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Advising the Senior Housing Community

The Resilience of Seniors Housing Real EstateFollowing the Global Financial Crisis of 2007 – 2008

Presented by Sean Murphy, Executive Chairman, CensusUp

04/11/2023

04/11/20232

I. Thesis

Residential real estate defaults negatively impacted the commercial real estate sector, generally, but seniors housing held its value Residential real estate bubble peaked in April 2006 Prices began steep fall mid-2006 Bursting of residential real estate bubble:

Produced the Global Financial Crisis (GFC) of 2007-2008 Negatively impacted commercial real estate (CRE) for years to

come, both debt and equity capital Fundamentally changed institutional investors’ allocations to CRE

Funds (CREFs) Caused institutions to retreat to core assets (e.g. Central Business

District office in select metro areas) and reduce exposure to other CRE asset classes

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II. The Residential Real Estate Bubble

US homeownership rate rose substantially between late 90’s and 2006 BUT: Hyper-growth driven by easy credit (i.e., “Subprime Debt”)

Residential Real Estate Bubble: Average US Home Price Nearly Doubled between 1995 – 2005 from approx. $135,000 to approx. $250,000

Buyers’ manic purchasing, particularly by first-time homeowners with sub-standard FICO scores

2006 Peak to Rapid Crash - No Plateau

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III. The Crash Buyers sought quick

wealth (“flipping”) Unqualified/

unsophisticated borrowers

Popular Adjustable Rate Mortgages (ARMs) with “teaser rates” Upon loan re-set:

dramatically higher rates and mortgage payments

Widespread belief: real estate prices only rise

Misplaced reliance on ease of property refinances

Manic Buying. Peak. Massive Crash

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III. The Crash: Subprime Meltdown Massive pools of

Residential Mortgage Backed Securities (RMBS) and Collateral Debt Obligations (CDO) 2003 – 2007

Late 2006: Subprime defaults rise dramatically

July 2007, Moody’s/ S&P downgrade RMBS & CDOs

Late 2006

Subprime defaults rise at alarming

rates

For 6 more months, ratings agencies continue to give

AAA ratings to new MBSs and CDOs

July 2007

MBS/CDOs lose most of their value

New securitizations vanish

90% of AAA-rated RMBS downgraded

to junk

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III: The Crash: Foreclosures Nationwide The days of easy

credit and the residential real estate bubble rapidly morphed into a foreclosure epidemic across the country

Economic models failed – credit rating agencies relied upon erroneous assumptions of very conservative residential loan default ratesSource: http://blog.builddirect.com/foreclosure-crisis-what-to-do/

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IV. The GFC (“Great Recession”) Crushed Investments

US Stockholders suffered losses of approx. $8 TRILLION during 2008

June 2007 - Sept 2008: Bear Stearns subprime hedge funds

collapsed Bank of America took over

Countrywide due to widespread losses in subprime loans

IndyMac failed and was seized by FDIC

Federal gov’t took over Fannie and Freddie

Lehman Bros. declared bankruptcy Merrill Lynch forced to be acquired

by BoA and sale announced Fed offered AIG an $85 billion credit

line WaMu failed, seized by the FDIC

and sold to JP Morgan Chase Federal Gov’t used hastily enacted

emergency legislation (TARP)

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IV. Global Financial Crisis Brought Dramatically Lower Transaction Volume

2007 – 2009 88% drop in

transaction volume

$359 billion in sales down to $60 billion

CRE property values fell by about one third EQUAL to the

decline of the 1990’s CRE recession BUT in a fraction of the time

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IV. The GFC: CMBS Nearly Extinct

CMBS issuances of approx. $235 billion in 2007 fell to approx. $12 Billion in 2008 Borrowers needing to re-finance were in a very difficult position Lenders: “extend & pretend” Very slow improvement over past 3 years - standards have tightened making debt unavailable

to many commercial borrowers.

Source: Commercial Real Estate Finance Council (DC Trade Association)

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IV. The GFC: Maturing CMBS Slowing CRE Market Revival

Brake on CRE market: restructuring

distressed debt delays lending on new projects

Estimate: 60% of CRE maturities through 2015 in distress

Lenders need to deal with problem loans before they can advance additional debt to CRE markets.

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V. Seniors Housing Cyclical Resilience, Unique Demand

Growing Market Demand Healthcare expenditures are approximately 17% of U.S. GDP and are expected to

reach 20% by 2017.(1) Seniors housing is a highly fragmented market. There are approximately 22,000

seniors housing and nursing care facilities in the U.S. valued between $250Bn and $270Bn.(2)

Seniors population rises as the baby boom ages

Attractive Risk-Adjusted Returns Relative to General Commercial Real Estate Sectors Conventional real estate assets recently traded at historically low cap rates and

many are currently under stress. Barriers to entry - specific skill set required, regulatory approvals restrict supply,

historical lack of institutional capital.

Distinct Performance and Pricing Characteristics Higher current returns should reduce reliance on terminal values to achieve

favorable risk-adjusted total returns. Financing market for seniors housing has become attractive despite ongoing stress

in the credit markets.Sources: 1) Centers for Medicare and Medicaid Services2) NIC Investment Guide 2012: Investing in Seniors Housing & Care Properties

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V. Seniors Housing Real Estate Spectrum – Mid-Acuity = Steady Demand

Throughout market cycles, need-driven, mid-acuity healthcare real estate provides superior risk-adjusted returns

Demand for mid-acuity assets is driven by sustained needs Mid-acuity real estate assets are less sensitive to economic pressures faced by lower

acuity, lifestyle-driven properties (independent living and age-restricted housing) that are subject to consumer tastes and financial capacity or by higher acuity properties (hospitals) with substantial exposure to government reimbursement risk.

High Acuity(Acute Need)

Mid-Acuity(Sustained Need) Low Acuity

(Lifestyle Choice)

CyclicalityRisk High

Reimbursement Risk High

Age Restricted Housing

Independent Living

Communities

Assisted Living

Skilled Nursing

Rehabilitation Facilities

Acute Care Hospitals

Memory Care

Image Source: Wakefield Capital Management, Inc.

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V. Sector Resilience – New Units Supply Constrained

The number of new seniors housing units added to the market has declined substantially since 1998 due to regulatory constraints in existence nationwide and other barriers to entry, absorption of over-built stock from the late 1990s and recent lack of available construction financing.

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V. Sector Resilience - Occupancy Rates Steady Over Time

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Q1

2012

82

83

84

85

86

87

88

89

Historical Occupancy Rates for Assisted Living Facilities in U.S.

As

sis

ted

Liv

ing

Fa

cili

ty O

cc

up

an

cy

Ra

tes

Favorable supply and demand dynamics have allowed Assisted Living Facilities to historically maintain a steady level of occupancy.

Source: National Investment Center for Seniors Housing

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V. Sector Resilience - Senior Housing Rents Less Volatile

Seniors housing is the only major real estate asset type that did not experience a decline in asking rents during the recent economic recession.

2007 2008 2009 2010 2011-12

-8

-4

0

4

8

12

Apartment Office RetailHotels Seniors Housing

Source: NIC MAP® Data & Analysis Service; MBAA; REIS; STR

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Advising the Senior Housing Community

Biographies

CensusUp Team

04/11/2023

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CensusUp Management Team

04/11/2023

Sean P. Murphy, Esq. – Executive Chairman A Partner and COO at Wakefield Capital Management, Sean also served as a

principal in a joint venture with NorthStar Realty Finance (NYSE: NRF) which acquired, managed and sold (in part) over $750 million in seniors housing and healthcare-related real estate. Sean has particular expertise in seniors housing real estate transactions and he serves on the Board of Directors of the Teresian House Center for the Elderly, a seniors housing facility in New York operated by the Carmelite Order. Sean also serves as an executive with Fidelity National Financial (Chicago Title Insurance Company) and he received his law degree and Masters in Real Estate from Georgetown University.

James Guidera, Jr. – Founder and COO With over 25 years of experience in marketing and sales, Jim understands

how to formulate a compelling message and deliver that message to the right audience. Jim has spent the last 4 years focusing on new technology-based marketing methodologies. Jim understands the needs and trends of senior housing, and how to apply modern marketing and sales techniques to the senior housing market.

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CensusUp Management Team, continued

04/11/2023

Gary Hughes, MAgS, ALFA – Executive Vice President Gary has more than 20 years experience working with vulnerable populations,

especially older adults. His expertise in senior housing is in sales/marketing,

operations and regulatory compliance. He has served as an Executive Director

and Director of Community Relations of several Assisted Living and Memory Care

Facilities on behalf of Sunrise Senior Living. He has also been an Assisted Living

Executive Director . He has a Master’s degree from the UMBC Erickson School of

Aging and holds an Assisted Living Facility Administrator license.

E. Brian Alexander, Esq. – Vice President Energy and Construction

Services and General Counsel Brian has close to 20 years of experience in the construction and energy

efficiency fields. Brian has more than 10 years in healthcare construction

projects, with particular expertise in project management, building mechanical and

electrical systems. Brian currently works with developers and building owners

and operators seeking to construct and operate sustainable buildings that use

energy in an economically optimal manner.

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CensusUp Management Team, continued Nicholas Park – Vice President Technology Implementation

and Integration Nick has over 25 years of experience working with senior living facilities,

health care facilities and hotels. He is focused on the seamless integration of communication systems and information technology for the health and safety of residents and efficiency improvements by staff. Some examples of products that he has integrated into senior housing during his extensive career include distribution cabling, portable and stationary audio/video systems, communication systems, TV systems, and security and card access systems (a critical issue in Memory Care Facilities for Seniors). Nick is a registered architect with AIA and NCARB. He received his MBA from the University of Houston and his Bachelor of Architecture from Boston Architectural Center.

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Advisory Board Steve Gurney – Founder of Guide to Retirement Living

Sourcebook The Guide to Retirement Living SourceBook is the most comprehensive

database of all senior housing, assisted living, nursing homes, home health care services, and professional resources in the Mid-Atlantic. Steve specializes in working with organizations to develop innovative concepts and products to help elders and families understand resources. He is also frequently called upon to help organizations better communicate their offerings to seniors, families and professionals. Steve has his Masters of Management in Aging Services (MAgS), The Erickson School – Management, Policy, Aging.

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Advisory Board Nick Lantuh – Former President of NetWitness Corporation

While at NetWitness, Nick led the sale and merger with EMC Corporation in 2011. Prior to this role, Nick was Vice President of the NetWitness Product Group, a Division of ManTech International. Nick conveys 18 years of I/T leadership, fund raising & start up experience, ranging from pre-revenue start-ups to Fortune 100. Mr. Lantuh has held leadership roles at organizations such as Cisco Systems, as well as pre-revenue start-ups in the security, software, wireless and networking spaces leading to three acquisitions and an IPO and the recent cash sale to EMC. Nick presently advises Census Up and government and business leaders in cyber security issues and spoke recently about “Entrepreneurship in Disruptive Technologies and Finding the Winning Formula”.