real estate funds
Suburban offices
Senior housing specialized REIT’s
Real estate mortgage investment conduits
Senior housing independent living
Full service lodging
Licensed assisted living facility (stand alone)
Health care operating companies
Continuing care retirement communities
Extended stay lodging
Hybrid independent living and assisted living facilities
Skilled nursing facilities (primarily long-term care_
Skilled nursing facilities (subacute/short-term rehab)
Licensed Alzheimer’s/dementia facility 4.25
Alternative Risk Ratings
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43. What now?
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44. How can we get our balance back?
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45. Back to Basics
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46. 100,000
s)
thousand
80,000
60,000
High-quality,
lation (in
professional
40,000
staff and management
U.S. Popu
20,000
30 2040 2050
2010 2020 20
80 1990 2000
0 1950 1960 1970 19
20 1930 1940
1900 1910 19
75-84 85+
65-74
Labor cost
25.0%
Housing containment
% of Total U.S. Population
20.0%
15.0%
and mitigation
of
10.0%
occupancy risk
5.0%
0.0%
00
10
20
30
40
50
60
70
80
90
00
10
20
30
40
50
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
65+ 85+
Review
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47.  Dems power stimulus bill
through Congress
 Passage of $787 billion
legislation hands Obama
a critical political victory
A Gloomy Outlook for
Housing Home Sales’ Big Season
Dane County home
sales continue to slip
It’s about the Housing
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48. 1990-2008 Growth Rates
120.0%
100.0%
80.0%
60.0%
45.9%
40.0% 31.1%
20.0%
0.0%
-20.0%
Sales of existing single-family
homes, condos, and co-ops NAR
The World Turned Upside Down

49. 2000-2008 Growth Rates
30.0%
20.0%
10.0%
-7.6% -7.8%
0.0%
-10.0%
-20.0%
-30.0%
Sales of existing single-family
homes, condos, and co-ops NAR
The World Turned Upside Down

50. 2007-2008 “Growth” Rates
0.0%
-5.0%
-10.0%
-15.0%
-14.9%
-20.0% -19.2%
-25.0%
Sales of existing single-family
homes, condos, and co-ops NAR
The World Turned Upside Down

51. 1990-2008 Growth Rates
120.0%
100.0%
80.0%
60.0%
45.9%
40.0% 31.1%
20.0%
0.0%
-20.0%
Sales of existing single-family
homes, condos, and co-ops NAR
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52. Risk Mitigation
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53. The World Turned Upside Down

54. 1,380 Assisted Living Units
11%
25%
Efficiencies
64% One bedroom
Two bedroom
Unit Mix
Madison MSA NIC MAP
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55. 3,826 Assisted Living Units
7%
32%
Efficiencies
54% One bedroom
Two bedroom
Unit Mix
Milwaukee MSA NIC MAP
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56. Madison Milwaukee
7%
11%
32%
25%
54%
64%
Efficiencies One bedroom Two bedroom Efficiencies One bedroom Two bedroom
Unit Mix NIC MAP
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57. 1,291 Assisted Living Units
4%
17%
33%
1970's
1980's
1990's
46% Since 2000
Segment Opening Year
Madison MSA NIC MAP
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58. 3,719 Assisted Living Units
3%
8%
29%
20% 1960's
1970's
1980's
1990's
39% Since 2000
Segment Opening Year
Milwaukee MSA NIC MAP
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59. Madison Milwaukee
1960's
3%
8% 1970's
4%
29%
1970's 20% 1980's
33% 17%
1980's
1990's
1990's
46% Since
Since 2000 39%
2000
Segment Opening Year NIC MAP
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60. The World Turned Upside Down

61. First Impressions
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62. The nicest
people are
here
Fully Integrated Marketing
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63. Lasting Impressions
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64. Real Estate Investment Mean “Risk”
Net lease properties 2.04
Warehouse market
Regional mall
Apartment market
Power retail center
Diversified public real estate investment trusts
Diversified private real estate investment trusts
Age restricted apartments (over 55)
Central business district offices
Strip mall
Flexible R&D
Private commingled real estate funds
Suburban offices
Senior housing specialized REIT’s
Real estate mortgage investment conduits
Senior housing independent living
Full service lodging
Licensed assisted living facility (stand alone)
Health care operating companies
Continuing care retirement communities
Extended stay lodging
Hybrid independent living and assisted living facilities
Skilled nursing facilities (primarily long-term care_
Skilled nursing facilities (subacute/short-term rehab)
Licensed Alzheimer’s/dementia facility 4.25
Alternative Risk Ratings
The World Turned Upside Down

65. Real Estate Investment Mean “Risk”
Licensed Alzheimer’s/dementia facility 2.04
Skilled nursing facilities (subacute/short-term rehab)
Skilled nursing facilities (primarily long-term care)
Hybrid independent living and assisted living facilities
Extended stay lodging
Continuing care retirement communities
Health care operating companies
Licensed assisted living facility (stand alone)
Full service lodging
Senior housing independent living
Real estate investment mortgage conduits
Senior housing specialized REIT’s
Suburban offices
Private commingled real estate funds
Flexible R&D
Strip mall
Central business district offices
Age restricted apartments (over 55)
Diversified private real estate investment trusts
Diversified public real estate investment trusts
Power retail center
Apartment market
Regional mall
Warehouse market
Net lease properties 4.25
New View?
The World Turned Upside Down

66. Judy Karofsky
Real Estate Insites, LLC jfk@chorus.net
The World Turned Upside Down