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March 5, 2014 THE SENIOR LIVING INDUSTRY AND CAPITAL MARKETS TODAY AND TOMORROW.

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Presentation on theme: "March 5, 2014 THE SENIOR LIVING INDUSTRY AND CAPITAL MARKETS TODAY AND TOMORROW."— Presentation transcript:

1 March 5, 2014 THE SENIOR LIVING INDUSTRY AND CAPITAL MARKETS TODAY AND TOMORROW

2 1937: HJ Sims refinanced Broward County Roads 2013: HJ Sims financed over $1 Billion in the senior living industry – 40 communities in 25 states Page 1

3 HJ SIMS BANKING TEAM Page 2

4 William B. Sims Managing Principal 40 years financing senior living at HJ Sims Son of Company founder R. Jeffrey Sands, Esq. Principal / General Counsel Joined HJ Sims in 1995 Co-leader of Sims banking team Formerly Managing Partner of the Hartford, CT office of the law firm of Wiggin & Dana Aaron M. Rulnick Principal Joined HJ Sims in 1997 Co-leader of Sims banking team Prior to joining Sims was with LeadingAge (formerly AAHSA) Based in Potomac, Maryland HJ SIMS BANKING TEAM Page 3

5 HJ SIMS BANKING TEAM Anthony Luzzi President – Sims Mortgage Funding Has been with HJ Sims for 30 years Started Sims Mortgage Funding in 1984 as FHA Mortgagee Kerrie J. Tomasiewicz Executive Vice President – Sims Mortgage Funding 25 years of experience with FHA mortgage insurance programs Approved Underwriter under the Multifamily Accelerated Processing (MAP) and LEAN programs Andrew J. Patykula Senior Vice President – Sims Mortgage Funding 9 years experience with FHA mortgage insurance programs Formerly a Fixed Income Trader with HJ Sims Page 4

6 HJ SIMS BANKING TEAM Roderic L. Rolett Executive Vice President Joined HJ Sims in 1987 Has 28 years experience in the senior living industry Prior to joining Sims, he was a Vice President with AMBAC and a Financial Guarantee Officer at Aetna Life and Casualty Mark Landreville Executive Vice President Joined HJ Sims in 2011 More than 30 years experience in investment and commercial banking, almost exclusively in the senior living field Based in Sims’ Bloomington, Minnesota office Andrew Nesi Executive Vice President Joined HJ Sims in 2011 Specialist in health care banking Prior to joining Sims, he had a 25 year career in commercial banking, most recently managing Bank of Scotland’s national senior living practice Page 5

7 HJ SIMS BANKING TEAM Robert D. Gall Senior Vice President Joined HJ Sims in 2000 Has completed more than 30 non-profit and for profit senior living and long term care financings totaling over $1 billion Based in Orlando, Florida office Xan Smith Senior Vice President Joined HJ Sims in 2011 More than 15 years experience in the senior living industry Formerly was CFO of Moorings Park, Naples, FL and CFO of Air Force Village, San Antonio, TX Based in Houston, Texas Page 6

8 HJ SIMS BANKING TEAM Curtis King Senior Vice President Joined HJ Sims in 2007 Has completed more than 20 senior living and long term care financings Provides structuring, analysis and valuation for Sims’ proprietary originations Kerry Moynihan Vice President Joined HJ Sims in 2011 Provides analytical and processing support for HJ Sims’ non-profit business Formerly worked in senior living industry lending group at Bank of Scotland Based in Sims’ Orlando, Florida office Page 7

9 HJ SIMS BANKING TEAM Tyler Hoch Vice President Joined HJ Sims in 2013 Specializes in qualifying and structuring opportunities and financial analysis Previously was a Director with Oppenheimer & Co. Based in Sims’ Bloomington, Minnesota office Elizabeth Sims Assistant Vice President Joined HJ Sims in 2013 Previously was with Entergy, where she worked on energy market models and valuing energy assets of the company Formerly worked for Goldman Sachs in commodity operations and for JP Morgan Private Bank Daughter of Bill Sims Page 8

10 HJ SIMS BANKING TEAM Brett P. Edwards Assistant Vice President Joined HJ Sims in 2010 Specializes in credit analysis, structuring and financial modeling of proposed financings Mackenzie Welch Senior Associate Joined HJ Sims in 2011 Specializes in analytical support for structuring, modeling and credit analysis for Sims’ not-for-profit Group Kelsey Lescop Associate Joined HJ Sims in 2014 Provides analytical and execution support on financings Formerly was a Research Analyst at Dealogic, LLC, performing market surveillance and analysis Page 9

11 SIMS’ DISTRIBUTION SYSTEM

12 Broadening Our Distribution System Importance  Lower costs of capital  Ability to close financings while other underwriters struggle  Ability to provide subordinate debt and/or preferred equity  Lessen need for equity and/or fund raising to close financings SIMS’ DISTRIBUTION SYSTEM Page 11

13 Broadening Our Distribution System – 2013 New branch office in Puerto Rico New expanded office space in New Jersey – 15 years as HJ Sims branch Added 7 new income advisors to existing branch offices Hired our first Director of Overall Marketing, Shauna Reilly SIMS’ DISTRIBUTION SYSTEM Page 12

14 Theme – “The Outcome Is Income” Emphasis on accredited investors Educated income advisors RESULTS Lower capital costs More structural choices Greater covenant flexibility Enhanced liquidity in dire markets SIMS’ DISTRIBUTION SYSTEM Page 13

15 2014 OUTLOOK

16 The Overall Environment Interest Rates Senior Living Industry Page 15

17 2014 OUTLOOK The Overall Environment Last year’s advice This year  Not as favorable as last year but still strong  Watch for more new supply of communities, higher construction costs, rising capital costs Page 16

18 Interest Rates 2014 OUTLOOK Page 17

19 Interest Rates 2014 OUTLOOK Page 18

20 Interest Rates 2014 OUTLOOK Page 19

21 Interest Rates 2014 OUTLOOK Page 20

22 Interest Rates 2014 OUTLOOK Page 21

23 Interest Rates 2014 OUTLOOK Page 22

24 2014 OUTLOOK Senior Living Industry Entrance Fee CCRCs Strong housing markets – Improvement in stable housing markets Limited new supply 89% average occupancy STATEEXAMPLE FloridaSinai Residences North CarolinaSearStone TexasEdenHill Page 23

25 2014 OUTLOOK Senior Living Industry Rental Independent Living Remains strong Older entrance age – could become younger with recovering economy More healthcare needed 91% average occupancy 78% lowest quartile Page 24

26 2014 OUTLOOK Senior Living Industry Assisted Living Remains strong More healthcare Some oversupply concerns in strong markets 93% average occupancy 80% lowest quartile Page 25

27 2014 OUTLOOK Senior Living Industry Memory Care Strongest segment 97% average occupancy 79% lowest quartile Concerns about high resident pricing combined with active new development Page 26

28 2014 OUTLOOK Senior Living Industry Nursing Homes Steady Medicaid reimbursement with improving state economies Post acute care = generous reimbursement and quality care at lower costs than hospitals Many Certificate of Need states = little new construction Other states = construction around rehabilitation and hospice services Average occupancy = 89% Lowest quartile = 72% Greater product and service differentiation than other senior living segments. Page 27

29 2014 OUTLOOK Summary The senior living market remains strong Capital costs are historically low The 2014 outlook is favorable Page 28

30 R. Jeffrey Sands Principal/General Counsel HJ Sims CASE STUDIES

31 SIMS RECAPITALIZES A $100 MILLION PORTFOLIO IN COLORADO Page 30

32 MacKenzie 2 properties in Denver Colorado area Springs – 95 IL / 48 AL/ 26 ALZ Ft. Collins – 95 IL / 26 AL / 26 ALZ Financed originally in 2006 – $75M of Senior Debt – $22M of subdebt and equity from Sims Opened in September, 2008 (Lehman) Page 31

33 MacKenzie Venture Partner went bankrupt Sims took over – Negotiated restructure with lenders at discount – Arranged for $65M on new senior debt in a very difficult market – Funded $3M of new equity Page 32

34 MacKenzie 2013 – Projects reached 100% occupancy – Refinanced senior debt with Fannie Mae $73M @ 3.5%, IO for 2 years, 10 year term Negotiated with Fannie to allow subdebt – Raised $14M of subdebt to repay working capital and clean up accrued interest on old debt. – Valuation has increased to $120M Page 33

35 MacKenzie Result – Creative capital structure – Lower cost of capital by 50% – Room to grow – Saved original investor’s capital and returns Page 34

36 SIMS RAISES $6.2 MILLION OF SUBORDINATE DEBT FOR A START-UP SENIOR LIVING COMMUNITY IN SCOTT DEPOT, WEST VIRGINIA 88 Unit new Assisted Living Facility Secondary Market outside Charleston, WV Challenge – How to put subdebt behind a HUD Construction Loan of $11M? Page 35

37 Cathcart Structure – Create a Holding Company and have Sims loan the money to the holding company – Holding Company then contributes proceeds as “equity” to HUD Borrower – HUD approved transaction Page 36

38 Cathcart Capitalized interest on the loan (protect fill up) Kept interest rate low with step ups over time Amortize from cash flow with minimum payment schedule Key point – Sims already a HUD approved Borrower so HUD felt comfortable that if there was a problem Sims could step in Page 37

39 Cathcart Win / Win – Gave Cathcart access to “debtequity” at a reasonable rate – Provided investors with a relatively low leveraged loan on a solid asset at an attractive return Page 38

40 Anthony Luzzi President Sims Mortgage Funding CASE STUDIES

41 Sims Mortgage Funding - The Commercial We are a subsidiary of HJ Sims that originates and underwrites HUD-insured loans for healthcare and senior housing; multifamily rental housing (market rate and affordable); and, hospitals. Over 70% of our lending activity is in the healthcare and senior housing space; about 50% of our multifamily activity is for affordable housing preservation. We’ve closed over $720 million in HUD-insured loans over the past 5 years, from New England to the West Coast. SMF personnel average about 20 years of service with the company – senior executives even longer. We’re a cohesive, experienced team that generates significant repeat business. We’re recognized by our peers as thought-leaders in our industry by serving in leadership positions in national trade associations and advocacy groups. Page 40

42 HUD-Insured Financing – The Overview HUD-insured financing has gained much popularity over the past five years, mostly on account of the “Three Ls”. Lehman Brothers – their collapse in September 2008 led to a severe depletion of capital across all lending sources; HUD remained active in the healthcare and housing spaces. Low interest rates – fueled by historically low 10-Year UST yields. Borrowers had been locking in rates on HUD-insured loans as low as 2.50% before mortgage insurance premiums; rates have increased, but remain under 4% for refinance loans and under 5% for construction loans. Low rates also drove a major push to refinance existing properties already insured by HUD, creating record levels of closings over the past few years. Lean Program – HUD created a uniform template to process and underwrite Section 232 healthcare and senior housing loans on a timely and predictable basis. Lean replaced the old, mostly inefficient model of having local HUD field offices approve deals that is still in use for the multifamily mortgage insurance programs. Page 41

43 The Year in Review- Athena Health Care Systems MA Portfolio Athena currently owns, operates and/or and manages 33 skilled nursing facilities (SNFs) containing about 4,200 beds; 18 are located in Connecticut, 12 in Massachusetts and 3 in Rhode Island. In June 2012, the company was rated # 33 by Provider in their “Top 50” nursing home management company rankings. Twenty-six of their facilities have HUD-insured loans. Athena acquired 5 SNFs in Massachusetts in December 2010; in order to meet seller’s timeframe to complete the sale, Athena obtained a $53 million, three-year bridge loan from a major commercial lender and $12 million in subordinate debt issued by HJ Sims. The financing plan was to take out the 2010 bridge debt with long-term, HUD- insured loans before the bridge loan matured. Since the subordinate debt was placed in service in 2010, at the time of the bridge loan closing, we had to be sure that it was structured to meet HUD’s requirements before we closed the HUD-insured loans. Page 42

44 Key to Success - we created a mandatory redemption provision in the subordinate loan structure that allowed a partial prepayment of that debt at the closing of the HUD-insured loans in order to meet HUD’s requirements related to overall debt limits. The Outcome - we obtained $51,086,500 in HUD-insured loans under the Lean program to take out the bridge; approximately $950,000 in subordinate debt was prepaid to meet HUD requirements. The HUD-insured loans were underwritten at 80% of value; an aggregate 2.39 DSC; 32-year fully amortizing terms; and, annual cap ex at an average of $815 per unit. The balance of HJ Sims subordinate debt remains in place and is scheduled to be redeemed by its 2019 final maturity date. Page 43 The Year in Review- Athena Health Care Systems MA Portfolio

45 The Year in Review- Essex Plaza I Essex Plaza I is a 451-unit elderly housing rental property located in downtown Newark, NJ. It has a Section 8 Housing Rental Assistance Contract that runs for 20 years starting in 2011. It underwent substantial rehabilitation in the late 1970s that was financed with a HUD-insured loan that had to be restructured in 1999 on account of a downturn in market conditions. This resulted in an “A” loan that was insured by HUD and a “B” loan that was held by HUD. As long as the B loan remained outstanding, there were limitations on how much cash could be distributed. This negatively affected the investment returns to ownership. Key to Success: developing a refinancing that would incentivize the owners and maintain the Project as affordable. The Outcome - we underwrote a new HUD-insured loan at 80% of market value that prepaid the A and B loans, provided $2 million for capital repairs and reserves, and generated an equity take-out that was distributed to the principals. Page 44

46 The Takeaways Now just five years old, the Lean program for healthcare properties remains an excellent vehicle to refinance existing debt used in connection with acquisitions or repositionings. HUD has restored contact underwriting staff to improve processing times, and a new Handbook is imminent. HUD’s multifamily mortgage insurance programs can provide cash incentives for owners to preserve affordable elderly rental and multifamily housing, whether the projects are Section 202 properties owned by not-for-profit organizations, or other types of age-restricted or multifamily properties that are owned by for- profit entities and financed with or without HUD mortgage insurance. HUD is moving to make its housing mortgage insurance programs more Lean-like through its Multifamily Transformation Project which is underway in the Southwest and Midwest regions. The political and budgetary environment for 2014 should be less turbulent than it was last year: no government shutdowns or exhaustion of HUD mortgage insurance commitment authority are anticipated. Page 45

47 Essex Plaza I Page 46

48 Athena Massachusetts Portfolio: Berkshire, Southeast, Southshore and Tremont Page 47

49 Aaron Rulnick Principal HJ Sims CASE STUDIES

50 Case Study Rivers of Grosse Pointe Page 49 Artist Rendering of The Rivers of Grosse Pointe 142(d) Tax-Exempt Bonds and Taxable Bonds for Start-up Rental CCRC

51 Rivers of Grosse Pointe Project New development rental CCRC located in Grosse Pointe Woods, Michigan –77 independent living apartments; 80 assisted living units; and 86 skilled nursing beds Project also had 40 independent living cottages under a condo structure outside of CCRC financing Owned and operator by an organization that operated two successful skilled nursing facilities in the Detroit Metro area Financing To comply with 142(d) bond regulations and to maintain tax-exempt status, must rent 20% (16 units) of the Independent Living units to individuals who earn less than 50% of the median annual income of the surrounding area (Detroit MSA) Total financing of $36,570,000 consisting of the following: –$17,230,000 - Tax-Exempt Series 2013A - First Mortgage Bonds –$10,000,000 – Taxable Series 2013B – First Mortgage Bonds –$9,250,000 – Equity Contribution > 25% -- Owner wanted low leverage Project was over 50% complete at the time of financing Page 50

52 Rivers of Grosse Pointe Financing Highlights HJ Sims was able to find a successful financing solution despite three major challenges with the financing after the POS was mailed in June 2013: 1.Detroit filing for bankruptcy in July 2013 2.Fed Reserve Chairman making Fed Tapering comments which started 6 months of bond sell offs 3.Only IL designated as set aside thus creating $10 million of taxable bonds to sell Sims sold approximately $10 million (or more than 35%) of the total bond issue to its retail investors. Page 51

53 Construction Progress at Closing Rivers of Grosse Pointe at Closing of Financing Page 52

54 Case Study Sims Works With 20-year Client to Refinance Existing Bank Debt and Secure Long-term Financing Maple Knoll Communities Page 53

55 Background Information Founded in 1848, Maple Knoll Communities, Inc. (“MKC”) is a Ohio-based not-for-profit 501(c) (3) organization MKC is based in the Greater Cincinnati metropolitan area Operates two Continuing care retirement communities: –Maple Knoll Village located on 54 acres in Springdale, Ohio –The Knolls at Oxford located on 85 acres in Oxford, Ohio Provides other senior services including: –Sycamore Senior Center –Maple Knoll HomeHealth –Manages several Affordable Housing communities Serves on average approximately 630 seniors in its owned facilities and another 240 seniors in the affordable housing corporations that it manages. Approximately 615 full and part-time employees. Page 54 Maple Knoll Communities, Inc.

56 Page 55 Maple Knoll Village

57 Page 56 Maple Knoll Village

58 Page 57 Knolls at Oxford

59 Page 58

60 Maple Knoll Communities Long-term Relationship Sims has been serving as MKC’s investment banker for 20 years –In 1993, Sims financed a major expansion to the Maple Knoll campus and then financed phases I and II of the Knolls of Oxford campus in 1999 and 2002 respectively. –In 2007, Sims financed incremental expansions at both campuses. –The 1999, 2002 and 2007 financings were all financed with letter of credit enhanced variable rate bonds with a syndicate of banks. –In 2010, Sims served as financial advisor to MKC to extend a portion of its letters of credit with the balance of the outstanding bank debt converted to bank qualified bonds. The 2010 financing also included a reorganization of the banking syndicate to include a total of six banks. Banking landscape continued to change after the financial crisis, some of the banks expressed the desire for repayment. In 2012, Sims again was engaged to secure alternative financing for the organization to address the expiration of its letters of credit and bank qualified bonds and to facilitate the repayment of the three banks that decided to exit the bank syndicate to reduce their portfolio exposure to senior living. Page 59

61 Financing Challenges: Need to refinance a portion of the bank debt created an opportunity for MKC to reduce its exposure to variable rate debt by issuing long-term fixed rate bonds. Although some banks sought repayment, there was still significant interest from other members of the bank syndicate to maintain a relationship with MKC. Keeping some level of bank debt lowered overall cost of capital; however, created intercreditor challenges with bank syndicate and bondholders Adding to the overall complexity of the capital structure, Sims was tasked with preserving the Bank Qualified status of part of the debt and wrapping a series of swap termination penalties into new swap agreements Additionally, there was a significant uptick in market rates as speculation regarding the reduction of quantitative easing and outflows from the municipal bond funds created widespread volatility Page 60 Maple Knoll Communities

62 Financing Solution: Sims was able secure both retail and institutional buyers for the fixed rate bonds when many of the traditional institutional investors had limited cash to invest Many other institutions did not want to be involved with a hybrid financing structure that included any bank debt Sims was able to implement a sophisticated capital structure that achieved MKC’s financing goals through the issuance of: –$30.92 million of fixed rate bonds to repay the banks exiting the syndicate and to lock into longer-term and stable capital –$36.0 million of a combination of direct bank purchased bonds and a taxable loan to secure a lower overall cost of capital –Structure also preserved MKC ability to re-issue up to $29.185 of bank qualified bonds as part of its overall bank financing Sims also worked with the banks to structure a new replacement swap with a 7- year term to match the new term of the direct bank purchase bonds without requiring any cash termination payment to be funded by MKC Page 61 Maple Knoll Communities

63 Mark Landreville Executive Vice President HJ Sims CASE STUDIES

64 $47,795,000* City of Rochester, Minnesota Health Care and Housing Facility Revenue Bonds Series, 2013A & 2013B (The Homestead at Rochester, Inc. Project) Sims Conference 2014

65 Overview Facility Site Page 64

66 Overview State-of-the-art existing facility located on 7.8 acres in Rochester, MN called “The Homestead at Rochester” sponsored by Volunteers of America National Services CCRC Opened in 2006 77 Independent units with options for either entry fee or rental plans 44 Assisted Living units 16 Memory Care units Premier market area – city population of approx. 110,000 – MSA population of 210,000 Located only 6 miles from the Mayo Clinic – largest medical center in the world Strong historical occupancy – Independent Living: 98.6%, Assisted Living: 92.2%, Memory Care: 98.1% (2013) 2013 historical DSCR of 1.71x Emphasis on expanding higher margin revenue opportunities Page 65

67 Overview Page 66

68 Overview Page 67

69 Overview Fiscal Year Ended June 30, 201120122013 Average occupied units or beds: Independent Living100.0% 98.6% Assisted Living93.3%95.1%92.2% Memory Care97.1%97.3%98.1% Historic Utilization Page 68

70 Independent Living Expansion Expansion will include 52 independent units: 46 one bedroom and 6 two bedroom –One bedroom units will range from 760 – 1,140 sq. ft. – entry fees range from $36,480 - $54,720 with entrance deposits and $1,581 - $2,371 without entrance deposits –Two bedroom units will range from 1,250 – 1,855 sq. ft. – rents range from $2,250 - $3,339 with entrance deposits and $2,600 - $3,858 without entrance deposits Projected distribution of entrance fee and non-entrance fee units are est. at 67% & 33%, respectively The Independent Living Units will not be state licensed for home care and any care that residents may request will be provided through state licensed home health agencies Median home sale price in Rochester - $168,000 w/ 65 avg. days on market (July 2013) Page 69

71 Skilled Nursing - TCU Expansion Project will include 56 skilled nursing beds that will be located in a separate building No existing skilled nursing beds on campus Medicare & Medicaid Certified Right to operate the skilled nursing beds are being acquired through bed rights purchase agreements with Eldercare of Minnesota, Inc. and Parker Oaks Communities, Inc. for a total of 46 beds Each wing of the Skilled Nursing building has been designed as a smallhouse/neighborhood model with most units opening onto the neighborhood. Each neighborhood also has its own individual dining area for the residents of that wing Page 70

72 Skilled Nursing Forecasted Payor Mix Year End June 30 2015201620172018 Private Pay100.0%56.2%26.8% Medicare0.0%28.1%50.0% Medicaid0.0%15.7%23.2% Total100% Page 71

73 The Project The expansion will be approx. 140,400 sq. ft. and will have 52 independent living units and 56 skilled nursing beds. The Town Center will also be expanded. The Project unit mix is as follows: Page 72

74 Final Campus Configuraion Page 73

75 Overview Proposed IL & SNF Project Existing IL & AL Existing HUD 202 Page 74

76 The Project Page 75

77 Historic Statement of Revenues In Excess of Expenses Page 76

78 Projected DSCR & Days Cash on Hand Analysis Page 77

79 Final Sources & Uses of Funds Page 78

80 Sales Results Summary Institutional Sales: $29,550,000 Retail Sales : $15,150,000 Other: $2,805,000 NIC 6.87% Page 79

81 $31,910,000* City of Williston, North Dakota Multifamily Housing Revenue Bonds Series, 2013 (Eagle Crest Apartments LLC Project) Sims Conference 2014

82 Eagle Crest Apartments- Overview Page 81

83 Bakken Formation Information Page 82

84 Economic Impact Per Well over 28 years Page 83

85 Typical “Man Camp” Housing Page 84

86 Key Considerations Market & Demand Overview Current vacancy rate for rental apartments in the PMA is near 0% PMA population is expected to grow more than 100% between 2010 & 2020 PMA population increased by 19.2% between 2010 & 2012 Williston is in the center of the Bakken Formation Williston Micropolitan Statistical Area was the fastest growing in the U.S. in 2011 at 9.3% Unemployment rate is 0.7% in Williams County Est. a bsorption/capture rate of 3% over next 5 yrs – includes current & forecasted development Current AMI in Williams County is $72,100 vs. $52,762 for U.S. Page 85

87 Key Considerations - Continued Financial –Equity Contribution of $5,475,416 (includes cash for Operating Deficit Reserve Fund and Deferred Developer Fee of $1,064,000) –Projected DSC of minimum 1.48x –Operating Deficit Reserve Fund $1,000,000 (Funded with developer equity) –Maximum Annual Debt Service Reserve Fund $2,948,869 Page 86

88 Proforma Financial Information Page 87

89 Eagle Crest Apartments-Market Overview Williams County - Primary Market Area –2012 permanent population of approx. 27,000 – service population of approx. 51,000 –20.9% population growth from 2010-2012 –Population expected to grow more than 100% between 2010 & 2020 Largest increase in 25-44 & 55-74 yr old ages – most likely to rent their housing Ages 25-34 est. to grow by 119% by 2020 –Located directly in the Bakken Oil Formation Number of barrels of oil produced annually in the Bakken has increased from 618,852 barrels in 2000 to 215,490,552 in 2012, an increase of 34,721% The number of oil wells has increased from 199 in 2000 to 5,128 in 2012, an increase of 2,477%. As of April 2013, approx. 8,764 wells were in production, an increase of 482.1% Bakken represents approx. 89% of oil production in the State of North Dakota –Unemployment rate of 0.7%, compared to 2.8% & 7.6% in North Dakota & U.S., respectfully –Current AMI in Williams County is $72,100 vs. $52,762 for U.S. City of Williston –Permanent population of approx. 18,500 – service population of approx. 33,500 –20.9% population growth from 2010-2012 –Williston Micropolitian Statistical Area was fastest growing in U.S. in 2011 Page 88

90 Apartments Summary 168 apartment units in four buildings: Configuration & Fees per building: –5 one bedroom & two bath – $2,000 (unfurnished); $2,400 (furnished) –32 two bedroom & two bath - $2,700 (unfurnished); $3,200 (furnished) –5 three bedroom & two bath - $3,400 (unfurnished); $4,000 (finished) Unit Features –Bay windows & balconies –9’ ceilings –Full-size in-unit laundry –Full kitchen appliance package w/ dishwasher & microwaves –Hardwood floors in kitchen, foyer and hallway –Walk-in closets Building Features & Amenities –Fully equipped exercise in each building –Lobby w/ fireplace –Elevators –Locker rooms on ground floor of each buildings with washrooms, full-height vented lockers, boot dryers and commercial grade washer/dryer Page 89

91 Eagle Crest Apartments- Overview Page 90

92 Eagle Crest Apartments- Overview Page 91

93 Final Sources & Uses of Funds Page 92

94 Sales Results Summary Sales Summary: –Institutional $24,370,000 –Retail $7,540,000 NIC: 7.925% MATURITY SCHEDULE $5,440,000 6.250% Term Bond Maturing September 1, 2023; Yield 6.500%; CUSIP 970712 AA3 $26,470,000 7.750% Term Bond Maturing September 1, 2038; Yield 8.000%; CUSIP 970712 AB1 Page 93

95 Andrew Nesi Executive Vice President HJ Sims CASE STUDIES

96 Case Study Mirabella Page 95 Debt Restructuring

97 Debt Restructuring – Mirabella Pacific Retirement Services — Medford, OR Based — Owns, Operates and/or Manages Over 50 Communities Primarily in Washington, Oregon and California — Mirabella is an Upscale CCRC in Downtown Seattle Initial Move-in Pace Encouraging; Ultimately Not Sustainable Due to Sharp Decline in Seattle Real Estate Market and Spike in Local Unemployment For Mirabella to Survive Pricing Flexibility was Needed Most of Bank Group was Exiting or Cutting Back in Senior Living Finance Restructuring of $130 million in Debt Necessary. Sims Acted as Financial Advisor to PRS & Mirabella Page 96

98 Debt Restructuring – Mirabella Keys to Success Negotiated Pricing Flexibility – Full Community at New Market Price Point Better Than Struggling Community Holding On To Prices From Another Time “Open Book” Financial Forecasting – Agree on Common Baseline Model From Independent Source; Various Scenarios Flow From Baseline Market Intelligence – Explore Multiple Refinancing Options and Update As Conditions Change Agree On Plan and Execute As Soon As Possible Page 97

99 Case Study United Methodist Homes of New Jersey Page 98 Creative Refinancing

100 Background UMHNJ was Founded in 1907 and is One of the Largest Senior Living Providers in New Jersey In Order to Take Advantage of Low Short-Term Interest Rates UMHNJ Wanted to Finance Bond Principal Payments for the Next 7 years with a Bank Term Loan Challenge Was to Find a Bank Willing to Accept Master Trust Indenture Structure Rather Typical Bank Covenant Structure Sims Worked with Management to Canvas Local Bank Market and Received Competitive Term Sheets Bank Loan Closed Prior to Scheduled Bond Principal Payment with Interest Rate 2.00% Below Bond Rate United Methodist Homes of New Jersey Page 99

101 United Methodist Homes of New Jersey Q1 2013 Interest Rates Were Broadly Trending Lower But Particularly for Investment Grade Borrowers UMHNJ Rated BB+ by S&P with Positive Outlook — No Change During Latest Annual Rating Review Despite Strengthening Metrics and Improved Performance Based on Our Experience with Rating Agencies We Believed an Investment Grade Rating from Fitch Investors Was Possible Worked with Management in Preparing Rating Request, Participated in Site Visit and Follow Up Communications UMHNJ Received BBB- (Stable) Rating from Fitch Refinancing of UMHNJ’s High Interest Debt Will Save $5 million (Present Value Basis) Over Life of Bond Issue Page 100

102 Robert Gall Senior Vice President HJ Sims CASE STUDY

103 Springs at South Biscayne Tax-Exempt Bonds on a Senior and Subordinate Basis Case Study Page 102

104 Springs at South Biscayne Project New Development Assisted Living/Memory Care Community –95 Assisted Living units –38 Memory Care units Located adjacent t0 the South Biscayne Church in North Port, FL Approximately 107,000 square feet off of US 41 (Tamiami Trail) City of North Port is located in Sarasota County in Southwest Florida Sponsor Omega Communities is the developer and owner of the Springs of South Biscayne and specializes in the development of faith based senior living communities in affinity relationships with well established churches. South Biscayne Church, is one of the largest churches in the North Port area with a congregation over approximately 2,700 members. Omega surrounded itself with established service providers in the senior living industry with LCS Development (program management), Gilbane Building Company (general contractor), and Lawson Group Architects to assist in designing a premier senior living community. Page 103

105 Springs at South Biscayne Challenge Received final construction contract to being marketing of bonds in mid-September 2013 Bond market had been experiencing 17 weeks of outflows and 25 billion dollars at this time causing liquidity and interest rate pressures Needed to find a solution to meet interested institutions demand for less leverage Financing Utilized 20%/50% set aside for tax-exempt status of bonds under IRC 142(d) Closed financing on January 31, 2014 on deadline of moratorium for reduced impact fees in the City Total financing of $30,100,000, consisting of the following: –$21,800,000 - Tax-Exempt Series 2014A - First Mortgage Draw Down Bonds –$2,700,000 – Tax-Exempt Series 2014B – Subordinate Mortgage Bonds –$5,600,000 – Equity Contribution from the Borrower Financing Highlight: The draw-down feature of the first mortgage bonds eliminated over $1.7 million of funded interest needed under a traditional fixed rate structure. In addition, the subordinate bonds enabled the project to reach certain credit metrics, helping to attract an institution to purchase the senior bonds on a draw down basis, limiting the need for the borrower to raise additional equity. Page 104

106 Ground Breaking of Springs at South Biscayne Page 105

107 Ground Breaking of Springs Page 106

108 Xan Smith Senior Vice President HJ Sims CASE STUDY

109 Case Study Whitecliffs Senior Living Page 108 Bank Financing

110 White Cliffs Senior Living Background White Cliffs is a 107 unit community consisting of 77 assisted living apartments and 30 memory care units opening in the spring, 2014 Location Kingman, Arizona a small city on the eastern edge of the Mojave Desert approximately 85 miles southeast of Las Vegas, NV Significant amount of retirees and snowbirds from the Northern states during the Winter months Developer Link Development — Oregon based development firm with a long standing history in senior living and multi family housing development — Managed by Milestone Senior Living, headquartered in Vancouver, Washington which manages 18 communities in 9 states primarily in the western United States — Experienced architect and general contractor — White Cliffs is a 107 unit community consisting of 77 assisted living apartments and 30 memory care units opening in the spring, 2014 Page 109

111 White Cliffs Senior Living Financing Challenges Small Market in a relatively remote area of Arizona Local economy was hit hard during the recession Market Opportunities Very limited existing competition Strong support for the project from the city Site location is in close proximity to the local hospital system Financing Solution Using the HJ Sims specialized banking distribution team Sims found a bank that was large enough to take on the full project and was able to understand the market opportunity Bank Financing Terms $ 12.1 Million Construction and Semi-Permanent loan equating to approximately 75% loan to cost 30 month construction and interest only period followed by a 5 year term note with a 25 year amortization Interest only rate = 5.00%, Term note rate = 5.25% Page 110


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