Feasibility Study and Consultant’s Report

For

LifePointe Memory Care

in

Southaven, DeSoto County, Mississippi

Prepared For:

Alluvion Securities, Memphis, Tennessee

November 2, 2013

Prepared By:

Jennings & Associates Jack H. Jennings, PE, CMA, CFM, CFC 10300 North Central Expressway

Suite 580 Dallas, TX 75231

(214) 691-6195

ii

Table of Contents EXECUTIVE SUMMARY ......................................................................................................................................................... 1

INTRODUCTION ................................................................................................................................................................... 2

PURPOSE AND SCOPE .................................................................................................................................................................... 2

METHODOLOGY ........................................................................................................................................................................... 2

ECONOMIC FEASIBILITY ....................................................................................................................................................... 3

DESCRIPTION OF REGION ............................................................................................................................................................... 3

PROJECT SITE .............................................................................................................................................................................. 3

UTILITIES .................................................................................................................................................................................... 5

LOCAL ECONOMICS ....................................................................................................................................................................... 5

MARKET FEASIBILITY ........................................................................................................................................................... 8

MARKET OVERVIEW – ASSISTED LIVING FACILITIES ............................................................................................................................. 8

DEMOGRAPHICS FOR ASSISTED LIVING MARKET ................................................................................................................................. 9

DEMENTIA, ALZHEIMER’S, AND MEMORY CARE ............................................................................................................................... 10

MARKET AREA........................................................................................................................................................................... 11

MARKETING PLAN ...................................................................................................................................................................... 11

COMPETITION ........................................................................................................................................................................... 12

DEMAND FOR MEMORY SPECIAL CARE ........................................................................................................................................... 13

TECHNICAL FEASIBILITY...................................................................................................................................................... 15

SUITABILITY OF SITE AND ENVIRONMENTAL IMPACT ANALYSIS ............................................................................................................. 15

FACILITY DESIGN ........................................................................................................................................................................ 15

ESTIMATION OF PROJECT DEVELOPMENT COSTS ............................................................................................................................... 15

LICENSURE AND REGULATION ....................................................................................................................................................... 16

Mississippi Licensure ........................................................................................................................................................ 16

Mississippi Standards ....................................................................................................................................................... 16

State and Federal Regulation ........................................................................................................................................... 16

Risk Relating to Government Regulation ......................................................................................................................... 17

Risk Relating to Health Privacy Regulations ..................................................................................................................... 17

Risk Relating to Construction ........................................................................................................................................... 17

Risk Relating to Startup .................................................................................................................................................... 17

Risk Relating to Regulations and Governmental Action ................................................................................................... 17

FINANCIAL FEASIBILITY ...................................................................................................................................................... 19

FINANCIAL STATEMENTS .............................................................................................................................................................. 19

REVENUE PROJECTION ................................................................................................................................................................ 19

OPERATING COSTS ..................................................................................................................................................................... 19

PROFITABILITY AND CASH FLOW PROJECTION .................................................................................................................................. 21

SENSITIVITY ANALYSIS ................................................................................................................................................................. 21

RISKS ....................................................................................................................................................................................... 22

Healthcare Reform ........................................................................................................................................................... 22

Regulation ........................................................................................................................................................................ 23

Drug Research .................................................................................................................................................................. 23

Dependence on Referrals ................................................................................................................................................. 23

Competition ...................................................................................................................................................................... 23

Labor Costs ....................................................................................................................................................................... 23

Economic Crisis ................................................................................................................................................................. 23

MANAGEMENT FEASIBILITY ............................................................................................................................................... 24

iii

ORGANIZATIONAL STRUCTURE ...................................................................................................................................................... 24

MANAGEMENT STRUCTURE ......................................................................................................................................................... 24

STAGE OF BUSINESS .................................................................................................................................................................... 24

CONFLICTS OF INTEREST............................................................................................................................................................... 24

CONSULTANT’S QUALIFICATIONS....................................................................................................................................... 25

DISCLAIMER ....................................................................................................................................................................... 26

CERTIFICATION .................................................................................................................................................................. 27

APPENDIX .......................................................................................................................................................................... 28

I. Description of DeSoto County and the Southaven Area

II. Dementia and Specific Types

III. Curricula Vitae for Key Management

IV. Architectural Drawing and Floor Plan

V. Financial Statements

List of Figures

FIGURE 1: PHOTOS OF PROPOSED SITE ....................................................................................................................................... 3

FIGURE 2: LOCATION OF DESOTO COUNTY MS ........................................................................................................................... 4

FIGURE 3: SITE LOCATION ............................................................................................................................................................ 4

FIGURE 4: AERIAL VIEW OF SITE .................................................................................................................................................. 5

FIGURE 5: UNITED STATES POPULATION PYRAMIDS, 1950 - 2100 .............................................................................................. 9

FIGURE 6: CONTINUUM OF CARE FOR DEMENTIA PATIENTS .................................................................................................... 10

FIGURE 7: SENSITIVITY ANALYSIS ............................................................................................................................................... 22

List of Tables TABLE A: PER CAPITA PERSONAL INCOME ................................................................................................................................... 6

TABLE B: SELECTED STATISTICS BY ECONOMIC SECTOR .............................................................................................................. 6

TABLE C: DESOTO COUNTY POPULATION PROJECTION ............................................................................................................. 11

TABLE D: INCIDENCE OF DEMENTIA BY AGE GROUP ................................................................................................................ 13

TABLE E: PREVALENCE OF DEMENTIA BY YEAR......................................................................................................................... 14

TABLE F: PROJECT DEVELOPMENT COSTS ................................................................................................................................. 16

TABLE G: COMPARISON OF OPERATING RESULTS TO RMA NORMS ......................................................................................... 20

TABLE H: FINANCIAL PROJECTION ............................................................................................................................................. 21

TABLE I: PROFORMA CASH FLOW STATEMENT ......................................................................................................................... 21

TABLE J: SENSITIVITY ANALYSIS ................................................................................................................................................. 22

1

Executive Summary

This Feasibility Study and Consultant’s Report was prepared to evaluate the feasibility of the

construction of a 34-bed 28,000 square foot memory care facility in Southaven, DeSoto County, Mississippi through the issuance of $6,015,000 in tax exempt bonds.

The county population is projected to grow by over 20% in the next ten years and the demographics are favorable. Due to an aging population, the demand for special care for those

with varying phases of dementia is expected to double by 2030. Additionally, the local

population aged 65 and older is growing at a rate more than double the growth of the overall population.

The proposed site location is situated on a campus with an existing assisted living facility on Star Landing Road E. The proposed site is favorable for the proposed construction project.

The financial feasibility of achieving the revenues, net income, and cash flow after debt service, as set forth in the Company’s Business Plan and Financial Plan are reasonable for an operation of

this size. Upon opening, LifePointe Memory Care will accept 16 residents from another assisted

living facility.

The owners also own LifePointe Village, an Assisted Living Center, and are experienced in the

industry. The management organization has extensive experience in all phases of development and operation of assisted living facilities and has successfully completed several such facilities

over the last decade. The principals of the management organization each have over 25 years’

experience in healthcare. They are highly qualified to develop and manage this project.

The Consultant that prepared this Feasibility Study does not foresee significant obstacles or

constraints in the efficient development, startup, and operation of this project.

We recommend that this project be implemented.

2

Introduction

Purpose and Scope

This Feasibility Study and Consultant’s Report was prepared for Alluvion Securities, LLC to

evaluate the feasibility of the construction and operation of a 34-bed 38,000 square foot Assisted Living Memory Care Center in Southaven, DeSoto County, Mississippi. This project will be

funded through the issuance of $6,015,000 in tax exempt bonds. The study and its findings are

limited to the analysis of the feasibility of a memory care center in DeSoto County, Mississippi.

The location of the proposed facility is 2700 Star Landing Road E, Southaven, Mississippi,

38672.

Methodology

The consultant that prepared this Feasibility Study reviewed and analyzed the business plan and

financial projections of the company, interviewed management, analyzed the markets for memory care in the area, analyzed the economy of the area, and analyzed the technical feasibility

of the proposed project. Procedures included, but were not limited to:

• Reviewing the demographics, population trends, and income statistics for the area,

• Reviewing the local economic conditions as reported by the U. S. Census Bureau,

• Investigating available infrastructure and utilities for the area,

• Inspecting the proposed site for suitability,

• Reviewing the floodplain maps for DeSoto County,

• Reviewing Mississippi State reports of assisted living homes and various inventories of assisted

living homes to determine potential competitors,

• Interviewing local assisted living facility operators to gain an understanding of the supply of

assisted living facility beds and occupancy rates,

• Reviewing State filings and inspections of existing assisted living facilities,

• Reviewing State regulations for licensure and operation of assisted living facilities,

• Reviewing various reports regarding Alzheimer’s disease and Dementia published by the

National Institute of Health, the Center for Disease Control, Department of Health and Human

Resources, other government agencies, and other organizations.

• Reviewing various market research reports for the long-term care industry published by market

research organizations,

• Interviewing key management personnel,

• Reviewing the proposed facility design and estimated construction costs,

• Analyzing the Company’s business plan and financial projections,

• Reviewing historical financial results for similar facilities, and

• Reviewing Security and Exchange Commission filings for public firms that operate in the same

industry.

3

Economic Feasibility

Description of Region

DeSoto County is influenced by the Memphis Metro Statistical Area. The Memphis Metro

Statistical Area consists of several counties located at the intersection of Tennessee, Mississippi,

and Arkansas.

According to the Census Bureau, the population of DeSoto County Mississippi in 2012 was

166,234, an increase of 3.1% over the 2010 population. During the same period, the State of Mississippi experienced a population growth of 0.6%. DeSoto County is the fastest growing

county in Mississippi.

See Appendix I for a description of Desoto County and the Southaven area.

Project Site

The proposed site location for the LifePointe Memory Care is 2700 Star Landing Road E,

Southaven, Mississippi. Star Landing Road is a hard surface all-weather road. The site consists of approximately 3.5 acres. The land is relatively flat, can easily be leveled, and is favorable for

construction of the proposed 28,000 square foot, one-story memory care facility. It is on the

same campus as LifePointe Village, an assisted living facility.

See below for maps of the location and an aerial view of the proposed site.

Facing West Facing Northeast

Figure 1: Photos of Proposed Site

According to the Mississippi flood map for DeSoto County, the proposed site is outside of the 0.2% annual floodplain1.

1 0.2% indicates a 500 year flood. Mississippi Department of Environmental Quality, Office of Geology.

4

Figure 2: Location of DeSoto County MS

Figure 3: Site Location

Desoto

County

Mississippi

Southaven

MS

Memphis

TN

Approximate

Site Location

5

Figure 4: Aerial View of Site

Utilities

Electrical service is provided to the area by Entergy.

Natural gas is provided to the area by ATMOS Energy.

Fresh water and sewerage is provided by the City of Southaven. Water is pumped out of the

Memphis Sand aquifer utilizing 11 ground water wells and then sent to four water treatment

plants where it is treated and tested. The system is currently operating at about 62% of its rated design capacity. The Mississippi Department of Health Inspections has rated the Southaven

water system at 4.7 out of a possible 5.0. The 2012 Annual Drinking Water Quality Report

(dated April 2013) shows that Southaven meets or exceeds all Federal and State laws and that there were no violations.

Wastewater is provided by the City of Southaven Utilities Department which consists of 27 major pump stations, collections lines, and one activated sludge treatment plant, and one dual

cell lagoon. A majority of wastewater collected in the Southaven system is transported through

interceptor lines owned by the Horn Lake Creek Basin Interceptor Authority to Memphis, where it is treated and then discharged into the Mississippi River. The rest of the wastewater is either

sent to the DeSoto County Short Fork Creek Facility or treated by a smaller wastewater facility

owned by the city. The City of Southaven is in the process of working with the DeSoto County Regional Utility Authority to construct interceptor lines that will transport wastewater to be

treated in the Short Fork Creek Treatment Facility. The Facilities Plan has been approved by the

Mississippi Department of Environmental Quality2.

Telecommunications is provided by AT&T and a number of competitive carriers.

Local Economics

2 City of Southaven.

Star Landing

Road E

Approximate

Site Location

LifePointe

Village

6

The local economy is highly influenced by the Memphis Metro Statistical Area. The Memphis

Metro Area is composed of the following counties: Shelby TN, Tipton TN, Fayette TN, Crittenden AR, DeSoto MS, Marshall MS, Tate MS, and Tunica MS.

The following table sets forth the per capita personal income figures for DeSoto County and the State of Mississippi as compared to the United States3.

Per Capita Personal Income

2001 2011 Change

United States $30,413 $41,560 +36.7%

Mississippi $23,337 $32,000 +41.4%

DeSoto County, MS $28,522 $33,737 +18.3%

DeSoto County as a % of MS 122.2% 105.4%

DeSoto County as a % of US 93.8% 81.2%

Table A: Per Capita Personal Income

In 2011, DeSoto County had a per capita personal income (PCPI) of $33,737, or 105% of the state average and 81% of the national average. In 2001, DeSoto County had a PCPI of $28,522,

or 122% of the state average and 94% of the national average. DeSoto experienced an increase of

18.3% between 2001 and 2011.The State of Mississippi increase for the same period was 41.4% and the national increase was 36.7%.

The following table sets forth economic data for 2002 and 2007 for selected DeSoto County Mississippi industries4.

Industry Establishments

Revenues

($1,000)

% Change

2002 - 2007

2002 2007 2002 2007 Establishments Revenues

Manufacturing 124 133 1,430,750 1,663,506 +7.3% +16.3%

Wholesale Trade 97 100 !,342,475 1,676,805 +3.1% +24.9%

Retail Trade 361 471 1,272,689 2,069,453 +130.5% +62.6%

Real Estate 74 110 60,653 89,987 +50.4% +48.4%

Professional,

Scientific & Technical

Services

125 175 53,280 77,946 +40.0% +46.3%

Health Care 161 208 232,408 424,370 +29.2% +82.6%

Accommodation and

Food Service 168 260 140,317 256,752 +54.8% +83.0%

Table B: Selected Statistics by Economic Sector

3 Bureau of Economic Analysis 4 U. S. Census Bureau. (The data sets for 2012 are not available as of the date of this Report.)

7

As demonstrated by both the local economy and per capita personal income statistics, DeSoto

County has experienced significant positive growth over recent years.

8

Market Feasibility

Market Overview – Assisted Living Facilities The assisted living industry is made up of a variety of senior care facilities, including assisted living facilities (ALFs). The Census Bureau divides the ALF industry into two major categories - continuing care retirement communities (NAICS 623311) and homes for the elderly (NAICS 623312). The primary distinction between the two is the presence of nursing care; continuing care facilities provide on-site nursing care while homes for the elderly do not5. This industry includes Memory Care Units (MCUs), also called Special Care Units (SCUs), that are designed to meet the specific needs of individuals with various phases of dementia. MCUs take many forms and can exist within various types of assisted living facilities in which individuals suffering from dementia are grouped together on a floor or a unit within a larger facility. Types of assistance offered in ALFs include help with activities of daily living (ADL) such as bathing, dressing, eating, grooming, and getting around. The future of ALF growth is directly tied to the population growth and will be spurred by the 77 million Baby Boomers over the next two decades. With life expectancy continuing to increase in the United States, the demand for assisted living facility space is expected to significantly increase6. The National Center for Assisted Living reports that in 2010 there were about 31,100 assisted living centers with about one million residents. About half of the communities were considered small with four to 10 beds. Sixteen of the facilities had 11 to 25 beds, and 28 percent were categorized as large communities with 26 to 100 beds. About seven percent were extra-large communities with over 100 beds7. By 2030, the number of residents in ALFs is expected to double8. Individuals who reside in retirement communities rely mainly on income derived from their investment portfolios, personal savings, from selling their homes, and assistance from family. Currently, about seven out of ten people living in ALFs depend on their personal wealth to pay for services9. The assisted living industry is highly fragmented. It is characterized by numerous regional and local operators and a few national operators. About four or five large firms make up only 15% of the market share. The remaining 85% is composed of a variety of local and regional non-profit and for-profit businesses10.

5 U. S. Census Bureau 6 Grabowski, David, et al, Health Research and Education Trust, Assisted Living Expansion and the Market for

Nursing Home Care. 7 Overview of Assisted Living, published by the American Association of Homes and Services for the Aging, American Seniors Housing Association, as reported by the National Center for Assisted Living. Also, date from the 2010 National Survey of Residential Care Facilities, The National Center for Health Statistics Data Brief No. 91. 8 IBISWorld, Retirement Communities in the U. S., May 2009. 9 IBID 10 IBID

9

Typically, assisted living facilities compete for residents primarily on the basis of quality of care, price, reputation, physical appearance of the residences, services offered, family preference, physician referrals, and location. Additionally, ALFs compete with home-based residential care, either provided by family members or by third parties. Because the assisted living industry is highly fragmented, competition for residents can be intense.

Demographics for Assisted Living Market The population pyramids below depict the U. S. population at four points in time: 1950, 2010, and projected to 2050 and 2100. The pyramids demonstrate that the U. S. population is getting progressively larger, as indicated by the width of the pyramid. The U. S. has also aged between 1950 and 2010 as indicated by increasing percentages of population aged 65 and older.

Figure 5: United States Population Pyramids, 1950 - 2100

In 1950, the U. S. experienced a Baby Boom as indicated by larger populations at ages 0 through 10. This segment is reflected by the larger population bars between ages 55 and 65 in the 2010 pyramid. In 2010, the majority of the U. S. population was working age and had a smaller child and aging population. By 2050, the relative size of the population ages 0 through age 70 is projected to be similar. This indicates that the population is in a steady state with no large shifts in either the child or elderly

10

population. This is also projected to be the case in 2100. The U. S. population is also expected to increase in size through 210011.

Dementia, Alzheimer’s, and Memory Care LifePointe Memory Care expects to serve a subset of the overall assisted living facility market restricted to those with significant memory issues. Dementia is an umbrella term describing a variety of diseases and conditions that develop when nerve cells in the brain die or no longer function normally. A description of the specific types of dementia is contained in Appendix II. Dementia, and Alzheimer’s, is a progressive, irreversible brain disease that slowly destroys memory and thinking skills and eventually the ability to carry out the simplest tasks of daily living. Alzheimer’s disease accounts for between 60% and 80% of all forms of dementia. Although treatment can slow the progression of the disease and help manage symptoms in some people, currently there is no cure for this devastating disease. The following figure shows the continuum of care12:

Figure 6: Continuum of Care for Dementia Patients

According to the Alzheimer’s Association, there were at least 5.4 million people with all forms of dementia as of 2010. This includes about 200,000 individuals under the age of 6513. It should

11 United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospect:

2010 12 Organisation for Economic Co-operation and Development, Dementia Care in 9 OECD Countries, Working Pager no. 13, 2004 13 op cit, Alzheimer’s Association

Social

Care

Medical

Care

Living Independently Living in an

at Home Institution

Diagnostic and

Therapeutic

Control Distressing Symptoms Maintenance

End of Life Support Ongoing Support

and Counseling

Information,

Support, Education

Intermittent

Assistance with ADL

Full Support with all

ADLS

STAGE

Diagnosis Early Intermediate Late End of Life

11

be noted that the World Health Organization estimates that the number of cases of dementia in the United States is about 3.9 million14.

Market Area LifePointe Memory Care expects to draw residents from DeSoto County and the surrounding

area. The following table sets forth the official projection of the population of DeSoto County by

age group through 202515.

2010 2015 2020 2025

Total Population 161,252 196,459 219,151 240,491

< 65 144,853 170,144 182,853 200,031

65 - 74 10,062 15,373 22,171 21,180

75 - 84 4,821 9,057 11,979 16,874

>85 1,516 1,886 2,148 2,405

Table C: DeSoto County Population Projection

The age distribution of the area can provide valuable insight, since the demand for memory care

services is tied to an aging population. The 2010 to 2025 Compound Annual Growth Rate (CAGR) for the population 65 years of age and older is 6.206% while the CAGR for the total

population is 2.701%.

Marketing Plan

Marketing is designed to educate the local community and to attract referral sources. Most residents will come to LifePointe Memory Care from a home setting. Secondarily, residents

come from a skilled nursing home or other senior living facility. Therefore, the primary

marketing opportunity is with local community organizations and churches.

Following is an outline of the marketing plan for LifePointe Memory Care.

INTERNAL

• Staff training in customer service to promote word of mouth

• Educational materials in facility regarding dementia and memory care

• Recognize staff birthdays and employee of the month • Staff meetings to stay current

• Pay CE costs to renew license

• Offer better benefits and pay than competitors • Display pictures and credentials/experience of staff on walls

14 U. S. Senate, Special Committee on Aging, March 2011, Alzheimer’s disease – An International Comparison of

Approaches. 15

DeSoto County Economic Development and Office of Policy Research and Planning, Mississippi Institutions of

Higher Learning

12

EXTERNAL

• Calling on referral sources to make aware of services and facilities offered

• Attending health fairs around community • Attending Chamber of Commerce meetings and events

• Business cards for employees

• Brochures and Trinkets to physician offices/case managers/nursing homes etc…. i.e. pens, note pads, cookies, etc.

• Lunch and Learn monthly with speaking bureaus

ADVERTISING

• Brochures

• Newspaper

• Regularly ads in both local papers and major events • Media

• Facebook, Twitter etc.

• Website • Info, current events, registration, staff, services

PROMOTIONAL EVENTS

• Grand opening • Anniversary events

• Talks at churches and community organization

Competition

The assisted living industry is highly fragmented. We reviewed several national data banks to determine the extent of competition for assisted living facilities in the area. We classified

competitive facilities into the following categories:

• Primary Competition – Assisted Living Facilities

We identified six assisted living facilities in close proximity with a total of 355 beds. This group has an estimated 80 beds reserved for memory care residents. The estimated occupancy rate for

the memory care beds is 90% - 95%.

The Centers for Disease Control report that about 42% of all assisted living residents suffer from

some stage of dementia16.

• Secondary Competition - Skilled Nursing Homes

16 Centers for Disease Control and Prevention, 2010 National Survey of Residential Care Facilities

13

We identified 13 skilled nursing homes in the immediate area with a total of 1,726 beds. The

estimated occupancy rate is 90%. The Centers for Disease Control report that about 16% of nursing home residents suffer from some stage of dementia17.

While skilled nursing homes are licensed by the State, the staff at one nursing home may have more experience and training with memory care than the staff at another.

The recent increase in Special Care Unit or Memory Care Unit capacity is negatively associated with total nursing home occupancy. Specifically, one study suggest that a 10% increase in SCU

capacity led to a 1.4 % decline in private-pay occupancy and a 0.2% – 0.6% increase in overall

patient acuity18.

• Tertiary Competition – Home Care

There are any number of individuals with early stages of dementia, Alzheimer’s or other memory

issues that are receiving home care. As discussed above, dementia patients experience a need for

a continuum of care that almost always leads to the need for institutional care.

The significant increase in the projection of individuals with various memory issues in DeSoto

County (see below) will likely create the need for additional capacity, and additional competition, for LifePointe Memory Care.

Demand for Memory Special Care

The incidence (rate of developing disease in a given time period) of Alzheimer’s, dementia, and related memory issues dramatically increases with age. The following table sets forth the

expected incidence by age category19:

Age

Group

Incidence

Per 1,000

People

65 - 74 53

75 – 84 170

>85 231

Table D: Incidence of Dementia by Age Group

Because of the increase in the number of people over 65, the annual incidence of Alzheimer’s and other dementias is projected to double by 205020.

17 Centers for Disease and Prevention, 2004 National Nursing Home Survey 18 Grabowski, Stevenson, and Cornell, Health services Research, Assisted Living Expansion and the Market for

Nursing Home Care. 19 Helbert, et al, Annual Incidence of Alzheimer Disease in the United States Projected to the year 2050, Alzheimer Disease & Associated Disorders 2001; in 2012 Alzheimer’s Disease, Facts and Figures, Alzheimer’s Association. 20 Ibid

14

The Alzheimer’s Association reports that the prevalence (the number of existing cases of a

disease in a population at a given time) of Alzheimer’s disease is about 13 percent of those aged 65 and older. The estimate of the prevalence of all forms of dementia is estimated to be about

13.9% of people age 71 and older21.

The following table sets forth a projection of the expected prevalence of all forms of dementia in

the DeSoto County population:

Year 2010 2015 2020 2025

Prevalence 2,279 3,658 5,045 5,624

Table E: Prevalence of Dementia by Year

The expected increase in individuals with all forms of dementia between 2010 and 2025 is 147%. Many individuals with early stages of memory issues will live independently as indicated above. However, the more than doubling of the population with some form of dementia suggests a strong demand for Special Care Unit capacity over the next fifteen years.

21 Alzheimer’s Association, 2012 Alzheimer’s Disease, Facts and Figures, Vol. 8, Issue 2.

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Technical Feasibility

Suitability of Site and Environmental Impact Analysis See Project Site above. If required, an environmental impact analysis of the proposed site will be

prepared by others and therefore this Feasibility Report does not address that issue.

Facility Design

Refer to Appendix IV for architectural drawings and a floor plan.

This is a typical single story layout and design for an ALF. The total square footage is 28,000.

The design is not complicated and is consistent with the design of similar facilities. Therefore, no constraints are noted.

The design of the building incorporates state-of-the-art “green” building strategies including:

• High efficiency mechanical systems including insulated windows and sealed cracks,

joints, and penetrations • Energy Star rated appliances such as refrigerators, washers, and dryers

• LEED compliant plumbing fixtures, such as dual-flush closets and low flow rate lavatory

faucets • Use of local materials such as locally produced construction materials

• Low VOC sheetrock, ceiling, and interior paint

• Increase of landscape and impermeable surface from nearly 0% to more than 12% • Treatment of water run-off before releasing into the storm sewer

• Maximum recycling of excess material during construction

LEED Design Concepts

This building is designed to follow LEED22 Certification standards as set forth by the U. S. Green Building Council: however, LifePointe Memory Care does not expect to apply for LEED

Certification due to the costs of filing. LEED is an internationally recognized green building

standard intended to save energy, conserve water consumption, reduce CO2 emissions, improve indoor environmental quality, and stewardship of resources.

Estimation of Project Development Costs

22 Leadership in Energy and Environmental Design

16

Borrower

Contribution Bond Total

Land $ 650,000 $ - $ 650,000

Construction Cost & Fees - 4,247,932 4,247,932

Construction Interest - 851,615 851,615

Cost of Issuance and Fees - 915,453 915,453

Total Development Costs $ 650,000 $ 6,015,000 $ 6,665,000 Table F: Project Development Costs

We used a national database of construction costs to compare the projected construction costs of LifePointe Memory Care to the typical costs of similar projects and determined that the

construction costs presented above is within the range of expected costs and is therefore

reasonable23.

Licensure and Regulation

Mississippi Licensure

LifePointe Memory Care must obtain a license from the State of Mississippi as a “Personal Care Home24.” The Mississippi State Department of Health, Division of Health Facilities Licensure and Certification is responsible for licensing Personal Care Homes. The division also conducts annual surveys of health facilities. Surveyors also investigate all complaints. Additionally, this agency reviews and approves all construction plans for health facilities.

Mississippi Standards

In addition to obtaining a license, LifePointe Memory Care must comply with certain Mississippi State Department of Health operating rules and regulations25.

State and Federal Regulation

State licensing agencies regulate assisted living operations in Mississippi and monitor

compliance with a variety of state and local laws governing licensure, changes of ownership,

personal and nursing services, accommodations, construction, life safety, food service, and other services. Generally, the state oversight and monitoring of assisted living facilities is less

burdensome than in the skilled nursing industry. Areas most regulated include:

• Qualifications of management and health care personnel,

• Minimum staffing levels,

• Dining services and overall sanitation,

23 Reed Construction Data for Zip Code 38672, Union Labor assumed 24 http://msdh.ms.gov/msdhsite/_static/30,0,83,61.html 25 Title 15: Mississippi State Department of Health, Part 3: Office of Health Protection Subpart 1: Health Facilities Licensure and Certification Chapter 50 - Minimum Standards of Operations for Alzheimer’s Disease/Dementia Care

Unit: General Alzheimer’s Disease/Dementia Care Unit, revised October 2012.

17

• Personal care and nursing services,

• Assistance or administration of medication and pharmacy services, • Residency agreements,

• Admission and retention criteria,

• Discharge and transfer requirements, and • Resident rights.

The State of Mississippi may conduct periodic unannounced surveys to assess and assure compliance with the respective regulatory requirements. A survey may occur following receipt

of a complaint regarding a resident which may also result in the need to implement a plan of

correction within a specific timeframe. Risk Relating to Government Regulation

Any failure to comply with a current or future regulation could lead to fines or penalties. Any

regulatory development as well as mandatory increases in the scope and severity of deficiencies determined by inspection officials could cause operations to suffer.

Risk Relating to Health Privacy Regulations

LifePointe Memory Care is subject to federal laws to protect the confidentiality of its residents’ health information. While not a covered entity in respect to the Health Insurance Portability and Accountability Act of 1996 (HIPPA), any direct invoice to the State Medicaid program would be considered a covered entity and therefore subject to HIPPA.

Risk Relating to Construction

The orderly construction of LifePointe Memory Care could be delayed due to a number of events such as the availability of materials or labor and weather conditions. Additionally, the construction is subject to certain inspections by local governments which could cause delays in construction. These are timing delays and are not considered as a fundamental risk to achieving operations.

Risk Relating to Startup

The availability of additional trained or trainable labor could present a risk to achieving sufficient revenues and cash flows to cover costs and debt service.

Risk Relating to Regulations and Governmental Action

As noted above, this industry is regulated by various state and federal laws and regulations. As of this date, the Affordable Care Act (“ACA” or “Obama Care”) is the subject of significant political debate: therefore, the overall industry and this facility could be favorably or unfavorably affected by current and future regulations, which are not fully known or even fully developed. The ACA, while upheld by the Court, is not fully implemented and therefore future rules are yet to be developed and the impact of those future rules is unknown at this time. Additionally, future legislative actions and insurance reform could favorably or unfavorably impact operations by imposing regulations, rules, and payment arrangements, none of which are known at this time.

18

While LifePointe Memory Care does not expect to receive a significant amount of its future income from Medicare payments, Medicare is facing formidable challenges, which are well-publicized, and the resolution of those challenges cannot be predicted.

19

Financial Feasibility

Financial Statements See Appendix V for proforma forward-looking financial statements26 for first five years of

operations.

The Consultant has reviewed and tested the financial projections and verified the assumptions

upon which the financial projections were made. It is the opinion of the Consultant that the

underlying assumptions are within reason and that it is reasonable to expect that the levels of revenue and profitability can be achieved and possibly exceeded.

Revenue Projection

The following sets forth the revenue projections for this project as presented in the Company’s

Business Plan.

Upon opening, LifePointe Memory Care expects to receive 16 residents that are currently

residing in LifePointe Village, an Assisted Living Center.

2015 2016 2017 2018 2019

Residents 19 31 31 31 31

Occupancy Rate 55.9% 91.2% 91.2% 91.2% 91.2%

Avg. Monthly Rate $ 5,000 $ 5,161 $ 5,342 $ 5,529 $ 5,722

Rental Revenue $ 1,140,000 $ 1,920,000 $ 1,987,200 $ 2,056,752 $ 2,128,738

Misc. Revenue 40,460 21,600 22,248 22,915 23,603

Total Revenue $ 1,180,460 $ 1,941,000 $ 2,009,448 $ 2,079,667 $ 2,152,341

There is no particular seasonality in revenue. Revenues are recognized on a cash basis.

Operating Costs Operating expenses for the first five years are based on the following expenses expressed both in

amounts for the first and fifth year and as a percentage of net revenue:

• Payroll and Payroll Related: $343,122 rising to $479,631; about 23.3% of revenues.

• Healthcare Services: $15,700 rising to $32,782; about 1.5% of revenues.

• Recreational Activities: $68,372 rising to $75,319; about 3.8% of revenues.

• Dietary: $223,082 rising to $257,088; about 12.9% of revenues.

• Housekeeping: $36,829 rising to $53,973.

• Maintenance: $468,177 rising to $86,151; about 4.3% of revenues.

• Administration: $76,502 rising to $85,289; about 4.3% of revenues.

26 As that term is defined in certain Federal Laws, often referred to as “Safe Harbor Statements”

20

• Management Fee: $59,023 rising to $ 109,769; about 5.1% of revenues.

• Property Insurance: $24,000 rising to $26,750.

• Property Tax: $19,200 rising to $21,820; about 1.1% of revenues.

• Depreciation and Amortization on building certain capitalized fees: $276,106 per year; about 14.7% of

revenues. Note that depreciation assumes certain costs are segregated and depreciated over useful lives of 7, 10,

or 15 years. Capitalized fees are amortized over the life of the note.

• Interest: Per the Debt Service Schedule.

There is no particular seasonality in expenses except that in some months utility costs may be

higher than in other months.

We also compared the expected operating costs for LifePointe Memory Care to the Risk

Management Association27 studies for this NAICS Code from the 2013 Report. We used the fifth

year of operations, at maturity, for this comparison.

(My not add due

to rounding) RMA28 LifePointe Difference

Better/(Worse)

Revenues 100.0% 100.0% -

Operating Expenses 86.0% 70.0% 16.0%

Operating Profit 14.0% 30.0% 16.0%

Other Expense 6.8% 18.7% (11.9%)

Profit Before Tax 7.2% 11.3% 4.2%

Table G: Comparison of Operating Results to RMA Norms

As noted, LifePointe Memory Care’s Operating Margin is significantly better than the industry norm; however is significantly below the norm in terms of Other (Interest) Expense. The NAICS

Code for Continuing Care Retirement Centers includes memory care units, special care units,

and assisted living centers, among others, each of which may have significantly different operating ratios than would be expected for LifePointe Memory Care (see Market Overview,

above). Additionally, the RMA database likely contains some properties that have been in

operation for several years.

In the opinion of the Consultant, the operating expenses are within reason, given the concept of

operation.

27 Risk Management Association (formerly Robert Morris Associates) conducts annual Financial Statement analyses (norms) used in the Banking and Financial Industry for the purposes of comparing Financial Statements to industry norms. 28 The RMA industry study used in this comparison is for ALFs with revenues between $1 and $3 million. There were 109 observations in the RMA database.

21

Profitability and Cash Flow Projection

The expense structure set forth in the consolidated financial projections, and the assumptions upon which the expense structure is based, are reasonable for this industry and this project.

LifePointe Memory Care expects to show a profit in its second year of operation.

Financial Projection

2014 2015 2016 2017 2018

Total Net Revenues $1,180,460 $1,941,600 $2,009,448 $2,079,667 $2,152,341

EBITDA29

246,453 820,658 852,388 887,389 923,769

Depreciation

276,106

276,106

276,106

276,106

276,106

Operating Profit (29,653) 544,552 576,282 611,283 647,663

Interest 420,820 420,820 415,100 408,620 401,620

Profit Before Tax ($450,473) $123,732 $161,182 $202,663 $246,043

Table H: Financial Projection

In the opinion of the Consultant, the costs assumptions included in the Company’s Business Plan

and Financial Projections are reasonable for this project.

The following table sets forth the summary cash flow information from the consolidated

projected financials30.

Pro Forma Cash Flow Statement

2014 2015 2016 2017 2018

Revenues $1,180,460 $1,941,600 $2,009,448 $2,079,667 $2,152,341

EBITDA $246,453 $820,658 $852,388 $887,389 $923,769

Total Debt Service (P+I) $420,820 $530,820 $535,100 $533,620 $531,620

EBITDA as a Multiple of Debt

Service 0.6X 1.5X 1.6X 1.7X 1.7X

Table I: Proforma Cash Flow Statement

Sensitivity Analysis

We prepared a Sensitivity Analysis assuming that all relevant costs remained constant and then

varied the occupancy. We used the fifth year of operations, at maturity, for this comparison.

29 Earnings before interest, taxes, depreciation, and amortization. EBITDA is frequently used as a surrogate for cash flow. 30 For this purpose, we assumed a $6,015,000 Bond with an average coupon of 7.219% with an average life of 17.133 years. Interest only in the first year.

22

Base Case

Occupancy 91.2%

Revenues $ 2,152,341

EBITDA $923,769

Varying Occupancy EBITDA Debt Service Free Cash Flow

100% $1,132,061 $531,620 $600,441

93% $ 974,447 $531,620 $442,827

87% $ 826,838 $531,620 $295,218

81% $ 679,229 $531,620 $147,609

75% $ 531,620 $531,620 $ -

Table J: Sensitivity Analysis

Figure 7: Sensitivity Analysis

Varying occupancy rates indicates a cash flow break-even at about 75% occupancy, assuming that costs are not reduced if occupancy decreases. Normally, variable costs would be reduced if

occupancy decreases, which would show a break-even at a lower occupancy rate than indicated

above.

Risks Please refer to Disclaimer below.

There are several general and specific risks to this venture that could affect the Offering and the Financing Plan.

Healthcare Reform

The impact of healthcare reform cannot be predicted. It will initiate significant changes to the United States healthcare system, including potential material changes to the delivery of

healthcare services and the reimbursement paid for such services by the government or other

third-party payors, including reforms resulting from the ACA or measures adopted at the federal or state level. Potential future efforts in the U. S. Congress to repeal, amend, modify,

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

100% 93% 87% 81% 75%

Ca

sh F

low

Occupancy

LifePointe Memory Care

Sensitivity Analysis

23

or retract funding for various aspects of the ACA create additional uncertainty about the

ultimate impact of the ACA on the healthcare industry. Regulation

In the ordinary course of business, the healthcare industry is subject to extensive and complex

federal and state government laws and regulations. The industry is also subject to audits, investigations, and inspections by various agencies and the regulatory environment is expected to

remain intense.

Drug Research

Developed countries are conducting research to find drugs and procedures to combat the

defective neurological processes in the brains of dementia patients that lead to the death of brain

cells. Such a discovery could lead to an effective drug that could reduce the incidence of various forms of dementia.

Dependence on Referrals

Assisted Living Centers generally rely on referrals from physicians and other healthcare providers for new patients. If LifePointe Memory Care is unsuccessful in developing,

cultivating, and maintaining strong relationships with community organizations, physicians,

and other healthcare providers, its occupancy, and revenues, could decline. Competition

At any time, a large national operator with superior financial resources could elect to enter the

same market and compete with LifePointe Memory Care. Also, as noted above, the immediate market is well suited for a higher supply of assisted living beds, which could lead

to future overbuilding, which in turn could lead to reduced occupancy and lower rates.

Labor Costs

The growing demand for licensed nurses, therapists, and other healthcare professionals, such

as certified nurse’s assistants and aides, could lead to increased wages and drive up operating

costs. In addition, any increase in regulatory requirements could lead to a need for increased staffing which would increase costs and reduce earnings.

Economic Crisis

An unfavorable economic condition, such as a depression or a major recession, could adversely affect the ability of seniors to afford resident fees and therefore could cause occupancy, revenues, and earnings to decline.

24

Management Feasibility

Organizational Structure

LifePointe Memory Care is organized as a Limited Liability Company under the laws of

Mississippi. Life Pointe Memory Care is a separate organization from LifePointe Village, LLC; however, the Members of LifePointe Memory Care are also the Members of LifePointe Village.

LifePointe Village has been in operation since 2008 and is currently operating at capacity. Both

LifePointe Memory Care and LifePointe Village are subsidiaries of LifePointe Holdings, LLC.

LifePointe Village currently has 16 residents in its memory unit that will be transferred to

LifePointe Memory Care.

Management Structure

The owners of LifePointe Memory Care have engaged Selah Management Group, LLC to manage and operate the facility. Selah currently manages LifePointe Village and is an

experienced group that specializes in operations of senior living industry. Selah has completed

ten projects similar in scope and size as LifePointe Memory Care. See Appendix III for an overview of Selah Management Group and Curricula Vitae for its principals.

The Consultant has interviewed the key management for this project and has researched their business and industry experience. In the opinion of the Consultant, management is more than

qualified to efficiently start up this facility and manage its growth.

Curricula Vitae for key management personnel are contained in Appendix III.

Stage of Business

This is an expansion of an organization that has successfully developed and managed a similar project, LifePointe Village, an assisted living facility. This project is in essence a continuation of

a similar project. As noted above, the management group has extensive experience in operating

similar facilities.

Conflicts of Interest

There are no conflicts of interest. As noted above, this industry is highly regulated. The principals of LifePointe Memory Care have no financial interest in any vendor or in any referral

source other than LifePointe Village.

25

Consultant’s Qualifications

This report was prepared by Jack H. Jennings. The Consultant has over 35 years of direct

experience in the preparation of economic analyses, financial analyses, feasibility studies, and market studies of similar projects and markets.

He has prepared Feasibility Studies for a wide variety of industries including assisted living facilities, hospitals, medical facilities, retirement homes, resorts and corporate retreats,

hospitality, mixed-use developments, retail, and service operations.

He has successfully completed consulting engagements in the U. S., Europe, Japan and the

former Soviet Union for firms ranging in size from start-up to firms in Fortune's Top 50. He is

skilled in the areas of corporate finance, strategic planning, marketing assessment, mergers & acquisition, and financial planning. He gained strategic planning, corporate finance, and

accounting experience with Fortune 500 firms. Earlier in his career he was a senior consultant

with a National CPA Firm.

Mr. Jennings earned his Master of Business Administration from the University of Dallas and his

Bachelor of Science in Industrial Engineering from Texas A&M University. He is a Certified Financial Consultant (CFC), Certified Financial Manager (CFM), Certified Management

Accountant (CMA), and is licensed as a Professional Engineer by the State of Texas. He is also a

Fellow in the Institute of Financial Consultants.

26

Disclaimer

This report is based on information derived from sources usually considered reliable. If additional facts come to light, our conclusions may change accordingly. Neither the sources of

information nor the conclusions of this report can or will be guaranteed.

The development of a new venture of this type is subject to numerous risks, some known and

some unknown, including, but not limited to, (a) economic risk, (b) market and pricing risk, (c)

management risk, (d) competition, (e) weather, (f) organizational risk, (g) technical risk, and (h) political risk.

While we believe the expectations, anticipations, plans, and estimates reflected in the forward-looking financial statements are reasonable, we cannot guarantee future results, levels of activity,

performance, or achievements. In addition, factors that we are not currently aware of, or are

immaterial at this time, may cause actual results or performance to differ materially from any future results or performance expressed or implied in such forward-looking statements.

27

Certification

Prior to this engagement we had no relationship with LifePointe Memory Care, LLC or any of its

affiliates.

We have no present or contemplated future interest in the assets or income from the properties

that are the subject of this report.

We have no personal interest or bias with respect to the subject matter of this report or the parties

involved.

Our compensation for preparing this report is in no way contingent upon the funding of this

project.

28

Appendix

I. Description of DeSoto County and the Southaven Area

II. Dementia and Specific Types

III. Curricula Vitae for Key Management

IV. Architectural Drawing and Floor Plan

V. Financial Statements

29

Appendix I

Description of DeSoto County and the Southaven Area

30

History of DeSoto County Desoto County was established on Feb. 9, 1836, and is one of the twelve counties formed in that year from the Chickasaw Indian cession of 1832. The county is bounded on the north by Shelby County, TN, on the south by the counties of Tate and Tunica, on the east by Marshall County and on the west by the Mississippi River and Crittenden County, AR. Hernando is the county seat. The area of Desoto County is about six hundred square miles. Desoto County was named in honor of Hernando De Soto, the county seat taking his Christian name. Among the early settlers were the families of the Condras, Paynes, Sanders, Cobbs, McMahans, Blockers, Finns, Atelinsons, Browns, Walkers, Martins, Mitchells, Moselys, and Cartrights. The Louisville, New Orleans and Texas railroad cross the county on the west side with the Illinois Central crossing in the center and east. Some of the towns besides the county seat were: Alpika, Blythe, Bright, Cedarview, Cockrum, Cublake, Days, De Soto Front, Eudora, Grover, Horn Lake, Ingram's Mill, Kelly, Lake View, Lewisburg, Love's Station, Miller, Moorotown, Nesbit, Norfolk, Olive Branch, Penton, Pleasant Hill and Plum Point.

Southaven

Southaven was officially incorporated in 1978. The city is so named because of its location south of Whitehaven. It is located 14 miles south of Memphis on the Tennessee – Mississippi border. Southaven is also known the “Top of Mississippi”. Southaven is known as one of the fastest growing cities in the southeast of the United States, the city is home to numerous sights.

The area was originally inhabited by the Mississippian Indians. It is the childhood home of well - known novelist John Grisham, and singer and songwriter Cory Branan. The city is also home to the famed mansion of Elvis Presley. Travellers can visit noteworthy sites like DeSoto Civic Centre, the Graceland, AutoZone Park, the Memphis Motorsports Park, the FedExForum and the Arkabutla Lake.

Source: USGenWeb Project and DeSoto Genealogical Society

31

Appendix II

Dementia and Specific Types

32

Common Types of Dementia and Their Characteristics

Type of Dementia Characteristics

Alzheimer’s Disease

Most common type of dementia; accounts for an

estimated 60 to 80 percent of cases. Difficulty

remembering names and recent events is often an early

clinical symptom; apathy and depression are also often

early symptoms. Later symptoms include impaired

judgment, disorientation, confusion, behavior changes and

difficulty speaking, swallowing and walking.

New criteria and guidelines for diagnosing Alzheimer’s

were proposed and published in 2011. They recommend

that Alzheimer’s disease be considered a disease that

begins well before the development of symptoms.

Hallmark abnormalities are deposits of the protein

fragment beta-amyloid (plaques) and twisted strands of

the protein tau (tangles) as well as evidence of nerve cell

damage and death in the brain.

Vascular Dementia

Previously known as multi-infarct or post-stroke dementia,

vascular dementia is less common as a sole cause of

dementia than is Alzheimer’s disease.

Impaired judgment or ability to make plans is more likely

to be the initial symptom, as opposed to the memory loss

often associated with the initial symptoms of Alzheimer’s.

Occurs because of brain injuries such as microscopic

bleeding and blood vessel blockage. The location of the

brain injury determines how the individual’s thinking and

physical functioning are affected.

In the past, evidence of vascular dementia was used to

exclude a diagnosis of Alzheimer’s disease (and vice versa).

That practice is no longer considered consistent with

pathologic evidence, which shows that the brain changes

of both types of dementia can be present simultaneously.

When any two or more types of dementia are present at

the same time, the individual is considered to have “mixed

dementia.”

Dementia with Lewy Bodies (DLB)

People with DLB have some of the symptoms common in

Alzheimer’s, but are more likely than people with

Alzheimer’s to have initial or early symptoms such as sleep

disturbances, well-formed visual hallucinations, and

muscle rigidity or other parkinsonian movement features.

Lewy bodies are abnormal aggregations (or clumps) of the

protein alpha-synuclein. When they develop in a part of

the brain called the cortex, dementia can result. Alpha-

synuclein also aggregates in the brains of people with

Parkinson’s disease, but the aggregates may appear in a

pattern that is different from DLB.

The brain changes of DLB alone can cause dementia, or

they can be present at the same time as the brain changes

of Alzheimer’s disease and/or vascular dementia, with

each entity contributing to the development of dementia.

When this happens, the individual is said to have “mixed

dementia.”

33

Mixed Dementia

Characterized by the hallmark abnormalities of Alzheimer’s

and another type of dementia — most commonly, vascular

dementia, but also other types, such as dementia with

Lewy bodies. Recent studies suggest that mixed dementia

is more common than previously thought.

Parkinson’s Disease

As Parkinson’s disease progresses, it often results in a

severe dementia similar to DLB or Alzheimer’s.

Problems with movement are a common symptom early in

the disease. Alpha-synuclein aggregates are likely to begin

in an area deep in the brain called the substantia nigra.

The aggregates are thought to cause degeneration of the

nerve cells that produce dopamine. The incidence of

Parkinson’s Disease is about one-tenth that of Alzheimer’s

disease.

Frontotemporal Lobar Degeneration (FTLD)

Includes dementias such as behavioral variant FTLD,

primary progressive aphasia, Pick’s disease and

progressive supranuclear palsy. Typical symptoms

include changes in personality and behavior and

difficulty with language. Nerve cells in the front and

side regions of the brain are especially affected. No

distinguishing microscopic abnormality is linked to all

cases.

The brain changes of behavioral variant FTLD may be

present at the same time as the brain changes of

Alzheimer’s, but people with behavioral variant FTLD

generally develop symptoms at a younger age (at

about age 60) and survive for fewer years than

those with Alzheimer’s.

Creutzfeld-Jakob Disease

Rapidly fatal disorder that impairs memory and

coordination and causes behavior changes. Results

from an infectious misfolded protein (prion) that

causes other proteins throughout the brain to

misfold and thus malfunction. Variant Creutzfeldt-

Jakob disease is believed to be caused by

consumption of products from cattle affected by

mad cow disease.

Normal Pressure Hydrocephalus

Symptoms include difficulty walking, memory loss

and inability to control urination. Caused by the

buildup of fluid in the brain. Can sometimes be

corrected with surgical installation of a shunt in the

brain to drain excess fluid.

34

Appendix III

Curricula Vitae for Key Management

35

LifePointe Owners

John. E. Dunlap, Manager

John Dunlap serves as a Manager and Member of LifePointe. Early in his career, Mr. Dunlap served as legal counsel and secretary to Holiday Inns of America in Memphis, Tennessee. For many years thereafter, Mr. Dunlap was a partner with Humphreys, Dunlap & Wellford, and is now counsel for a local law firm. Mr. Dunlap has also been involved as an owner in the development, financing, and management of hospitality projects and other businesses. From 1954 to 1958, he attended Rhodes College in Memphis, Tennessee and earned a Bachelor of Arts in History. From 1958 to 1961, he attended Vanderbilt Law School in Nashville, Tennessee and earned a Doctor of Jurisprudence degree. From 1960 to 1965 he served in the United Sates Marine Corps Reserve.

Joe H. Bryan, Manager

Joe Bryan serves as a Manager and Member of LifePointe. Mr. Bryan was involved in church development ministries for over 50 years. Mr. Bryan has led companies in the design, construction, financing, and furnishing of churches throughout the nation and has served as a consultant in many faith vases senior housing projects. From 1956 to 1960, Mr. Bryan attended California Baptist University in Riverside, California and studied Sociology. In 1967, he was honored with a Doctorate from Linda Vista Baptist College and Seminary in San Diego, California.

David M. Dunlop, Manager

David Dunlop serves as a Manager and Member of LifePointe. He is a native of Memphis, Tennessee and a graduate of Wake Forest University with a B. A. in Political Science and Law. He obtained his Doctor of Jurisprudence from the University of Tennessee College of Law in 1985. Mr. Dunlop has been in private practice in Memphis since 1985. Mr. Dunlop has broad experience in diverse areas of practice including general corporate law, real estate transactions, commercial loans, acquisitions, mergers, secured transactions, civil litigation, bankruptcy, and probate. He has served as legal counsel in the area of senior living development and management for the past four years. Mr. Dunlop is the son of John R. Dunlop.

Ron P. Kirkpatrick, Jr., Manager

Ron P. Kirkpatrick has over 35 years of commercial real estate development and operational experience. Ron graduated from the University of Memphis in 1981 with a Bachelor of Business Administration degree in management with a minor degree in real estate. Ron’s experience includes developing hotels, apartments, office buildings, retail shopping centers, and tract nix-use projects. During the late 80’s through late 90’s Ron was the Real Estate Development Director for the County of DeKalb Georgia which makes up one-half the population of Atlanta, Georgia. He specialized in economic redevelopment

36

projects using tax exempt financing incentives. After leaving Atlanta and returning to Memphis, Ron has been very active in commercial real estate.

R. L. Kirkpatrick, Sr., Manager

Ron L. Kirkpatrick has over 50 years of corporate hotel and real estate development experience. He is the former Chairman of the Board of a publicly traded hotel company – Downtowner Hotels. During his tenure as Chairman of the Board of Downtowner, the company developed over 152 properties throughout North and South America as well as Europe. Ron graduated in 1954 from the University of Arkansas with a Bachelor of Business degree. He also attended Harvard University in 1970 for Chief Executive Officers that managed publicly traded companies with revenues exceeding $100,000,000 per year. Since selling his position in Downtowner Corporation, Ron has been involved in many different commercial real estate ventures. Even though Ron is now semi-retired his knowledge and experience is an invaluable resource for the Management Team.

Management Group Selah Management Group, LLC

Selah Management Group is a senior living healthcare firm specializing in operations management, development, marketing, and strategic planning for the senior living industry. This includes Assisted Living Properties, Independent Living Properties, as well as related senior living campus development projects. Founded in 2005 by two experienced and recognized senior living executives, Selah management Group was established to satisfy the increasing demands for the senior living industry. The principals, William T. Filippone and Alan D. Parrish, together bring a combined 60 years of experience in all facets of senior living operations, finance and development. Mr. Filippone and Mr. Parrish founded Selah after growing other senior living companies. The most recent success story is American Senior Living, L. P. During1999, American Senior Living (ASL) completed the acquisition of 18 senior living properties owned by Sun Bridge. That acquisition brought 1,965 assisted living and independent living units to the company along with 144 skilled nursing beds. In 2002, the company added six additional ALF’s to the portfolio that totaled an additional 492 units. The company completed 2005 with revenues exceeding $80,000,000. During the First Quarter of 2006 ASL reached an agreement to sell 18 of its assets to Brookdale Senior Living for an acquisition price that exceeded $124,000,000. The return to the investors of ASL exceeded a 40% annual compounded return. Mr. Filippone has served the senior living industry for his entire business career dating back to 1974. His prior experience includes service in senior executive capacities, as manager and investor, with several healthcare companies that specialized in operations improvement, oversight management, property development along with strategic business planning that led to company expansion with increased growth and shareholder valuation.

37

He has served at the Board level of various healthcare related companies along with the American Diabetes Association, dedicating much of his time to non-profit community organizations. He is a graduate of West Virginia University with a degree in Business Management and Finance.

Mr. Parrish has been in the healthcare industry since 1979 rising from staff accountant to senior financial management and operations positions. Prior to starting Selah he was CFO and then President of a Liberty Healthcare. Mr. Parrish obtained a BSBA degree in Accounting from East Carolina University and is a Certified Public Accountant.

38

Appendix IV

Architectural Drawings and Floor Plan

39

40

41

Appendix VI

Financial Statements

42

LifePointe Memory Care, LLC

Proforma Balance Sheet

As of December 31,

2014 2015 2016 2017 2018

Assets

Cash $212,150 $507,304 $825,364 $1,179,763 $1,572,563

Total Current Assets 212,150 507,304 825,364 1,179,763 1,572,563

Land 650,000 650,000 650,000 650,000 650,000

Building 4,247,932 4,247,932 4,247,932 4,247,932 4,247,932

Capitalized Interest and Fees 1,767,068 1,767,068 1,767,068 1,767,068 1,767,068

Accumulated Depreciation and

Amortization (276,106) (552,212) (828,318) (1,104,424) (1,380,530)

Total Fixed Assets 6,388,894 6,112,788 5,836,682 5,560,576 5,284,470

Total Assets 6,601,044 6,620,092 6,662,046 6,740,339 6,857,033

Liabilities and Member’s Interest

Liabilities

Accounts Payable 36,517 41,833 42,605 43,235 43,886

Total Current Liabilities 36,517 41,833 42,605 43,235 43,886

Long Term Debt 6,015,000 5,905,000 5,785,000 5,660,000 5,530,000

Total Liabilities 6,051,517 5,946,833 5,827,605 5,703,235 5,573,886

Member’s Interest

Members Contribution 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

Retained Earnings (450,473) (326,741) (165,559) 37,104 283,147

Total Member’s Interest 549,527 673,259 834,441 1,037,104 1,283,147

Total Liabilities and Member’s Interest $6,601,044 $6,620,092 $6,662,046 $6,740,339 $6,857,033

43

LifePointe Memory Care, LLC

Proforma Statement of Operations

For The Years Ending,

2014 2015 2016 2017 2018

Residential Service Revenue $1,140,000 $1,920,000 $1,987,200 $2,056,752 $2,128,738

Miscellaneous Revenue 40,460 21,600 22,248 22,915 23,603

Total Revenue 1,180,460 1,941,600 2,009,448 2,079,667 2,152,341

Operating Expenses Personal Care 343,122 438,930 452,098 465,661 479,631

Healthcare Services 15,700 30,000 30,900 31,827 32,782

Recreational/Activities 68,372 68,928 70,996 73,126 75,319

Dietary 223,082 235,272 242,330 249,600 257,088

Housekeeping 36,829 49,393 50,875 52,401 53,973

Maintenance 68,177 78,840 81,205 83,641 86,151

Administration 76,502 78,051 80,393 82,804 85,289

Management Fee 59,023 97,080 102,482 106,063 109,769

Property Insurance 24,000 24,480 25,214 25,971 26,750

Property Tax 19,200 19,968 20,567 21,184 21,820

Depreciation and Amortization 276,106 276,106 276,106 276,106 276,106

Total Expenses 1,210,113 1,397,048 1,433,166 1,468,384 1,504,678

Income From Operations (29,653) 544,552 576,282 611,283 647,663

Interest 420,820 420,820 415,100 408,620 401,620

Net Income (Loss) ($450,473) $123,732 $161,182 $202,663 $246,043

44

LifePointe Memory Care, LLC

Proforma Statement of Cash Flows

For the Years Ended,

2014 2015 2016 2017 2018

Operating Activities

Net Income ($450,473) $123,732 $161,182 $202,663 $246,043

Adjustments to Reconcile Net Earnings to Cash

Depreciation & Amortization 276,106 276,106 276,106 276,106 276,106

Accounts Payable 36,517 5,316 772 630 651

Total Operating Activities (137,850) 405,154 438,060 479,399 522,800

Investing Activities - - - - -

Financing Activities

Long-Term Financing - (110,000) (120,000) (125,000) (130,000)

Total Financing Activities - (110,000) (120,000) (125,000) (130,000)

Net Increase (Decrease) in

Cash ($137,850) $295,154 $318,060 $354,399 $392,800

Cash at Beginning of Year 350,000 212,150 507,304 825,364 1,179,763

Cash at End of Year $212,150 $507,304 $825,364 $1,179,763 $1,572,563