HCRE FUND Healthcare Real Estate Fund EXECUTIVE SUMMARY
EXECUTIVE SUMMARY YOUR INVESTMENT: 101
HCRE FUND Share Price: $1,000
INVESTOR SUITABILITY
Investment Minimum: 25 Shares - $25,000
FOR “ACCREDITED INVESTORS” ONLY As defined in Rule 501(a) of Regulation D under the Securities Act, to be an “Accredited Investor” a natural person must have either:
Offering: 7927 Shares - $7,927,000
•
An individual net worth, or joint net worth with his or her spouse, of more than $1,000,000, excluding his or her primary residence
•
An individual income in excess of $200,000, or joint income in excess of $300,000
Number of Properties: 5 Number of Beds: 401
HEALTHCARE REAL ESTATE CORPORATION •
Manages the operations of the HCRE Fund
•
Highly experienced management team
•
Headed by Kent Eikanas • •
10+ Years experience in the senior housing industry Acquired or managed approximately $1 billion worth of healthcare assets
STEPHEN A. KOHN & ASSOCIATES •
Broker/Dealer for fund securities
•
Member of FINRA, SIPC, MSRB
•
Headed by Stephen A. Kohn • • •
2
28+ Years of experience in the financial services industry Elected to serve on FINRA National Adjudicatory Council President of the Independent Broker Dealer Association
HEALTHCARE REAL ESTATE: DEFINED Healthcare real estate is a term used to describe commercial real estate properties with a medical related use. Our primary focus is specified as senior housing defined below.
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2
3
ASSISTED LIVING:
MEMORY CARE:
SKILLED NURSING:
Licensed and regulated healthcare facilities that provide personal care services, support and housing for those who need help with activities of daily living yet typically require only limited medical care.
Licensed and regulated healthcare facilities that offer higher levels of personal assistance for residents with Alzheimer’s disease or other forms of dementia.
Licensed and regulated healthcare facilities where short and long-term care is provided for seniors who suffer from serious health issues.
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WHY THIS INVESTMENT BABY BOOMER DEMOGRAPHICS According to the U.S. Census Bureau, a Baby Boomer is a person who was born during the Post-World War II baby boom between 1946 and 1964. As these Baby Boomers continue to age, their economic influence will increasingly progress toward a focus on healthcare services. 78.2 MILLION AMERICANS, “THE BABY BOOMERS,” WERE BORN BETWEEN 1946 AND 1964.1
EVERY 8 SECONDS AN AMERICAN TURNS 65 YEARS OLD. 2
OR, ABOUT 10,000 3 PEOPLE EVERY DAY.
10,000 people
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CHRONIC DISEASE IN SENIORS 4 Chronic Disease is a long-lasting condition that can be controlled but not cured. As a nation, 75% of our healthcare dollars goes to treatment of chronic diseases. These persistent conditions are the nation’s leading causes of death and disability.
80%
50%
60%
of seniors have at least 1 CHRONIC DISEASE.
of seniors have at least 2 CHRONIC DISEASES.
of seniors will have more than 1 CHRONIC DISEASE BY 2030.
1: US Census Bureau.http://www.census.gov/newsroom/releases/archives/facts_for_features_special_editions/cb06-ffse01-2.html. 2,3: USA Today (http://www.usatoday.com/news/ nation/2010-11-14-baby-boomersturn-65_N.htm, http://pewresearch.org/pubs/1834/baby-boomers-old-age-downbeat-pessimism) 4:http://www.cdc.gov/chronicdisease/index.htm
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1 IN 5 DOLLARS IS EXPECTED TO BE SPENT ON HEALTHCARE BY 2020.
1
$$$ $$
THE NUMBER OF AMERICANS USING NURSING FACILITIES WAS 2.4 MILLION IN 2000. THAT NUMBER IS EXPECTED TO RISE TO 3.7 MILLION IN 2020, A 54% GROWTH. 4 2000
THE HEALTHCARE REAL ESTATE MARKET HAS AN ESTIMATED VALUE OF $1 TRILLION. 3
OVER THE PAST DECADE, EMPLOYMENT IN THE HEALTHCARE INDUSTRY HAS EXPERIENCED 10 TIMES THE GROWTH RATE OF ALL OTHER INDUSTRIES. 2
DEMAND FOR ASSISTED LIVING FACILITIES IS EXPECTED TO ALMOST DOUBLE BY 2030. 5
$2.4 MILLION
+54% 2020
$3.7 MILLION $ in Millions 1.0
1.5
2.0
2.5
3.0
3.5
4.0
ANNUALIZED TOTAL RETURNS (%) 6 3-, 5- and 7-Year Periods Ending December 31, 2011 16 14 12 10 8 6 4 2 0 -2
3 Years Apartment
5 Years Industrial
Office
Retail
7 Years Hotels
Senior Housing
1: Centers for Medicare and Medicaid Services http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf 2: http://www.brookings.edu/research/reports/2013/07/01-healthcare-metro-monitor 3: http://www.ventasreit.com/innovation/seniors-housing-and-healthcare-real-estate-investing 4: govinfo.library.unt.edu⁄seniorscommission⁄pages⁄final-report ⁄keydemo.html 5: http:⁄⁄www.sbdcnet.org ⁄small-business-research-reports⁄assisted-living-facilities 6: National Council of Real Estate Investment Fiduciaries Property Index, AEW Research
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THE INVESTMENT HOW IT WORKS
REIT PARTIES
1
REIT Parties purchase 5 properties
2
REIT Parties transfer 46% interest in properties to Fund
1 3
Investors invest in Fund
4
Joint Venture is formed
2
4
54% 46%
REIT PARTIES
6
HCRE FUND
INVESTORS (YOU)
3
KEY POINTS MANAGEMENT TRANSPARENCY: (The benefit of joint venturing with a public company) • The Securities and Exchange Commission requires public filings on edgar.sec.gov for all publicly registered companies • Any material event that affects the public company and its operations must be filed promptly (A material event would include changes to executive personnel, acquisitions and sales of properties)
PORTFOLIO: (Prevents exposure to the hazards of a blind pool offering where no properties are identified at the commencement of the offering period) • Properties currently existing and occupied • Property diversification
PASSIVE INVESTMENT: • Investor not responsible for actively managing the asset
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PORTFOLIO PROPERTIES
FRIENDSWOOD
PACIFIC
150-Bed Skilled Nursing Facility Galveston, Texas
78-Bed Skilled Nursing Facility Tigard, Oregon
FERNHILL
FARMINGTON
51-Bed Skilled Nursing Facility Portland, Oregon
71-Bed Memory Care Facility Medford, Oregon
SHERIDAN
51-Bed Intermediate Care Facility Sheridan, Oregon 8
PROPERTY HIGHLIGHTS WHY THESE PROPERTIES? OPERATORS: • Private regional operators • Focused on quality of care • Depth of experience (10-20+ years of
experience in the senior housing industry)
LEASE TERMS: • Long term leases (10-15 years) • Annual lease escalators (between 2-2.75%) • NNN (triple-net) leases
Operators have 10 to
20 years of
E XPE RIEN CE 9
INVESTMENT HIGHLIGHTS INCOME • GROWTH • CAPITAL PRESERVATION • Recession resilient asset class • Lack of volatility • Passive income • Established, researched demographics driving sector demand (baby boomer driven) • Existing and occupied facilities – not a blind pool • Regional operators with 10-20+ years of experience • Long-term (10-15 year) NNN leases with annual lease escalators • Properties underwritten by General Electric Capital (GE Capital)
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SAMPLE INVESTMENT - $100,000 ORIGINAL INVESTMENT
YEAR
TARGETED ANNUAL CASH FLOWS
$100,000
2013
$
11,000
11.00%
2014
10,700
10.70%
2015
11,100
11.10%
2016
11,500
11.50%
11,900
11.90%
2018
12,400
12.40%
2019
12,800
12.80%
2020
13,300
13.30%
2021
13,700
13.70%
2022
14,200
14.20%
2017
Total
TARGETED ANNUAL YIELD
(1)
(2)
222,600
(1) Amounts shown are on an annualized basis. (2) Expected Hold Period is between four and six years. 11
IMPORTANT DISCLOSURE An investment in Healthcare Real Estate Fund, LLC (the “Fund”) is an investment in securities. The Fund’s securities may be sold only to “accredited investors,” which for natural persons are investors who meet certain minimum annual income or net worth thresholds. The securities are being offered in reliance on an exemption from the registration requirements of the Securities Act of 1933 and are not required to comply with specific disclosure requirements that apply to registration under the Securities Act. The Securities and Exchange Commission has not passed upon the merits of or given its approval to the securities, the terms of the offering, or the accuracy or completeness of any offering materials. The securities are subject to legal restrictions on transfer and resale, and investors should not assume they will be able to resell their securities. Investing in securities involves risk, and investors should be able to bear the loss of their investment. This executive summary is solely for your information and is subject to change and speaks only as of the date hereof. Any opportunity to purchase the Fund’s securities is available solely to investors each of whom is an “accredited investor” within the meaning of Regulation D as promulgated by the Securities and Exchange Commission. Investment in the Fund will be permitted solely upon the terms and conditions set forth in the Fund’s Private Placement Memorandum, as may be amended or supplemented, and an investor must have received and reviewed a PPM prior to investing in the Fund. Some of the statements in this executive summary may be “forward-looking statements” and the Fund intends such forward-looking statements to be covered by the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. The Fund cautions that such statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, assumptions and other factors – many of which are outside of the Fund’s control and difficult to forecast – that could cause actual results to differ materially from those set forth in or implied by the forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they were made and the Fund assumes no, and hereby disclaims any, obligation to update any of the forward-looking statements contained in this presentation as a result of new information or new or future developments or otherwise This executive summary also includes market and industry data that the Fund has obtained from market research, publicly available information and industry publications. These sources generally state that the information that they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. The market and industry data in this presentation is often based on industry surveys and preparers’ experience in the industry. The Fund has not independently verified this information. An investment in the Fund involves substantial and speculative risks including, but not limited to, risks associated generally with the start-up nature of the Fund, lack of liquidity in the Fund’s securities, real estate-related risks regarding the properties in which the Fund invests (the “Properties”), lack of diversity of investment, continuing uncertainty in the financial and credit markets, reliance on third party operators to operate the Properties, the use of leverage, the short-term nature of the current senior financing secured by the Properties, investment in a multi-tiered joint venture, the Fund’s lack of control and voting rights regarding the operations of the Properties, reliance on Summit Healthcare REIT, Inc. (“JV Manager”) to asset manage the Properties, reliance on Healthcare Real Estate Partners, LLC (“Fund Manager”) to manage the Fund, the limited fiduciary responsibilities of the Fund Manager and the JV Manager, substantial Fund Manager and affiliate compensation, the existence of various conflicts of interest between the Fund Manager and its affiliates, including JV Manager, Summit Healthcare REIT, Inc., and the Fund, and tax risks.
HCRE FUND
1920 Main Street, Suite 410 Irvine, CA 92614 Toll-free: (877) 980-4477 Local: (949) 954-6567 www.HCREFund.com
HF0060 10/13