B.C. Ziegler and Company | Member SIPC & FINRA

KENDAL AT HANOVER – RESIDENT DISCUSSION

Keith RobertsonManaging Directorkrobertson@ziegler.com

PRESENTED BY

ZIEGLER INVESTMENT BANKING | SENIOR LIVING FINANCE PRACTICE

November 20, 2019

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Investment banking, capital markets and proprietary investment services offered through B.C. Ziegler and Company. FHA mortgage banking services are provided through Ziegler Financing Corporation which is not a registered broker/dealer. Ziegler Financing Corporation and B.C. Ziegler and Company are affiliated and referral fees may be paid by either entity for services provided.

This presentation was prepared based upon information provided by Management and contains certain financial information, including audited and unaudited information, certain statistical information and explanations of such information in narrative form (the “Information”). Management believes this information to be correct as of the date or dates contained herein. However, the financial affairs change constantly, and such changes may be material. Today’s discussion may contain forward-looking statements, which may or may not come to fruition depending on certain circumstances, including those outside the control of management. Please be advised that management has not undertaken, assumed no duty and are not obligated to update the Information. In addition, please be advised that past financial results do not predict futurefinancial performance.

DISCLAIMERS

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CHANGING BUSINESS AS USUAL

Changing Customer

Workforce Pressures

Skilled Nursing/

Post-Acute

Technology &

Innovation

COMPETITION

Source: Ziegler Investment Banking

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OVERALL SECTOR OBSERVATIONS

• Not-for-Profit Senior Living sector is generally healthy– Highest occupancy levels since ‘07; Highest number of rated

organizations• Active reinvestment in existing campuses• Continued growth of community-based platforms• New location growth not fast enough to counter rate of NFP

closures and dispositions• Active merger, acquisition, affiliation environment• Working hard on workforce and developing leaders• Devoting significant resources to adapting to dynamic

healthcare environment• Investing in technology and innovation

Source: Ziegler Investment Banking

5Sources: Urban Land Institute; and Source: U.S. Census Bureau National Population Projections based on 2010 Data. 2016 Base Population; Projections updated in 2017 (released March 13, 2018)

Increasing Demand

0.00

20.00

40.00

60.00

80.00

100.00

120.00

1980 1990 2000 2010 2020 2030 2040 2050 2060

(In M

illio

ns)

65 - 74 75 - 79 80 - 84 85+

We Are Here

DEMOGRAPHICS DEFINE THE MARKET FORECASTED U.S. SENIORS POPULATION (1980 TO 2060) (MILLIONS)

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FACT SHEET: AGING IN THE UNITED STATES

Demographics Positive Developments Challenges

Population of 65+ will nearly double by 2060

Education levels are increasing

Obesity rates among 60+ have been increasing

Older adult population becoming more racially diverse

U.S. life expectancyincreased

Wide economic disparities

Diversity gap between generations

Gender gap in life expectancy is narrowing

More older adults are divorced

Older adults are working longer

Steep rise in American’s living with Alzheimer’s disease

Aging in place Uncertainty over future of Social Security andMedicare

Source: Population Reference Bureau, July 2019, “Aging in the United States”

75% of NFPs have dedicated memory care

units; increase from 60% last year

7Source: The Transamerica Center for Retirement Studies, December 2017

BABY BOOMER RETIREMENT EXPECTATIONS

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OVERALL GROWTH OBSERVATIONS

• Not-for-profit (NFP) senior living growth is picking up in select markets, but new location growth remains relatively flat– Dispositions and closures outpacing new location growth

• For-profit growth of new locations continues to be high

• NFP growth through affiliation and acquisition has surpassed growth through new development

• NFPs are actively reinvesting in existing campuses

• Overall growth of NFP residential housing was 2.8% in 2018

• Expansion of the continuum with home and community-based services (HCBS) platforms (joint ventures common)

Source: Ziegler Investment Banking

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FUTURE NOT-FOR-PROFIT NEW LOCATIONSANTICIPATED OPENINGS IN THE NEXT 5 YEARS

Source: Ziegler Investment Banking, September 2019

• Tracking an additional 10 For-Profit Life Plan Communities in development

1

2 1

4

3

53 MD, 2

7

3

Upper New England, 2

1

3

1

1

1

2

41

3

50 NFP New Locations

LPC, 48%

IL only, 8%

IL/AL/MC, 38% AL/MC,

2%

AL/SN, 4%

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SATELLITE CAMPUSES – NEW CAMPUS ALTERNATIVETYPICAL ELEMENTS OF NEW LOCATION SATELLITE CAMPUSES

• Geographic proximity to other campus, often a larger, full-continuum community

• Generally smaller development with fewer amenities• Limited, if any, healthcare settings• Contractual relationship with main campus (primarily for

healthcare; access to amenities)• Generally would not exist without the resources and support of

main campus• Branding tied to parent• Reliant on main campus for governance, leadership, etc.

Source: Ziegler Investment Banking

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COMMUNITY EXPANSION & REPOSITIONINGS: TRENDS 2014-MAY 2019

Source: Ziegler Investment Banking (deals as of 5/31/19)

86%

52%

43%39%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Independent Living Common area upgrades Skilled Nursing Memory Care

Ziegler-Financed Deals 2014-2019: Use of Funds

Expansion of ILUsUnit changes/upgrades

Combining ILUs

Dining venuesWellness centers

Common area upgrades

Modernizing SNFConversion to private

Household models

Specialized memory support units-generally in AL

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0%

2%

4%

6%

8%

10%

12%

14%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Construction vs. Inventory; MAP31Seniors Housing | 4Q05 – 3Q19

For-Profit Independent Living*

For-Profit Assisted Living*

Not-for-Profits

FOR-PROFIT INVESTMENT IN INDEPENDENT LIVING IS INCREASING

Source: NIC MAP® Data Service | www.nic.org/nic-map; *Excludes CCRCs

2019 LZ 200 Growth: 3.0%

2019 LZ 200 (data as of 12/31/18)

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SIGNIFICANT NEW DEVELOPMENT COMING FROM FOR-PROFIT/PRIVATE SECTOR

Publicly announced projects January 2019 through August 2019

Source: Ziegler Investment Banking; Tracking of “In The Pipeline” publicly announced projects, Senior Housing News

Type # of New Campuses # of Expansions or Repositionings

Not-For-Profit Sponsor 14 14

For-Profit Owner 243 27

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SECTOR CONSOLIDATION• Similar to other health and service-related sectors, the not-

for-profit senior living sector is consolidating

• Sponsorship Transitions– Affiliations– Mergers– Acquisitions– Dispositions

29 41 63 97 149 204 264 320385 446

36 5175

111174

254

345405

568651

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 2016 2017 2018 Sep-19

Cumulative Totals (2010-SEPT 2019) by # of Transactions & # of Communities

Transactions Market-Rate Communities

Note: Includes market-rate communities; excludes government subsidized; The ELGSS community count is also excluded from the community count (represents 160+ communities); Source: Ziegler Investment Banking 9/1/2019

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PRIMARY CONSOLIDATION DRIVERS VARY DEPENDING ON STRENGTH OF ENTITIES INVOLVED

Pressured Situations

Strategic Mergers & Affiliations

Complexities of Healthcare

Leadership Turnover

Inability to be competitive with reimbursement pressures; not viewed as strong partner to health networks

CEO termination or retirement; no clear successor; inability to recruit high-level talent

Board “asleep at the wheel”; unaware of threats and pressures and need to change and be proactive

Complexities of Healthcare

Leadership Turnover

Board Strength

Strengthen existing platforms; benefits of scale

CEO departure or retirement opens dialogue

Board initiates; understands benefits peer merger or affiliation might bring

Source: Ziegler Investment Banking

Board Strength

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UNIVERSITY-RELATED SENIOR LIVINGRELATION TO UNIVERSITY

SOURCE: Ziegler Investment Banking, as of 9/1/17

12

32

19

1

12

6

0

5

10

15

20

25

30

35

Direct Ties EstablishedTies

Indirect Owned NoAffiliation

Unknown

Relationship to College/University

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UNIVERSITY-RELATED SENIOR LIVING“ESTABLISHED OR DIRECT TIES” EXAMINED

7.3%

51.2%

36.6%

4.9%

Retirement Community Distance from College/University

Greater Than 2 Miles

Less Than 2 Miles

Adjacent To or OnCampus

Unknown

SOURCE: Ziegler Investment Banking, as of 9/1/17

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SENIOR LIVING & SERVICES WORKFORCE

• Technologies and innovative solutions

• Benefits• Staff training

• Minimum wage hikes• Cost of insurance• Bonus/incentive comp.• Cost of turnover

• Branding• Improving internal

efforts• Starting younger

• AI/Technology

• Front-line staff• Middle-Management• C-Suite• External partners

Stakeholder Groups Recruitment

Retention$

Source: Ziegler Investment Banking

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DEFINING HOME & COMMUNITY-BASED SERVICES

PACE Home Care Hospice

Adult Day CCaH Villages

NORCs Home Health

Sources: Ziegler Investment Banking

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HCBS SERVICE LINES AMONG NOT-FOR-PROFIT PROVIDERS• Percentage of providers offering HCBS (off-campus to non-residents) -

likelihood increases with the size of the organization

Source: Preliminary 2019 LeadingAge Ziegler 200 (data as of 12/31/18)

70%

50%45%

70%

59%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Largest 10 Largest 100 Largest 200

Multi-Site Providers (LZ 200)

2018 2019

34%

46%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Largest 150 Single-Sites

Single-Site Providers

2018 2019

• 70% have annual HCBS revenue <$10M• 30% of providers are in joint venture for HCBS

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THE GROWING COMPLEXITY OF THE SKILLED NURSING SERVICE LINE

• Changes occurring within the skilled nursing side of the business (long-term & post-acute)

Reimbursement Challenges

Shifting Consumer Preference

Aging-in-Place

Regulatory Pressures

Workforce Shortages“Skip the SNF”

Source: Ziegler Investment Banking

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TECHNOLOGY: NOT-FOR-PROFITS AS INNOVATORS

“Nonprofit organizations are the pioneers of seniors housing. The first communities, dating back to the early 1900s, were affiliated with religious organizations. Fast-

forward to today and nonprofit organizations are again on the forefront of innovation.”

Source: Seniors Housing Business, August-September 2019

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ZIEGLER LINK•AGE FUNDS

HEALTH SYSTEMS INDUSTRY PROFESSIONALSSENIOR LIVING PROVIDERS

HEALTHCARE IT

• Population Analytics• Clinical Decision Support• Care Management Software• Regulatory Reporting• Medication Management and

Adherence• Remote Monitoring• Telehealth Platforms

HEALTHCARESERVICES

• Homecare 2.0• Palliative and Hospice Care• Capitated Physician Models• Concierge Medicine• Behavioral Change

Management• Emerging Managed Care

Models

OTHER POST-ACUTE OR AGING RELATED

• Post-Acute Care Diagnostics and Therapeutics

• Medicare Advantage / Dual Eligible Plans

• Chronic Disease Management

• Institutional Pharmacy

GENERATING RETURNS, both financial and strategic, for organizations across the healthcare and aging services landscape that have a significant interest in finding innovative solutions to improve the independence, quality and cost of care, and overall lives of the aging population.

Source: Ziegler and Link•Age

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Ziegler is a privately-held investment bank, capital markets and proprietary investments firm A registered broker dealer with SIPC & FINRA Ziegler provides its clients with capital raising, strategic advisory services, equity & fixed-income trading and researchFounded in 1902, Ziegler specializes in the healthcare, senior living and educational sectors as well as general municipal finance

ABOUT ZIEGLER