1. Investing in Seniors Housing
Maravilla, Santa Barbara, CA
Investing in Seniors Housing
St. Joseph's University Real Estate and Construction Forum
Presentation by Anthony J. Mullen, CPA
Partner, Royal Star Properties & Senior Fellow, NIC
April 9th, 2013

2. Today’s seniors housing is a mix of real estate, hospitality and care.2

3. Seniors Housing Continuum3

4. Rents Vary by Care Segment
Average Monthly Rent by Care Segment as of 2012Q4
Housing, Laundry,
Meals, Socialization
Source: NIC MAP® Data & Analysis Service 4

5. Size of the Property Market
Estimated National Counts as of 2012Q4
Number of Properties
Number of Units
Majority Independent Living
4,048
878,315
Majority Assisted Living
7,118
534,081
Majority Nursing Care
11,206
1,505,944
Total
22,372
2,918,340
Source: NIC Research 5

6. Market Values by Property Type
Implied Market Values ($B) as of 2012Q4
Source: NIC Research 6

7. Health Care REITs Outperform Other REITs
Annualized Total Returns (%)
1-, 3-, 5- and 7-year Periods
December 31, 2012
-- Leave Apartment, Hotel, Health Care
-- Reverse the order (7, 5, 3, 1)
Source: NAREIT 7

8. Seniors Housing Total Returns Outpaced NPI*
Annualized Total Returns (%)
1-, 3-, 5- and 7-year Periods
December 31, 2012
-- Leave Apartment, Hotel, Health Care
-- Reverse the order (7, 5, 3, 1)
*NCREIF Property Index (NPI)
Source: NCREIF; AEW Research 8

9. Seniors Housing Rents Less Volatile
Year-over-Year Asking Rent Growth Trends (%)
2007Q1 – 2012Q4
-- Leave Apartment, Hotel, SH
Source: NIC MAP® Data & Analysis Service; MBAA; REIS; STR 9

10. Seniors Housing Occupancy Held Up Well
Year-over-Year Occupancy Trends (Basis Points)
2007Q1 – 2012Q4
-- Leave Apartment, Hotel, SH
Source: NIC MAP® Data & Analysis Service; MBAA; REIS; STR 10

11. Demand Drivers for Seniors Housing
Strengthening demographics
Rising penetration rates and product acceptance
Longer life expectancy
Fewer informal family care givers available
Potentially more ADL needs 11

12. Strong Demographic Growth
Population Growth (%),
CAGR (%):
75+ Cohort:
2.2
25-34 Cohort:
0.6
U.S. Population
0.8
Source: U.S. Census Bureau 12

13. Demographics Will Remain Strong for Decades
Population Growth (%),
Source: U.S. Census Bureau 13

14. Pace of New Supply is Now Tempered
Distribution of Existing Units by Year Property Opened (%),
-- Remove Nursing Care
Source: NIC MAP® Data & Analysis Service 14

15. Construction Activity Has Been Tempered
Construction vs. Inventory (%); MAP31
2005Q4 – 2012Q4
Source: NIC MAP® Data & Analysis Service 15

16. Moderating Supply Growth to Aid Recovery
Seniors Housing Historical and Forecast Supply-Demand; MAP31
2006Q1 – 2013Q4’F
Source: NIC MAP® Data & Analysis Service 16

17. Seniors Housing Average Cap Rates Higher
Rolling Four-Quarter Cap Rate/Yield (%)
2008Q1 – 2012Q4
-- Remove Office
Source: NIC MAP® Data & Analysis Service; RCA; FRED 17

18. Obesity on the Rise
Distribution of Healthy, Overweight, and Obese Adults (%),
Source: Centers for Disease Control and Prevention 18

19. Institutional Interest in Seniors Housing High
Relative Attractiveness of Property Types for New Investments by Year
2010 – 2013 (Ratings: 1 = least attractive, 5 = most attractive)
-- Retail, Office, Infrastructure, MBO  Remove
-- Remove 2010 & 2011
Source: 2013 Plan Sponsor Survey; Kingsley Associates; Institutional Real Estate, Inc. 19

20. Critical Issues to Accept for 1st Time Players
Virtually no lender will finance an inexperienced first time buyer of an existing property without an experienced operator.
No lender will finance a ground up property without an experienced development partner and an experienced management company.
If you intend to be in the business long term, hire talent with 10+ years of experience and form your own management company. 20

21. Bankruptcy Warning
The average net move-in per month is substantially below apartments.
Be ultra conservative and use a proven sales consultant with 15+ years experience or you will likely fail.
Do not use more than 4 net move-ins per month in IL, 2.5 net per month in AL and 1.5 net per month in ALZ in your pro forma.
Unlike apartments, this product must be sold in 95% of the cases…very few seniors want to move to IL and AL! 21

22. Why Professional Selling Matters
Independent Living Occupancy by Quartile; MAP31
2005Q4 – 2012Q4
Source: NIC MAP® Data & Analysis Service 22

23. Key Takeaways
Seniors housing and care’s market value is $300 billion and growing. 
Seniors housing private and public investment returns outperformed other commercial real estate property investments during the past seven years.
Three of the 10 largest REITs are now health care REITs.
Seniors housing was a resilient real estate sector during the economic recession. 23

24. Key Takeaways Better than average outlook for market fundamentals
Solid and relatively stable investment returns
Increasing presence of institutional investors
A range of investment strategies that potentially also diversify a multi-asset portfolio
Variety of avenues for investment available
Experienced, quality operator is key to mitigating risks and achieving success through various cycles 24

25. NIC Overview

26. About NIC Not-for-profit data and research organization
Mission – to facilitate informed investment in the seniors housing and care industry
Research, Data & Analytics
NIC assesses trends shaping the industry as they relate to investors, lenders, owners and operators
NIC's NIC MAP® Data and Analysis Service tracks more than 12,600 properties on a quarterly basis in the 100 largest metropolitan markets.
Conferences & Events
NIC hosts two signature deal-making conferences annually connecting operators with capital providers
Proceeds from events are used to fund data and research efforts 26

27. NIC MAP® Data and Analysis Service
Leading resource for data on independent living, assisted living, memory care, nursing care and CCRC properties.
Tracks more than 12,600 properties quarterly in the 100 largest metropolitan markets
Actionable market data for operators, developers, analysts, investors to:
Identify new market opportunities
Measure and benchmark property performance (occupancy and rents) by care and unit type
Manage portfolios more efficiently
Anticipate emerging market trends by monitoring sales transactions, construction activities
Demonstrate performance to key stakeholders
Data access via subscription or standardized reports
Visit or contact John Blumer at to learn more 27

28. Investing in Seniors Housing
Sagewood, Phoenix, AZ
Investing in Seniors Housing
National Investment Center for
the Seniors Housing & Care Industry (NIC)
| (410)