ABHOW Preliminary Planning Parameters – FY 2010 Budget Board Meeting February 19, 2009

Preliminary Planning Parameters for FY 2010 Budget Strategic Assumptions: ABHOW debt will not be refunded in 2009 and SJG will need to obtain Phase IIa financing under ABHOW with transfer to Cornerstone between in FY 2010 Management fees from ToP will increase with continuing revenue growth Seniority profitability will continue to increase slightly Foundation contribution revenue will be flat with FY 2009 budget or down if significant shortfall PG will continue in the “trough” period for repositioning with declining occupancy and entrance fees JP will have achieved stabilization

Preliminary Planning Parameters for FY 2010 Budget Operating Assumptions: Salary increase assumption lowered to 3.0% given economic challenges Increases higher than this will need to be covered by additional fee increases or reductions in FTEs Fringe benefits modeled at 29% overall, and at the same community specific percentage as in FY 2009 Health benefits estimated increase of 10% Other expenses held to an increase of 3.0%

Preliminary Planning Parameters for FY 2010 Budget Operating Assumptions: Interest expense increase of $1 million from FY 2009 budget Anticipate that ABHOW refunding will not occur until late FY 2010 if at all ~ use actual fixed rates on bonds, assume 2.5% SIFMA plus 2.6% fees on variable Assume that interest expense on $25 million of FY 2006 debt will be expensed with SJG Ph I opening – assume 2.5% SIFMA for all in cost of 4% for $1 million additional interest expense Assume interest on JP with 2.5% SIFMA and swap in place at blended rate of 6% on $23 million of debt for $1.4 million

Preliminary Planning Parameters for FY 2010 Budget Operating Assumptions: Allocation of Home Office overhead remains at 10.5% of budgeted expenses – with a cap of 8.5% of cash revenues for individual communities New program development will be bottom-line neutral Cash operating margin target for all entities to be determined initially based on multi-year plan so we can understand differences / needed refinements to the model – Continue to focus on revenue increases ½% higher than expenditure increases We want to outperform the multi-year forecast model –

Preliminary Planning Parameters for FY 2010 Budget Home Office Assumptions: Allocation of Home Office overhead to decline to 10.5% of budgeted expenses – with a cap of 8.5% of cash revenues No FTE growth over FY 2009 budget Budget no greater than 110% prior year actual for budgets with “cushions” in other expenses – Budget for ½ of incentive comp for $600,000 Initial requests for programs need additional review

Preliminary Planning Parameters for FY 2010 Budget Seniority Assumptions: Two new management contracts at $100,000 each New staff person to support managed contracts growth if not filled in FY 2009 Ongoing support of redevelopment Market increases to ABHOW contracts

Preliminary Planning Parameters for FY 2010 Budget American Baptist Properties Assumptions: ABP will generate losses with deferred payments on Boise ground lease and workout support for Las Ventanas Estimate a $500,000 loss as starting point

Preliminary Planning Parameters for FY 2010 Budget Affordable Housing Assumptions: Continuing pace of development of two communities per year Primarily tax credit financed Upfront need for capital of $500,000, rolling Staff complement increases in FY 2009 will be adequate to carry into FY 2010

Preliminary Planning Parameters for FY 2010 Budget Investment Assumptions: Investment income budget for assumes no realized gains given strains in the market Assume $2.0 million of dividend and interest earnings, less than FY 2008 given declining available balances with redevelopment and short term fixed rates declining

Preliminary Planning Parameters for FY 2010 Budget Foundation Assumptions: Foundation contributions, bequests, maturities of $600,000 Plan for endowment matching pool of $100,000 depending on entrance fee performance Plan for Home Office subsidy of $400,000 to keep administrative charge under 1.5% of endowment value Solve for a distribution rate that will maintain the aggregate distribution to communities – start with 3.8%

Preliminary Planning Parameters for FY 2010 Budget Capital Assumptions: Net entry fees from re-occupancy increase to $15.0 million –fill of SJG offsets curtailment at PG to plan for attrition Principal retirement for existing variable rate debt $805,000, for fixed rate debt $1.135 million for 2006 issue $1.065 and JP $250,000 for a total of $3.35 million plus AH Capital expenditures budget to be determined after determining cash operating margin – initial target at $11 million – needs to be based on Zumbrunnen studies and part of a three year solid normal capital and deferred maintenance plan Apartment remodel threshold for capitalization to increase from $10,000 to $20,000 per apartment

Preliminary Planning Parameters for FY 2010 Budget These assumptions at a high level suggest: FY 2010 FY 2009 Bud Cash from Operations $ 8,000 $ 7,363 Cash from entrance fees 15,000 13,361 Investment income 2,500 3,626 Total cash sources $ 25,500 $ 24,620 Capital spending 11,000 12,253 Interest expense 7,700 7,031 Debt principal 4,000 3,985 Redevelopment projects (detail next pg) 5,000 3,200 Other investment 500 500 Total cash uses 28,200 26,969 Net cash and investment change $ (2,700) $ (2,349)

Preliminary Planning Parameters for FY 2010 Budget Unrestricted Redevelopment Capital Ex: TSJG Additional Phase II 2,000 Valle Verde 13,000 Available to draw from trustee for VV (11,000) Piedmont Gardens 500 Pilgrim Haven 500 Total Estimate $ 5,000