Market Fundamentals & Trends in Senior Housing by Argentum

Market Fundamentals & Trends in Seniors Housing ALFA 2015 Conference and Exposition Wednesday, May 6, 2015 Tampa, Florida Chuck Harry Managing Director and Director of Research & Analytics NIC

Beth Burnham Mace Chief Economist and Director of Capital Markets Outreach NIC

Today’s Presentation

1. Macroeconomic Trends and Patterns 2. Capital Markets and Recent Transactions Trends 3. Seniors Housing Market Trends 1Q’15

4. Seniors Housing Market Outlook

© 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAP® Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Top Themes for Macroeconomic Trends 1Q’15

1. Economy Slowed in 1Q 2015, But Recovery Continues 2. Jobless Rate Lowest Since 2007 3. Strong Dollar Hurts Manufacturing

4. Low Oil Prices Help Consumer 5. Consumer Confidence Strong 6. Housing Slow to Recovery, but Improvement Expected 7. Interest Rates Poised to Rise

Job Gains Slowed in 1Q’15 Monthly Employment Gains (Thousands) 300 200

259 169

208

173 95

100

173

188

199

2011

2012

2013

197

0 -100 -200 -300

-298

-400 -423

-500 2004

2005

2006

2007

2008

2009

2010

2014

Q1'15

Source: US BLS © 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAP® Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

The Jobless Rate Fell to 5.5% in February 2015 Monthly Unemployment Rate (%)

Source: US BLS ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

The Dollar Has Quickly Appreciated Trade-Weighted Exchange Rate (1997 = 100) 120 Dollar Has Appreciated By 14% Since June 2014

115 110 105 100 95

Trade Weighted Exchange Rate, Index 1997 = 100

Jan-15

Sep-14

May-14

Jan-14

Sep-13

May-13

Jan-13

Sep-12

May-12

Jan-12

Sep-11

May-11

Jan-11

Sep-10

May-10

Jan-10

Sep-09

May-09

Jan-09

Sep-08

May-08

Jan-08

Sep-07

May-07

Jan-07

Average Since 2007 = 102

Source: Federal Reserve ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Oil Prices Have Fallen Sharply Oil Prices (WTI, Dollars Per Barrel) 140 120 100 80 60 40

20 0 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 West Texas Intermediate Prices ($/barrel)

10-Year Average = $81

Source: U.S. Energy Information Administration ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Consumer Confidence Is Best In Seven Years Consumer Confidence (Index, 1985 = 100) 200 180 160 140 120 100 80 60

40 20 Mar-14

Nov-12

Jul-11

Mar-10

Nov-08

Jul-07

Mar-06

Nov-04

Jul-03

Mar-02

Nov-00

Jul-99

Mar-98

Nov-96

Jul-95

Mar-94

Nov-92

Jul-91

Mar-90

Consumer Confidence Index: Present Situation, (Index 1985=100, SA) Consumer Confidence Index: Expectations, (Index 1985=100, SA) Source: Conference Board ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Home Prices Have Not Recovered Fully S&P/Case-Shiller National Home Price Index 200

20.0%

180

15.0%

160 10.0%

140 120

5.0%

100 0.0%

80 60

-5.0%

40 -10.0%

20 0 Jan-87 Nov-87 Sep-88 Jul-89 May-90 Mar-91 Jan-92 Nov-92 Sep-93 Jul-94 May-95 Mar-96 Jan-97 Nov-97 Sep-98 Jul-99 May-00 Mar-01 Jan-02 Nov-02 Sep-03 Jul-04 May-05 Mar-06 Jan-07 Nov-07 Sep-08 Jul-09 May-10 Mar-11 Jan-12 Nov-12 Sep-13

-15.0%

Case Shiller Home Price (left, Index, Jan 2000= 100)

Year/Year Growth (right)

Source: S&P Dow Jones Indices; CoreLogic, Inc. ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Sales of Single-Family Residences Have Room To Go Single-Family Home Sales窶年ew and Existing (Thousands, SAAR) 1,600

7,000

1,400

6,000

1,200

5,000

1,000 4,000

800 3,000

600 2,000

400

1,000

200

Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec90 91 92 93 94 95 96 97 98 99 00 01 03 04 05 06 07 08 09 10 11 12 13 14

New Home Sales

Existing Home Sales (Right)

Source: National Association of Realtors, U.S. Census Bureau ﾂｩ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPﾂｮ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Forecast Summary Summary of Projections for Key Statistics (Q4/Q4) GDP

Inflation

Unemployment Rate

10-Year Treasury (%)

2014

2015

2016

HFE

2.4

2.8

Capital Economics

2.4

3.3

2.8

Federal Reserve (3/15)

2.4

2.3-2.7

HFE

1.6

2.5

Capital Economics

1.6

1.5

2.0

Federal Reserve (3/15)

1.6

0.6-0.8

1.7-1.9

HFE

6.2

4.9

4.3

Capital Economics

6.2

5.3

4.7

Federal Reserve (3/15)

6.2

5.0-5.2

4.9-5.1

HFE

2.2

2.7

3.8

Capital Economics

2.2

2.5

3.0

Federal Reserve

2.2

Source: Federal Reserve, HFE, Capital Economics ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Recent Interest Rate Movements U.S. 10-Year Treasury Rate 3.2 3.0 2.8 2.6 2.4 2.2 2.0 1.8

1.6 20Sep13

13Dec13

7Mar14

30May14

30Jul14

8Oct14

31Dec14

25Mar15

Source: National Association of Realtors, U.S. Census Bureau ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Consensus Among WSJ Economists: Rising Rates

4.00

U.S. 10-Year Treasury Note (%)

3.50

Forecast

3.00

2.50

2.00

1.50

1.00 2009Q1

2010Q1

2011Q1

2012Q1

2013Q1

2014Q1

2015q1

2016Q1

Source: Wall Street Journal ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Top Themes for Capital Markets and Transactions 1Q'15

1. Transactions Volume Were Strong in 1Q 2015 2. Seniors Housing Sales Pricing at Record Highs 3. Small Size Deals Dominated the Market

ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

More Than $3 Billion in Closed Volume During 1Q Closed Transactions Volume United States | 1Q’08 – 1Q’15 $15b

4-qtr rolling total

Seniors Housing

$12b $9b $6b $3b $0b

$15b $12b

Nursing Care 4-qtr rolling total

$9b $6b $3b $0b 2008

2009

2010

2011

2012

2013

2014

2015

Transactions data for 1Q15 is preliminary.

Small Deals Dominated the Quarter

Transactions data for 1Q15 is preliminary. ÂŠ 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPÂŽ Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Seniors Housing Pricing at Cyclical Highs? Seniors Housing Rolling 4-Qtr Price/Unit United States | 1Q’08 – 1Q’15 $250k

$200k All Properties $150k

Qualified Properties*

$100k

$50k

$0k 2008

2009

2010

2011

2012

2013

2014

2015

Transactions data for 1Q15 is preliminary. * Only includes properties with either a confirmed, approximate, street talk, or appraised pricing qualifier © 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAP® Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Top Themes for Seniors Housing Market Trends 1Q’15

1. Unexpectedly Weak 1Q’15 absorption 2. Occupancy Declined in Most Property Types 3. Winter Weather Didn’t Adversely Affect Aggregate Starts

Occupancy Declined Across All Aggregates Seniors Housing Occupancy 4Q’05 – 1Q’15 93% 92% Secondary Markets All Markets Primary Markets

91% 90% 89% 88% 87% 86% 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Decline in Occupancy Wasn’t Restricted to One Region Seniors Housing Occupancy 1Q’08 – 1Q’15 93%

Northeast West North Central Pacific

92% 91% 90%

Mid-Atlantic

89%

East North Central Southeast

88%

Mountain

87%

Southwest

86% 85% 84% 83% 2008

2009

2010

2011

2012

2013

2014

2015

Data includes all NIC MAP tracked CBSAs within the region © 2015 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAP® Data Service. Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. For license information please contact NIC at 410-267-0504.

Pockets of Weak Absorption in Each Region

Seniors Housing Quarterly Absorption As of 1Q’15

Varying Supply-Demand Conditions Across Markets Seniors Housing – All Markets As of 1Q’15

14 Markets

26 Markets

32 Markets

27 Markets

Demand Issues in Some Markets, Supply Issues in Others Seniors Housing – Primary Markets As of 1Q’15

7 Markets

12 Markets

6 Markets

Despite Soft Quarter, Most Markets Up YOY Seniors Occupancy By Metro Market Primary Markets as of 1Q’15 96% Increased YOY 94%

Decreased YOY

92% 90% 88% 86% 84% 82% SJ MIN PIT BAL POR BOS DC CIN DET NY SD STL SEA SAC LA ATL SF MAP31 PHI KC DEN CLE ORL MIA TAM PHO SA CHI LV DAL HOU RIV

80%

Top Themes for Seniors Housing Outlook 1Q’15

1. Recovery Should Resume in Independent Living 2. Supply and Demand Largely in Balance in Assisted Living 3. Occupancy May Be Plateauing in Assisted Living

Recovery Should Resume in Independent Living Majority Independent Living Supply-Demand Forecast Primary Markets | 1Q’06 – 1Q’16’F

Inventory Growth (L) Absorption (L) Occupancy (R) 95%

Forecast

93%

91%

89%

87%

-1k

85% 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Has Assisted Living’s Occupancy Peaked? Inventory Growth (L) Absorption (L) Occupancy (R) 95%

Majority Assisted Living Supply-Demand Forecast Primary Markets | 1Q'06 – 1Q’16’F 4k

Forecast

93%

91%

89%

87%

-1k

85% 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Some of Assisted Living’s Decline was Seasonal Assisted Living Occupancy Primary Markets | 4Q’05 – 1Q’15 91%

90%

89%

Seasonally Adjusted Official

88%

87%

86% 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Starts Were Pocketed Throughout the Country

Seniors Housing Construction Starts 1Q’15

Starts on Par with Recent Quarters Construction Starts (Units) Primary Markets | 1Q’06 – 1Q’15 4k

Majority Assisted Living

3k 2k

4-qtr moving avg 1k 0k 4k

Majority Independent Living

3k 4-qtr moving avg

2k 1k 0k 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Independent Living Construction Up, But Still Tempered Independent Living Construction vs. Inventory 4Q’05 – 1Q’15 8% 7% 6%

Primary Markets

5% 4% 3%

Secondary Markets

All Markets

2% 1% 0% 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Assisted Living Construction Up in Secondary Markets Assisted Living Construction vs. Inventory 4Q’05 – 1Q’15 8% 7%

Secondary Markets

All Markets Primary Markets

5% 4% 3% 2% 1% 0% 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Development was Spatially Diversified

Seniors Housing Construction As of 1Q’15

Development Comes in Cycles Seniors Housing Construction

Asking Rents Outpaced Inflation Annual Asking Rent Growth/Inflation Primary Markets | 1Q’07 – 1Q’15 5%

Majority IL Majority AL

Core Inflation 1%

0% 2007

2008

2009

2010

2011

2012

2013

2014

Notes: - Asking rents include base rent plus avg care fee. - Annual growth 2015 reported on a same-store basis.

Second Quarter 2015 NIC MAP Release Data Release: Wednesday, July 8th Webinar: Tuesday, July 14th