1. ABHOW Preliminary Planning Parameters – FY 2010 Budget
Board Meeting
February 19, 2009

2. Preliminary Planning Parameters for FY 2010 Budget
Strategic Assumptions:
ABHOW debt will not be refunded in 2009 and SJG will need to obtain Phase IIa financing under ABHOW with transfer to Cornerstone between in FY 2010
Management fees from ToP will increase with continuing revenue growth
Seniority profitability will continue to increase slightly
Foundation contribution revenue will be flat with FY 2009 budget or down if significant shortfall
PG will continue in the “trough” period for repositioning with declining occupancy and entrance fees
JP will have achieved stabilization

3. Preliminary Planning Parameters for FY 2010 Budget
Operating Assumptions:
Salary increase assumption lowered to 3.0% given economic challenges
Increases higher than this will need to be covered by additional fee increases or reductions in FTEs
Fringe benefits modeled at 29% overall, and at the same community specific percentage as in FY 2009
Health benefits estimated increase of 10%
Other expenses held to an increase of 3.0%

4. Preliminary Planning Parameters for FY 2010 Budget
Operating Assumptions:
Interest expense increase of $1 million from FY 2009 budget
Anticipate that ABHOW refunding will not occur until late FY 2010 if at all ~ use actual fixed rates on bonds, assume 2.5% SIFMA plus 2.6% fees on variable
Assume that interest expense on $25 million of FY 2006 debt will be expensed with SJG Ph I opening – assume 2.5% SIFMA for all in cost of 4% for $1 million additional interest expense
Assume interest on JP with 2.5% SIFMA and swap in place at blended rate of 6% on $23 million of debt for $1.4 million

5. Preliminary Planning Parameters for FY 2010 Budget
Operating Assumptions:
Allocation of Home Office overhead remains at 10.5% of budgeted expenses – with a cap of 8.5% of cash revenues for individual communities
New program development will be bottom-line neutral
Cash operating margin target for all entities to be determined initially based on multi-year plan so we can understand differences / needed refinements to the model –
Continue to focus on revenue increases ½% higher than expenditure increases
We want to outperform the multi-year forecast model –

6. Preliminary Planning Parameters for FY 2010 Budget
Home Office Assumptions:
Allocation of Home Office overhead to decline to 10.5% of budgeted expenses – with a cap of 8.5% of cash revenues
No FTE growth over FY 2009 budget
Budget no greater than 110% prior year actual for budgets with “cushions” in other expenses –
Budget for ½ of incentive comp for $600,000
Initial requests for programs need additional review

7. Preliminary Planning Parameters for FY 2010 Budget
Seniority Assumptions:
Two new management contracts at $100,000 each
New staff person to support managed contracts growth if not filled in FY 2009
Ongoing support of redevelopment
Market increases to ABHOW contracts

8. Preliminary Planning Parameters for FY 2010 Budget
American Baptist Properties Assumptions:
ABP will generate losses with deferred payments on Boise ground lease and workout support for Las Ventanas
Estimate a $500,000 loss as starting point

9. Preliminary Planning Parameters for FY 2010 Budget
Affordable Housing Assumptions:
Continuing pace of development of two communities per year
Primarily tax credit financed
Upfront need for capital of $500,000, rolling
Staff complement increases in FY 2009 will be adequate to carry into FY 2010

10. Preliminary Planning Parameters for FY 2010 Budget
Investment Assumptions:
Investment income budget for assumes no realized gains given strains in the market
Assume $2.0 million of dividend and interest earnings, less than FY 2008 given declining available balances with redevelopment and short term fixed rates declining

11. Preliminary Planning Parameters for FY 2010 Budget
Foundation Assumptions:
Foundation contributions, bequests, maturities of $600,000
Plan for endowment matching pool of $100,000 depending on entrance fee performance
Plan for Home Office subsidy of $400,000 to keep administrative charge under 1.5% of endowment value
Solve for a distribution rate that will maintain the aggregate distribution to communities – start with 3.8%

12. Preliminary Planning Parameters for FY 2010 Budget
Capital Assumptions:
Net entry fees from re-occupancy increase to $15.0 million –fill of SJG offsets curtailment at PG to plan for attrition
Principal retirement for existing variable rate debt $805,000, for fixed rate debt $1.135 million for 2006 issue $1.065 and JP $250,000 for a total of $3.35 million plus AH
Capital expenditures budget to be determined after determining cash operating margin – initial target at $11 million – needs to be based on Zumbrunnen studies and part of a three year solid normal capital and deferred maintenance plan
Apartment remodel threshold for capitalization to increase from $10,000 to $20,000 per apartment

13. Preliminary Planning Parameters for FY 2010 Budget
These assumptions at a high level suggest:
FY FY 2009 Bud
Cash from Operations $ 8, $ 7,363
Cash from entrance fees , ,361
Investment income , ,626
Total cash sources $ 25, $ 24,620
Capital spending , ,253
Interest expense , ,031
Debt principal , ,985
Redevelopment projects (detail next pg) , ,200
Other investment
Total cash uses , ,969
Net cash and investment change $ (2,700) $ (2,349)

14. Preliminary Planning Parameters for FY 2010 Budget
Unrestricted Redevelopment Capital Ex:
TSJG Additional Phase II ,000
Valle Verde ,000
Available to draw from trustee for VV (11,000)
Piedmont Gardens
Pilgrim Haven
Total Estimate $ 5,000