20100804x AZ 6801 Appraisal Youngtown AZ.sflb
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REAL ESTATE APPRAISAL SELF‐CONTAINED REPORT Fountain Retirement Hotel July 19, 2010 SENIORS HOUSING & HEALTHCARE REAL ESTATE ADVISORY SERVICES Fountain Retirement Hotel 12030 113th Ave Youngtown, Arizona 85363 HT File No. 20100804 © 2010 HealthTrust, LLC 6801 Energy Court, Suite 200 | Sarasota, FL 34240 | P: 941.363.7500 | F: 941.363.7525 | HealthTrust.com FOUNTAIN RETIREMENT HOTEL HEALTHTRUST August 13, 2010 Ms. Rona Sherzai GE Healthcare Financial Services 2 Bethesda Metro Center Bethesda, MD, 20814 RE: Real Estate Appraisal of Fountain Retirement Hotel 12030 113th Ave Youngtown, Arizona 85363 HT File No. 20100804 Dear Ms. Sherzai: At your request and authorization, HealthTrust, LLC, has prepared a Self‐Contained Real Estate Appraisal of the subject, an existing Assisted Living Residence. The “as is” market value is relevant as to the date we last inspected the site, or July 19, 2010. The report will be used to assist with underwriting a potential loan involving the subject. The effective date of the “as is” value was estimated under market conditions observed at that time, reflecting the fee simple interest in the total assets of the business (“TAB”). Market value, total assets of the business, and other appraisal terms are defined within the text of the following report. Complete descriptions of the property, together with the sources of information and the bases of our estimates, are stated in the accompanying sections of this report. The report is a Self‐Contained Real Estate Appraisal that complies with the reporting requirements set forth in Standards Rule 2‐2 of the Uniform Standards of Professional Appraisal Practice and FIRREA. As a result of our investigation and analysis, we have estimated the "as is" market value of the fee simple interest in the subject including the total assets of the business (real estate, personal property and total intangible assets), as depicted in the following table: ii FOUNTAIN RETIREMENT HOTEL HEALTHTRUST VALUATION SUMMARY(1) Date of Value/Appraised Interest As‐Is 19‐Jul‐2010 Market Value of Fee Simple Estate Market Value of Leased Fee Estate Market Value of Leasehold Estate $2,200,000 ‐‐‐ ‐‐‐ Real Property Allocation Real Property FF&E (Personal Property) Business Value Market Value of the Going Concern (TAB) $2,000,000 $100,000 $100,000 $2,200,000 (1) Subject to the Certification, Standard Conditions and Special Conditions Source: HealthTrust, LLC The accompanying prospective financial analyses are based on estimates and assumptions developed in connection with the appraisal. However, some assumptions inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our prospective financial analyses will vary from our estimates and the variations may be material. This report, the final estimates of value and the prospective financial analyses are intended solely for your information and assistance for the function stated above, and should not be relied upon for any other purpose. This report is for the exclusive use of GE Capital and any and all holders of a note or notes secured by a mortgage, deed of trust or deed to secure debt encumbering the subject property, and their respective affiliates, designates, successors and assignees, rating agencies and bond holders, and no other party shall have any right to rely on any service provided by HealthTrust. Neither our report nor any of its contents nor any reference to the appraisers or our firm, may be included or quoted in any document, offering circular or registration statement, prospectus, sales brochure, other appraisal, loan or other agreement without HealthTrust LLC's prior written approval of the form and context in which it will appear. Respectfully submitted, HealthTrust, LLC iii FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Certification I certify that, to the best of my knowledge and belief: The statements of fact contained in the accompanying report are to the best of our knowledge true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute and in conformity with the 2010 Edition of the Uniform Standards of Professional Appraisal Practice. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. Alan C. Plush, MAI has not made an inspection of the subject. No one, other than those so named in the certification pages herein, provided assistance to the undersigned with preparation of this report. Alan C. Plush, MAI has not provided consulting or valuation services within the three years immediately preceding acceptance of this assignment. The subject of this appraisal, Fountain Retirement Hotel, is located at 12030 113th Ave, Youngtown, Arizona 85363. As of the date of this report, Alan C. Plush, MAI, has completed the requirements of the continuing education program of the Appraisal Institute. x _______________________ Alan C. Plush, MAI State‐Certified General Appraiser 31350 (AZ) 6801 Energy Court, Suite 200 Sarasota, FL 34240 (941) 363‐7501 email@example.com iv FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Certification I certify that, to the best of my knowledge and belief: The statements of fact contained in the accompanying report are to the best of our knowledge true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute and in conformity with the 2010 Edition of the Uniform Standards of Professional Appraisal Practice. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. Colleen H. Blumenthal, MAI has not made an inspection of the subject but reviewed this report. Anthony Stablein has not made an inspection of the subject but assisted with the valuation for this report. Kim Walther assisted with research for this assignment and Charles Plush inspected the subject property. No one, other than those so named in the certification pages herein, provided assistance to the undersigned with preparation of this report. Colleen H. Blumenthal, MAI has provided consulting or valuation services within the three years immediately preceding acceptance of this assignment. Colleen H. Blumenthal performed a desk review of the subject property in the fourth quarter of 2009. The subject of this appraisal, Fountain Retirement Hotel, is located at 12030 113th Ave, Youngtown, Arizona 85363. As of the date of this report, Colleen H. Blumenthal, MAI, has completed the requirements of the continuing education program of the Appraisal Institute. x _______________________ Colleen H. Blumenthal, MAI State‐Certified General Appraiser 31276 (AZ) 6801 Energy Court, Suite 200 Sarasota, FL 34240 (941) 363‐7502 firstname.lastname@example.org v FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Certification I certify that, to the best of my knowledge and belief: The statements of fact contained in the accompanying report are to the best of our knowledge true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute and in conformity with the 2010 Edition of the Uniform Standards of Professional Appraisal Practice. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. David Rey Salinas, ASA has made an inspection of the subject. No one, other than those so named in the certification pages herein, provided assistance to the undersigned with preparation of this report. David Rey Salinas, ASA provided consulting or valuation services within the three years immediately preceding acceptance of this assignment. Colleen H. Blumenthal performed a desk review of the subject property in the fourth quarter of 2009. The subject of this appraisal, Fountain Retirement Hotel, is located at 12030 113th Ave, Youngtown, Arizona 85363. As of the date of this report, David Rey Salinas, ASA, has completed the requirements of the continuing education program of the Appraisal Institute. x _______________________ David Rey Salinas, ASA State‐Certified General 31205 (AZ) 10 Liberty Square Boston, MA 02109 (617) 542‐2125 email@example.com vi FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Standard Conditions This appraisal report shall be subject to standard conditions, permitted and/or limited usage, and terms of engagement, which are outlined as follows: Appraisals are performed and written reports are prepared in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and with the Appraisal Institute's Standards of Professional Appraisal Practice and Code of Professional Ethics. Unless specifically stated, the value conclusion(s) contained in the Appraisal applies to the real estate only, and does not include personal property, machinery and equipment, trade fixtures, business value, goodwill or other non‐realty items. The Appraisal report covering the subject is limited to surface rights only, and does not include any inherent subsurface or mineral rights. Income tax considerations have not been included or valued unless so specified in the Appraisal. We make no representations as to the value changes that may be attributed to such considerations. The legal description used in this report is assumed to be correct and we have made no survey of the property. We assume that there are no hidden or unapparent conditions of the property, subsoil, or structures that would render it more or less valuable. No opinion is rendered as to property title, which is assumed to be good and marketable. Unless otherwise stated, no consideration is given to liens or encumbrances against the property. Sketches, maps, photos, or other graphic aids included in appraisal reports are intended to assist the reader in ready identification and visualization of the property, and are not intended for technical purposes. It is assumed that legal, engineering, or other professional advice, as may be required, has been or will be obtained from professional sources and that the appraisal report will not be used for guidance in legal or technical matters such as, but not limited to, the existence of encroachments, easements or other discrepancies affecting the legal description of the property. It is assumed that there are no concealed or dubious conditions of the subsoil or subsurface waters including water table and flood plain, unless otherwise noted. We further assume there are no regulations of any government entity to control or restrict the use of the property unless specifically referred to in the report. It is assumed that the property will not operate in violation of any applicable government regulations, codes, ordinances or statutes. This report is not intended to be an engineering report. We are not qualified as structural or environmental engineers; therefore we are not qualified to judge the structural or environmental integrity of the improvements, if any. Consequently, no warranty or representations are made nor any liability assumed for the structural soundness, quality, adequacy or capacities of said improvements and utility services, including the construction materials, particularly the roof, foundations, and equipment, including the HVAC systems, if applicable. Should there be any question concerning same, it is strongly recommended that an engineering, construction and/or environmental inspection be obtained. The value estimate(s) stated in this Appraisal, unless noted otherwise, is predicated on the assumptions that all improvements, equipment and building services, if any, are structurally sound and suffer no concealed or latent defects or inadequacies other than those noted in the Appraisal. We will call to your attention any apparent defects or material adverse conditions which come to our attention. vii FOUNTAIN RETIREMENT HOTEL HEALTHTRUST In the absence of competent technical advice to the contrary, it is assumed that the property being appraised is not adversely affected by concealed or unapparent hazards such as, but not limited to asbestos, hazardous or contaminated substances, toxic waste or radioactivity. Information furnished by others is presumed to be reliable, and where so specified in the report, has been verified; but no responsibility, whether legal or otherwise, is assumed for its accuracy, and it cannot be guaranteed as being certain. No single item of information was completely relied upon to the exclusion of other information. Appraisal reports may contain estimates of future financial performance, estimates or opinions that represent the appraiser's view of reasonable expectations at a particular point in time, but such information, estimates or opinions are not offered as predictions or as assurances that a particular level of income or profit will be achieved, that events will occur, or that a particular price will be offered or accepted. Actual results achieved during the period covered by our prospective financial analyses will vary from those described in our report, and the variations may be material. Any proposed construction of rehabilitation referred to in the Appraisal is assumed to be completed within a reasonable time and in a workmanlike manner according to or exceeding currently accepted standards of design and methods of construction. Any inaccessible portions of the Property or improvements not inspected are assumed to be as reported or similar to the areas that are inspected. It should be specifically noted by any prospective mortgagee that the appraisal assumes that the property will be competently managed, leased, and maintained by financially sound owners over the expected period of ownership. This appraisal engagement does not entail an evaluation of management's or owner's effectiveness, nor are we responsible for future marketing efforts and other management or ownership actions upon which actual results will depend. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. The report, the final estimate of value and estimates of future financial performance included therein, are intended for the information of the person or persons to whom they are addressed, solely for the purposes stated therein, and should not be relied upon for any other purpose. The addressee shall not distribute the report to third parties without prior permission of HealthTrust. Before such permission shall be provided, the third party shall agree to hold HealthTrust harmless relative to their use of the report. Neither our report, nor its contents, nor any reference to the appraisers or HealthTrust, may be included or quoted in any offering circular or registration statement, prospectus, sales brochure, other appraisal, loan or other agreement or document without our prior written permission. Permission will be granted only upon meeting certain conditions. Generally, HealthTrust will not agree to the use of its name as a "named expert" within the meaning of the Securities Act of 1933 and the Securities Act of 1934. viii FOUNTAIN RETIREMENT HOTEL HEALTHTRUST The valuation applies only to the property described and for the purpose so stated and should not be used for any other purpose. Possession of the report, or copy thereof, does not carry with it the right of publication. Any allocation of total price between land and the improvements as shown is invalidated if used separately or in conjunction with any other report. Neither the report nor any portions thereof (especially any conclusions as to value, the identity of the appraisers or HealthTrust, or any reference to the Appraisal Institute or other recognized appraisal organization or the designations they confer) shall be disseminated to the public through public relations Media, news media, advertising media, sales media or any other public means of communication without the prior written consent and approval of the appraisers and HealthTrust. The date(s) of the valuation to which the value estimate conclusions apply is set forth in the letter of transmittal and within the body of the report. The value is based on the purchasing power of the United States dollar as of that date. Acceptance of and/or use of this report constitutes acceptance of all Standard Conditions. Appraisal assignments are accepted with the understanding that there is no obligation to furnish services after completion of the original assignment. If the need for subsequent service related to an appraisal assignment (e.g., testimony, updates, conferences, reprint or copy service) is contemplated, special arrangements acceptable to HealthTrust must be made in advance. Unless otherwise stated, no effort has been made to determine the possible effect, if any, on the subject property of energy shortage or future federal, state or local legislation, including any environmental or ecological matters or interpretations thereof. We take no responsibility for any events, conditions or circumstances affecting the subject Property or its value, that take place subsequent to either the effective date of value cited in the Appraisal or the date of our field inspection, whichever occurs first. This engagement may be terminated whether by client or HealthTrust at any time upon written notice to that effect to the other parties, it being understood that, unless HealthTrust shall unilaterally terminate the engagement without the client's consent and without reasonable cause, the provisions related to the payment of fees and expenses through the date of termination will survive any termination, and it being further understood that the indemnification and hold harmless provisions shall survive any termination thereof, whether or not such termination is unilateral. ix FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Extraordinary Assumptions Although this appraisal is not contingent upon any particular management, it does presume that the subject’s management is competent and experienced with operations of an Assisted Living Residence. The impacts of legislative changes for the reimbursement of Medicaid and Medicare can be significant but are difficult to predict. Our estimates and conclusions reflect the current reimbursement policies and those reasonably anticipated for the short term. Please note that the subject is encumbered by an arm’s length lease. However, our analysis is reflective of the fee simple interest within the subject property. x FOUNTAIN RETIREMENT HOTEL HEALTHTRUST TABLE OF CONTENTS PREFACE 3 GLOSSARY OF TERMS SENIORS HOUSING AND HEALTH CARE INDUSTRY OVERVIEW 5 7 INTRODUCTION 12 SCOPE OF WORK APPLICABILITY OF APPROACHES LEGAL INTEREST APPRAISED EFFECTIVE DATES OF APPRAISAL USE PREMISE 12 13 14 14 14 DESCRIPTIVE DATA 15 SITE DESCRIPTION ZONING ASSESSMENT AND TAXES IMPROVEMENT DESCRIPTION 15 16 16 17 MARKET ANALYSIS 21 REGIONAL ANALYSIS NEIGHBORHOOD ANALYSIS 21 25 COMPETITIVE MARKET ANALYSIS 28 REGULATORY OVERVIEW DEFINITION OF PRIMARY MARKET AREA SUPPLY ANALYSIS DEMAND ANALYSIS PENETRATION ANALYSIS MARKET CATEGORIZATION 28 29 29 31 40 41 HIGHEST AND BEST USE 43 AS IF VACANT AS CURRENTLY IMPROVED 43 44 VALUATION ANALYSIS 45 INCOME APPROACH 45 ESTIMATES OF MARKET RENT ‐ STABILIZED OCCUPANCY TOTAL REVENUE ESTIMATES OPERATING EXPENSES NET OPERATING INCOME ESTIMATE CAPITALIZATION RATE DERIVATION DISCOUNT RATE DERIVATION INCOME APPROACH CONCLUSION 53 54 55 56 61 63 68 69 SALES COMPARISON APPROACH 73 SALES GRID ANALYSIS EGIM ANALYSIS SALES COMPARISON APPROACH CONCLUSION 76 78 78 1 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST COST APPROACH 80 LAND VALUATION IMPROVEMENT VALUATION DEPRECIATION COST APPROACH CONCLUSION INSURABLE VALUE ESTIMATE 80 83 86 86 88 RECONCILIATION AND FINAL VALUE ESTIMATES 89 ASSET VALUE ALLOCATION MARKETABILITY ANALYSIS 90 92 ADDENDA 93 SUBJECT PHOTOGRAPHS AND EXHIBITS PROVIDED FINANCIAL STATEMENTS IMPROVED SALES DEMOGRAPHIC DATA ENGAGEMENT LETTER APPRAISER QUALIFICATIONS 2 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST PREFACE Fountain Retirement Hotel EXECUTIVE SUMMARY Property Data Name: Address: Property Type: Gross Building Area (SF): Land Area (acres): Year Built: Condition: Effective Age: Total Density: Unit Mix: AL Total Parcel Number: Assessed Value: Property Taxes: Zoning District: Flood Zone: Owner of Record: Management Company: Highest & Best Use: As Though Vacant As Currently Improved Fountain Retirement Hotel 12030 113th Ave Youngtown, Arizona 85363 Assisted Living Residence 37,102 1.35 1971 Average 35 65 As‐Is No. Units Set‐Up Beds 65 78 65 78 200‐85‐406B $159,938 $9,863 R (Rural District) Outside Aviv Asset Management LLC Fountain Assisted Living Residence Assisted Living Residence 3 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST EXECUTIVE SUMMARY (CONT.) Financial Analysis Summary Purpose of the Appraisal: Salient Dates of Appraisal: As Is Interest Appraised: Excess Land: Excess CON: Valuation Assumptions: Capitalization Rate: Terminal Capitalization Rate: Discount Rate: Revenue Growth Rate: Expense Growth Rate: Management Fee: Reserves (Capex) Per Unit: Stabilized Expense Ratio Stabilized Occupancy assist with underwriting a potential loan involving the subject July 19, 2010 fee simple $0 $0 9.50% 10.00% 11.00% 2.50% 2.50% 5.00% $300 80.11% 77.00% Value Indication(s) As‐Is 19‐Jul‐2010 The Cost Approach ‐ Fee Simple The Income Approach ‐ Fee Simple The Sales Approach ‐ Fee Simple $2,400,000 $2,200,000 $2,200,000 The Income Approach ‐ Leased Fee The Income Approach ‐ Leasehold ‐‐‐ ‐‐‐ Value Conclusion(s) Market Value of Going Concern (TAB) Market Value of Leased Fee Estate Market Value of Leasehold Estate $2,200,000 ‐‐‐ ‐‐‐ Value Allocation(s) Real Property FF&E (Personal Property) Business Value Market Value of the Going Concern (TAB) $2,000,000 $100,000 $100,000 $2,200,000 The values presented above are subject to the Certification of Value, Standard Conditions, and Extraordinary Conditions and may not be distributed in partial context without the entire appraisal document. The summary values cannot be completely understood without the entire document and/or additional information from our work files. The accompanying prospective financial analyses are based on estimates and assumptions developed in connection with the appraisal. However, some assumptions inevitably will not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the period covered by our prospective financial analyses will vary from our estimates and the variations may be material. 4 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Glossary of Terms Market Value: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. property (cash, work force, contracts, name, patent, copyrights, and other residual intangible assets, to include capitalized economic profit) of a business. Highest and Best Use: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible and that results in the highest value. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: a) Buyer and seller are typically motivated; b) both parties are well informed or well advised and each acting in what they consider their own best interests; c) a reasonable time is allowed for exposure in the open market; d) payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and, e) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Insurable Value: Value used by insurance companies as the basis for insurance. Often considered to be replacement or reproduction cost less deterioration and non‐insurable items. Sometimes a cash value but often entirely a cost concept (Marshall & Swift). Investment Value: The specific value of an investment to a particular investor or class of investors based on individual investment requirements; distinguished from market value, which is impersonal and detached. Real Property: All interests, benefits, and rights inherent in the ownership of physical real estate; the bundle of rights with which the ownership of the real estate is endowed. Fee Simple Estate: Absolute ownership unencumbered by any other interest or estate subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. Personal Property (FF&E): Identifiable portable and tangible objects that are considered by the general public to be “personal,” e.g., furnishings, art work, antiques, gems and jewelry, collectibles, machinery and equipment; all property that is not classified as real estate. (USPAP, 1992 edition) Personal property includes movable items that are not permanently affixed to, and part of, the real estate. Leased Fee Estate: An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (leased fee owner) and leased fee are specified by contract terms contained within the lease. Leasehold Estate: The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions. Business Value (Intangible Property): A value of enhancement that results from items of intangible personal property such as marketing and management skill, an assembled work force, working capital, trade names, franchises, Total Assets of the Business (TAB): The tangible property (real property and personal property, including inventory and furniture, fixtures, and equipment) and intangible 5 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Common Area Maintenance (CAM): The expense of operating and maintaining common areas; may or may not include management charges and usually does not include capital expenditures on tenant improvements or other improvements to the property. See also common area. patents, trademarks, contracts, leases, and operating agreements. (going‐concern value). Floor Area Ratio (FAR): The relationship between the above‐ground floor area of a building, as described by the building code, and the area of the plot plan on which it stands; in planning and zoning, often expressed as a decimal, e.g., a ratio of 2.0 indicates that a permissible floor area of a building is twice the total land area. Gross Building Area (GBA): The total floor area of a building, including below‐grade space but excluding unenclosed areas, measured from the exterior of the walls. Gross building area for office buildings is computed by measuring to the outside finished surface of permanent outer building walls without any deductions. All enclosed floors of the building including basements, mechanical equipment floors, penthouses, and the like are included in the measurement. Parking spaces and parking garages are excluded. Life Estate: Total rights of use, occupancy, and control, limited to the lifetime of a designated party, often known as the life tenant. Ad Valorem Tax: A real estate tax based on the assessed value of the property, which is not necessarily equivalent to market value. Appraisal Foundation: (Condensed) Not‐for‐ profit educational foundation, organized in 1987 to foster appraisal professionalism through the establishment of uniform standards of appraisal practice and qualifications for the state certification and licensing of appraisers. The Foundation’s is responsible for appointing members to the two independent boards, The Appraisal Standards Board (ASB) and the Appraisers Qualification Board (AQB). The ASB promulgates standards found in USPAP while the AQB establishes minimum experience, education, and examination criteria for state licensing of appraisers and recommends such criteria for state licensing boards. These boards operate under the authority (through the enactment of FIRREA) of Congress, which delegated responsibility to these boards which are monitored by the Appraisal Subcommittee. Financial Institutions Reform, Recovery and Enforcement Act (FIRREA): (Condensed) Legislation enacted in 1989 to bail out the savings and loan industry; FIRREA created the Office of Thrift Supervision (OTS) under the Treasury Department. As part of this act, the OTS was charged with creating the Appraisal Subcommittee to implement Title XI of FIRREA mandating state certification of appraisers who perform assignments for Federal Financial Institutions Regulatory Agencies. Uniform Standards of Professional Practice (USPAP): Current standards of the appraisal profession, developed for appraisers, and the users of appraisal services, by the Appraisal Standards Board, of the Appraisal Foundation. The Uniform Standards set forth the procedures to be followed in developing an appraisal, analysis, or opinion and the manner in which an appraisal, analysis, or opinion is communicated. They are endorsed by the Appraisal Institute and by other professional organizations. Operating Expense Ratio (OER): The ratio of total operating expenses (TOE) to effective gross income (TOE/EGI); the complement of the net income ratio (NIR), i.e., 1 ‐ NIR. 6 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Seniors Housing and Health Care Industry Overview The subject of this analysis is a seniors housing/ health care property. The health care and seniors housing industry can generally be segregated into five separate and distinct levels. These levels range, in order of intensity from lowest to highest, from a seniors apartment (i.e., age‐restricted) to independent living community, assisted living residence, skilled nursing facility to, ultimately, an acute care (hospital). The following overview is intended to provide a brief overview of this market sector summary. Senior Apartments: This product type includes all age‐restricted apartments where at least 80% of the residents are 55 years of age or older. Physically, the properties are similar to traditional apartments with a clubhouse, perhaps exercise facilities, covered or garage parking, and a swimming pool. No services are offered for meals or housekeeping, but social activities are typically available. The resident profile includes an active adult who is typically retired and has no need for assistance with activities of daily living or instrumental activities of daily living. Units typically include a full kitchen, washer and dryer hook‐ups, balconies or patios, window treatments and floor covering. The NIC/American Seniors Housing Association’s Seniors Housing Construction Trends Report 2009 indicates that the construction starts of senior apartment units in 2008/09 (April through March) totals 7,815 units. The report indicates that the total national inventory of senior apartments within the 100 largest Metro markets is 410,000 units. 7 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Independent Living Communities: Independent living communities were the largest response the market provided in the 1980s to increasing demand for senior accommodations. These projects, typically ranging in size from 150 units to 300 units, are designed in similar fashion (operationally) to an apartment complex, in that units often contain separate bedrooms and cooking facilities. Also provided in the development is a commons area that includes a kitchen and dining room and offers three meals per day. Most rental communities include one or two meals per day in conjunction with their service fee; however, additional meals can be purchased. Services typically included are weekly housekeeping and linen service, maintenance of grounds, activities, etc. Residents who locate in an independent living community must be physically and mentally capable of performing all of the activities of daily living (ADL). Development of these types of communities, given their large scale, prompted entries into the industry by both local and national firms. However, by the very nature of the communities (independent), residents are capable of relocating if personal preferences or needs change. Operationally, lack of experience and underestimation of the complexity of operating an independent living retirement community has led to bankruptcies and financial difficulties for many of these facilities. Lack of a clear need motivation for residency in an independent community, coupled with over‐development in many markets, has caused a reassessment of the true market potential for these properties. Nonetheless, they continue to serve a much‐needed niche in the overall retirement housing market. The NIC/American Seniors Housing Association’s Seniors Housing Construction Trends Report 2009 indicates that there were a total of 5,029 units started in 2008/09, representing a 58% decline from the previous year. The inventory is estimated at 388,062 units within the 100 largest Metro markets. According to the 1st Quarter 2010 NIC MAP Construction Monitor, among the 31 largest MSAs, independent living indicated the following: Assisted Living Residences: The second level of seniors housing is the assisted living residence. Assisted living becomes necessary when a resident is no longer capable of performing all of the activities of daily living (ADLs). ALRs vary in the intensity of personal care services provided, from the resident who is mentally competent but physically frail, to the resident who is both mentally disoriented and physically frail. Residents suffering from Alzheimer’s or some other form of dementia typify the higher intensity level. Assisted living residences have emerged as one of the growth sectors in the senior housing and health care market in the late 1980s. Assisted living residences are designed to provide a level of care that is 8 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST roughly between that of independent living and skilled nursing. Residents live in a residential apartment, but all instrumental activities of daily living (e.g., cooking, cleaning, driving) are provided and typically at least three or ADLs such as grooming, bathing, dressing, and toileting are provided. Many of these communities have a distinct section for Alzheimer care where there is a higher ratio of staffing, a wanderguard system and other amenities specifically designed to improve the quality of life for these seniors. From a licensure standpoint, most states require little additional documentation or certification for a property to advertise this specialty unit. Finally, a number of states have Medicaid reimbursement for stays at assisted living residences. This appears to be the final level of support needed to legitimize assisted living as a niche within the industry, and allow for institutional investment over the near term as opposed to the distant future. The Seniors Housing Construction Trends Report 2009 indicates that there were 3,572 assisted living units started and 1,298 memory care units started. Nationally, construction in this sector peaked between 1997 and 2001. However, overall starts are down 42% from last year. The current inventory within the 100 largest Metro markets is estimated 356,241 units, of which 61,860 units are designed for memory care. Please, note these are units, with actual supply amounts higher in terms of beds. According to the 1st Quarter 2010 NIC MAP Construction Monitor, among the 31 largest MSAs, assisted living indicated the following: Skilled Nursing Facilities: Skilled nursing facilities are the oldest property type in the healthcare/retirement industry. They are, operationally, one step below hospitals. Physically, skilled nursing facilities contain smaller rooms and typically house residents on a semi‐private basis. The rooms, from an appearance standpoint, are similar to a hospital room and do not contain cooking facilities. Operationally, these facilities differ from independent and assisted living residences in that a significant portion of their income is derived from government sources rather than the residents. In fact, Medicare and Medicaid, combined, paid for approximately 78% of the skilled nursing care provided in 2009. Thus, changes in reimbursement can have a material impact on a residence’s profitability. Although increasingly, long‐term care residents are being treated in community (ALR) and residential (home health) settings, nursing homes will continue to be of need to persons requiring 24‐hour skilled care. Hence, the acuity of the nursing home resident is expected to increase in coming years. 9 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST The Seniors Housing Construction Trends Report 2009 indicates that there were 3,761 nursing beds started in 2008/09, representing a 1% increase from last year. American Health Care Associate (AHCA) estimates the total certified bed count in the US at 1,668,769. According to the 1st Quarter 2010 NIC MAP Construction Monitor, among the 31 largest MSAs, skilled nursing indicated the following: Acute Care Hospitals: The final care level offered is the acute care environment, or hospital. This is the segment of the market with which the general public is most familiar, generally from personal experience. A hospital often represents the last step in the life cycle, and is totally separate and distinct from seniors housing and the three care levels discussed previously. Also, there is little exhibited interrelationship in the relative demand and supply characteristics of acute care hospitals with the remaining elements of the seniors housing market. Other Product Types: In addition to the four levels described, numerous hybrids or variations occur. For instance, a typical Continuing Care Retirement Community (CCRC) offers services beginning at the independent living level progressing to assisted living and ultimately skilled nursing. CCRCs are often endowment or buy‐in situations where a large entry fee is charged to the new resident in exchange for lower monthly service fees for the balance of their residency at the community. Many variations exist on refund policies of this entry fee ranging from 0% to 90% and higher. Most communities amortize the non‐refundable fees over four to eight years. Given the orientation of the consumer to either rental or endowment, CCRCs are generally separate and distinct from direct competition with rental communities. Summary: This review of seniors housing services is intentionally brief and is designed to acquaint the reader with the general differences in product types and services available to the retiree consumer. These services and products are differentiated by price and need level. Capital resources appear available ‐ albeit limited ‐ to well‐managed communities and established operators with the less experienced developer/operators relying on personal relationships with local lenders. Market fundamentals across most sectors are strong and will continue to do so until significant development occurs. In spite of the housing market woes, financial market crises and other economic challenges, the seniors housing industry is faring well. The most recent quarterly update from NIC MAP suggests the following trends within the 31 largest MSAs in Seniors Housing (Independent and Assisted Living) and Majority Nursing Care: 10 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST At present, the overall development activity is minimal, following banner years of peak activity and large portfolio transactions. Of note, more than 25% of all of the seniors housing projects started in 2007/08 were expansions and we believe that in‐fill development will have an increasing role as these projects have less cost and risk than new projects. In terms of sales, the amount of activity in 2008 was down about 65% from recent years and most of the transactions that have occurred involved Class B/C product or non‐performing assets. Deal flow in 2009 has not picked up materially but in the latter half of the year, we have seen increased activity as Sunwest sheds assets at discounted prices and Sunrise continues to reorganize. Erickson Retirement Communities, which entered bankruptcy in September, 2009 is also struggling with cash flow and has halted development on existing and new projects. Following the company’s reorganization, some assets are expected to be available in 2010. Many outsiders will remain on the sidelines while so many of the industry largest operators generate negative headlines. However, this will allow opportunities for strategic buyers, as evidenced by the Lonestar/LaVida and Blackstone/Emeritus purchases (the latter has yet to close) of Sunwest assets and Brookdale’s purchase of a Sunrise portfolio thus far this year. Overall the fundamentals of the industry are good for the long‐term, albeit soft for IL and to some degree AL in the short term. Lack of capital will constrain many deals and require more equity, so we expect some modest increases in capitalization rates while cash flows remain steady in the short term and improve over the long term. 11 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST INTRODUCTION Legal Description: The subject’s legal descriptions were not provided. We presume the descriptions herein are correct and assume no liability for them. Three‐Year Sales History: The subject sale history has been analyzed and researched in accordance to USPAP for the past three years prior to the date of appraisal. The sale history is presented as follows: SALES HISTORY Owner of Record: Last Subject Sale Date: OR Book/Page: Last Subject Sale Price: Arms' Length? Pending Sale/Contract? If yes, terms: Aviv Asset Management LLC No previous sales in the past three years N/A N/A N/A No N/A The subject property has not sold in the previous three years. Further, we are unaware of any sales involving the subject property. Operational History: According to on‐site management, the subject’s occupancy has been mostly stable over the last several months. The operator’s annualized performance is below the 2009 indication and the subject’s current operations. Based on the financial and performance data provided, the subject’s occupancy and operational trends are summarized as follows: OPERATIONAL SUMMARY Appraisal ‐ Stabilized Occ % Total/RD AL 77% $47.86 Average Occupancy 77% Total Revenues $47.86 Profit Margin 19.9% Source: HealthTrust LLC and Fountain Level of Care 2010 Annualized Occ % Total/RD 70% $48.40 70% $48.40 25.9% 2009 Actual Occ % Total/RD 78% $47.38 78% $47.38 18.9% Purpose and Intended Use of the Appraisal: To estimate the "as is" market value of the subject as a going concern including personal and intangible property. The intended use of this appraisal is to assist with underwriting a potential loan involving the subject. The intended users are representatives of the client. Scope of Work General Property Scope: Standards Rule 2‐2 of USPAP requires that each written real property appraisal report must describe the extent of the process of collecting, confirming and reporting data. Based on the identified objective of the appraisal, we have viewed the exposure as requiring tremendous effort, particularly with regard to the subject’s income‐producing potential. In order to appraise the subject, we have inspected the subject, its neighborhood, and the general market area on July 19, 2010. As part of the appraisal process, we have examined: 12 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Supply and demand Development trends Current demographic data and projected changes over the next five years Operating characteristics Valuation trends and characteristics Legislative environment We have surveyed the most comparable properties in this market area to assess typical demand and rates in the PMA. As the subject is an income‐producing property type that is typical bought by investors, we have spent the most time, effort and original research on verifying income and expense comparables, rent comparables, identifying trends that may impact the subject’s operations. The greatest extent of research was in the income approach. While we have attempted to limit this research to the subject’s primary market area, due to lack of improved sales, we have expanded our search to properties throughout the region. We believe that most or all‐discoverable pertinent market information has been obtained and considered. All sales were verified through a party to the transaction and most have been inspected by the appraisers or associates at HealthTrust. In terms of the cost approach, we have identified sales of vacant property with public sources and used the Marshall Valuation Guide and regional cost comparables. Nonetheless, we have expended minimal research effort for this approach as it generally produces the least reliable indication for a going concern appraisal. Lastly, as a part of this process we have obtained and verified data with local market participants (owners and operators of comparable properties), state regulatory agencies as well as local governing officials. The resulting value estimates have been reconciled based on their relative strengths, weaknesses and appropriateness into a final value estimate. This appraisal report is a written record of our conclusions and opinions, containing the most pertinent market data used and a discussion of the reasoning underlying our estimates. Applicability of Approaches The COST APPROACH is the sum of the land value and the cost new of the improvements less accrued depreciation. The cost approach is based on the premise that an informed, rational investor/purchaser would pay no more for an existing property than the cost to reproduce a substitute property with the same utility without undue delay. The INCOME APPROACH is based on the premise that a prudent investor would pay no more for the subject property than for another investment with similar risk and return characteristics. Since the value of an investment can be considered equal to the present worth of anticipated future benefits in the form of dollar income or amenities, this approach estimates the present value of the net income that the property is capable of producing. These amounts are discounted at a rate that reflects the risk to the investor and the amount of income necessary to support debt service or the mortgage requirement. 13 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST The SALES COMPARISON APPROACH (market approach) is the process where prices of reasonably similar properties are compared to the subject and are adjusted for differences in financing, sale conditions, time, location and physical characteristics. This approach is based upon the principle of substitution, which implies that a prudent purchaser would not pay more to buy the subject than for a comparable substitute property in a similar location. Each approach to value has its strengths and weaknesses, depending on a large extent on the type of property being appraised and the quantity and quality of data available. In most instances, one or more of these approaches will produce a more reliable value indication than the other approach(es). Therefore, the final step in the appraisal process is the RECONCILIATION and correlation of all the value indications into a final value estimate. This step usually begins with a discussion of the merits and demerits of each approach and an analysis of the reliability of the data used in each approach. It concludes with a statement of the final value estimate. In addition, it is necessary to identify any business value and personal property value separate from the real estate. The allocated contribution values were estimated following the reconciliation and final value estimates. This report should be read in its entirety for a complete understanding of the scope of the appraisal and the limiting conditions that apply to this valuation and report. Specific attention should be drawn to the Letter of Transmittal, Certification, Standard Conditions and Significant Issues. Legal Interest Appraised The real property interest appraised is considered to be the fee simple estate in the 1.35 owned acres. Effective Dates of Appraisal Charles Plush physically inspected the subject site on July 19, 2010. The “as is” valuation date is also July 19, 2010. The appraisal is based upon market conditions observed at that time. Use Premise The subject property valued herein is based on the existing use as an Assisted Living Residence. The implications relative to this premise on the highest and best use of the property are addressed in a later section of this report. 14 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST DESCRIPTIVE DATA Site Description We have made a visual inspection of the subject property. Where applicable, we have supplanted our analysis with information provided by the subject’s management and/or the client. As previously noted, we are not experts in the presence of hazardous substances or the structural integrity of the site or improvements. Based on our inspection of the property, the subject’s site characteristics are as follows: SITE DESCRIPTION Access Primary Frontage: Type: Median Divided: Accessibility Visibility Exposure 113th Ave N 2 way, 1 lane each way No Average Fair Fair Facilitating Entry to Site Turn Lane: Stop Sign: Traffic Light: No No No Easements Right of Way: Utility: Ingress/Egress: Drainage: Other (specify): N/A N/A N/A N/A N/A Utility Services Electric: Gas: Water: Sewer: Telephone Cable: Yes Yes Public Public Yes Yes Flood Zone Flood Plain: Designation: Community Panel: Date: Outside X500 04013C1610J September 30, 2005 General Site size: Source: Shape: Topography: 1.35 acres Client Regular Level Other Site Improvements Paved Drives: Walkways: Landscaping: Signage: Ancillary Buildings: Retention Ponds or areas: Yes Yes Yes Yes No No Parking Open Parking spaces: Covered Parking spaces: Garage spaces: Handicap spaces: Total 35 20 0 1 56 Soil Drainage: Soil Conditions: Above‐Ground Storage Tanks: Underground Storage Tanks: Hazardous Substances: Costs to cure: Adequate Normal No No No $0 Seismic Zone: 1 We were not provided with title or a survey detailing the presence of easements on the subject site. We assume that typical easements exist and are unaware of any restraints that would hinder development of the subject if vacant. 15 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST AERIAL MAP Zoning We verified the subject’s zoning designation and reviewed the corresponding zoning ordinance with the Town of Youngtown. According to the zoning department, the subject site cannot be rebuilt if it were destroyed. A summary of the zoning requirements is as follows: ZONING DESIGNATION Designation: Zoning Authority: R (Rural District) Town of Youngtown Permitted Uses: churches, golf courses, hospitals, medical clinics, and pharmacies Maximum Height: Permitted Density: Max. Permitted FAR: Required Parking: Subject Permitted As: 30 to 50 feet depending on use N/A N/A one space for each bed legally non‐conforming use Assessment and Taxes The subject property is assessed by Maricopa County. The following table details the subject’s most recent assessment and tax information: 16 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SUMMARY OF REAL ESTATE TAXES Subject Assessed Value(s): Parcel ID 200‐85‐406B Total Assessed Value: Land Building Adjustments & Taxes: Exempt Value: Assessment Ratio: Taxable Value: Effective Tax (Millage) Rate: Total Real Estate Taxes: Total Personal Property Taxes: Total Taxes: Effective Year: Total $1,599,382 $1,599,382 61.6676 Total Taxes Per: $152 Unit $0 10% $159,938 per $1,000 $9,863 $0 $9,863 2009 $126 Bed We have estimated total taxes of $160 per unit, which is similar to the current tax burden of $152 per unit as we believe the subject is appropriately assessed. Improvement Description The following description of the subject improvements is based on our visual inspection of the subject as well as review of the floor plans and information provided by the operator. These plans are contained in the Addenda of this report. We have partitioned the subject’s gross building area as follows: SUMMARY OF GBA Portion Assisted/Memory Care Total GBA 37,102 37,102 DESCRIPTION OF IMPROVEMENTS Improvement Description: Year Built: Year of Last Major Renovation Number of Buildings Number of Stories Nurse’s Stations Overall Condition Overall Quality 1971 N/A 1 2 1 Average Average Building Shape Basement Balconies Number of Elevators Dining Rooms Deferred Maintenance Functional Obsolescence regular None No 1 1 No No The subject property was constructed at one time. The improvements are well maintained, with replacements having been made as needed. Overall, we find that the subject property has an effective age of 35 years, compared to its actual age of 39 years, due to the adequate maintenance of the improvements. The subject’s improvements are detailed as follows: DESCRIPTION OF IMPROVEMENTS (CONT.) 17 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Construction Details: Foundation Type: Structure Type: Roof Type: Exterior Wall Finish: Interior Partitions ‐ Common Areas: Interior Partitions ‐ Resident Units: Ceilings ‐ Common Areas: Ceilings ‐ Resident Units: Lighting ‐ Common Areas: Lighting ‐ Resident Units: HVAC ‐ Common Areas: HVAC ‐ Resident Units: Floor Coverings ‐ Common Areas: Floor Coverings ‐ Resident Units: Windows: Sprinkler/Security System: FF&E: Concrete slab Wood Frame Flat Stucco Latex paint over drywall Latex paint over drywall Latex paint over drywall Latex paint over drywall Fluorescent Fluorescent Forced air PTACs Carpet Carpet and vinyl sheet Aluminum frame, single‐hung All units have 24‐hour emergency call system with central monitoring. The building is not sprinklered and contains smoke detectors. This appraisal includes all chattel and personal property associated with the subject’s operation such as furnishings for all common and administrative areas, office equipment, kitchen and laundry equipment, maintenance equipment, and all other accessory items required for normal operation. Community Layout The building is designed in a “square” shape. The resident living units have kitchens or kitchenettes with range, sinks and partial size refrigerators or full size refrigerators. All units have baths with a sink, toilet and prefabricated shower stall. Overall, the unit sizes and layouts are typical for senior living. The following table illustrates the amenities offered by the subject. Overall, we find these to be typical within the market, and adequate given the subject’s age, quality and prospective resident: 18 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SUMMARY OF AMENITIES Unit Amenities: Balconies/porches Cable/satellite TV Emergency pull‐cords Fire/smoke detectors Full kitchens High‐speed internet Community Amenities: Activity rooms Arts & crafts rooms Assistance w/ ADLs Bank branch Beauty/barber shop Business Center Chapel Coffee Shop/Deli Computer room Concierge service Courtyard Covered parking Dining room ‐ main Dining room ‐ private Exercise facilities Game/billiards rooms Garage parking General store Golf course Guest Accommodations Health center Housekeeping Ice cream parlor No Yes Yes Yes Yes No Individually controlled HVAC Kitchenettes Private baths Walk‐in closets Washer/dryer hookups Washers/dryers Yes Yes Yes No No No Yes Yes Yes No No No No No No No No No Yes No No Yes No No No No No Yes No Laundry facilities Library Linen Service Lounge areas Medications Pharmacy Postal services Putting green Reception Area Scheduled transportation Security 24 hour Skilled nursing care Social activities Spa/Whirlpool Storage area/bin Swimming Pool Tennis courts Theater/Auditorium Therapy Room Utilities Walking/nature trails Wanderer Mgt. System Woodworking shop Yes No Yes Yes No No Yes No Yes No No No Yes No No Yes No No No Yes No No No The subject contains a total of 65 units and 78 beds, indicating the following unit sizes and mix: UNIT MIX Type of Unit Assisted Living Semi‐Private Studio 1‐Bedroom Total No. of Units Size (sf) Net Rentable Area 13 46 6 65 280 ‐ 280 280 ‐ 280 354 ‐ 354 3,640 12,880 2,124 18,644 Compared to the overall industry, the subject indicates the following: 19 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SUMMARY OF IMPROVEMENTS Level of Care: AL Total No. of Units No. SU Beds No. Lic Beds 65 65 78 78 80 80 Building Efficiency: Subject Gross Building Area (GBA): Ratio of Net Rentable Area GBA/Unit GBA/Bed 37,102 50.3% 571 476 2009 State of Seniors Housing Median No. Of Units 73 2009 State of Seniors Housing Median Indications IL AL CCRC 114,311 51,000 357,415 69.0% 57.5% 71.9% 914 699 1,146 N/A N/A N/A Americans With Disabilities Act: The Americans With Disabilities Act sets strict and specific standards for handicapped access to and within most commercial and industrial buildings. Determination of compliance with these standards is beyond appraisal expertise and, therefore, has not been attempted by the appraisers. For purposes of this appraisal, we are assuming the improvements are in compliance. We assume no responsibility for the cost of such determination, and our appraisal is subject to revision if the improvements are not in compliance. Conclusion ‐ Subject Property Data: Following our review of the plans and our property inspection, we find that the subject site is adequate to support the improvements. Furthermore, we did not note evidence of functional obsolescence inherent in the subject’s design and believe that they are functional for seniors housing and care. Finally, we did not note material deferred maintenance at the subject. 20 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST MARKET ANALYSIS The subject of this appraisal is located in Youngtown in the Phoenix‐Mesa‐Scottsdale, AZ Metropolitan Statistical Area (MSA). Appraisal theory recognizes four factors (environmental, social, economic, and governmental) that influence property values within a region, county, neighborhood or district. Accordingly, a review of each as it relates to the Phoenix‐Mesa‐Scottsdale, AZ MSA, as well as the subject’s more immediate neighborhood, is presented. Regional Analysis The subject’s location within the Phoenix‐Mesa‐Scottsdale, AZ MSA is as follows: AREA MAP Additionally, the following pages were provided by Moody’s Economy.com, Précis Metro reports to provide a comprehensive analysis regarding current and projected economic conditions for the subject’s MSA. 21 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST 22 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST 23 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST 24 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Neighborhood Analysis The key focus of the neighborhood analysis is not as much competition‐oriented as it is physical and use oriented. More specifically, this analysis describes the area of generally homogenous uses within which the subject is located. This neighborhood is not intended to reflect the competitive neighborhood of the subject; however, it instead reflects the neighborhood in physical proximity to the subject. Our assessment of the subject neighborhood is presented as follows: NEIGHBORHOOD MAP 25 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST NEIGHBORHOOD TRAITS Boundaries North East South West Neighborhood US‐60 N 99th Ave W Olive Ave waterway Type of Neighborhood Mixed‐use Abutters Residential Industrial Uses Single‐Family Residential Vacant Land Composition Agriculture Community (Recreation) Hospitality Industrial Medical Office Public/Governmental Residential (Single‐Family) Residential (Multi‐Family) Retail Present No Yes Yes Yes Yes Yes Yes Yes Yes Yes Prevalence None Low Low Low Low Low Low Moderate Low Low Demand Generators Hospital Regional Mall Churches Seniors Housing Adult Children Homes Yes No Yes Yes Yes Access/Influences Local Area Access Regional Ingress/Egress Neighborhood Cycle Neighborhood Influence Grand Avenue I‐10 and I‐17 Stability Positively impacts the subject 26 Neighborhood Cycle Growth Revitalize Stability Decline FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Proximity to hospitals is often an important consideration when selecting a seniors housing community. Nearby hospitals are identified in the following map and table: HOSPITAL MAP SUMMARY OF NEARBY HOSPITALS Hospital Boswell Memorial Hospital Beds 492 Source: Thomson Profiles of U. S. Hospitals 27 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST COMPETITIVE MARKET ANALYSIS Regulatory Overview Independent Living: Typically, there are no regulations for freestanding independent living, which generally has the same requirements from a regulatory standpoint as any multifamily development. However, independent living units that are in a continuum of care that offers some level of lifecare, are often regulated by the state’s Department of Insurance. Assisted Living: State regulations vary considerably for this level of care, ranging from states that have no regulations and classify them as hotel/motel properties to states that are considering some type of CON regulations. It is probable that, in the future, as state reimbursement becomes more common, some type of barrier to entry legislation will become common. States typically feel that use of CON or similar legislation enhances profitability in that full occupancy is more efficient than partial occupancy, and ruinous competition is a danger to the industry and quality of care overall. As the subject is located in Arizona, which has regulatory legislation, at this point it is appropriate to review this legislation and the impact it will have on the subject and residences in the market. Arizona Assisted Living Legislation: The State of Arizona licenses assisted living facilities according to size and levels of care. Facilities with ten or fewer beds are classified as an assisted living home and facilities with 11 or more beds are considered an assisted living center. There are three categories of service: (1) Supervisory Care; (2) Personal Care; and (3) Directed Care. Supervisory care is similar to independent living and does not permit assistance with ADLs. Personal care provides standard assisted living services. Directed care is the highest level of assisted living care and allows cognitive stimulation and activities to maximize functioning. This level provides services to Alzheimer’s and dementia residents. Regulatory requirements include three meals a day with not more than 14 hours between the evening meal and the morning meal; no more than two residents in a unit or bedroom; heating and cooling systems must maintain the facility at a temperature between 68 to 85 degrees at all times; there must be at least 80 square feet of floor space for a resident in a private bedroom; there must be at least one tub or shower for each eight individuals in a facility; a residential unit must contain at least 220 square feet. A complete description of all regulatory requirements is contained in Title 9: Health Services, Chapter 10, Supp. 03‐3. The Arizona Long Term Care System (ALTCS) is a program for low‐income residents. The income limit is $1,656 per month and resources are limited to $2,000 for a single individual and $3,000 for a couple. 28 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Definition of Primary Market Area The 2009 Overview of Assisted Living completed by the Assisted Living Federation of America (ALFA) in conjunction with AAHSA, ASHA, NCAl and NIC indicates that typical assisted living residences draw 85% of their residents from within 15 miles, which shows a change from five years earlier when 73% of the demand would emanate from within a 15‐mile radius. However, we estimate that 100% of the demand for the subject’s services emanate from within the PMA. We point out that while residents may reside in a community from outside the primary market, conversely residents will also leave the primary market to reside elsewhere. Thus, while we do consider the prevalence of migration in and out of the PMA within our penetration analysis, it is viewed as being anecdotal in nature and difficult to quantify. Moreover, the Claritas projections serve to estimate the future migration, as it pertains to the subject’s PMA. However, as we will discuss later in the following sections, prevalence of adult children are a primary indicator of migration. Based on our interviews with both executive directors and directors of marketing at comparable projects in the area, including the subject’s operator, we have determined that the subject’s primary market area (PMA) is a five‐mile radius. Supply Analysis The subject’s management identified the following communities as being its primary competitors: Freedom Plaza The Woodmark at Sun City Ventana Winds f.k.a. Willow Creek We find the following relationship among the subject and its primary competitors: Reputation/Quality (Service, Amenities, Reputation) Ventana Winds f.k.a. Willow Creek The Woodmark at Sun City Dated Plant Freedom Plaza SUBJECT Reputation/Quality (Service, Amenities, Reputation) 29 State‐of the Art FOUNTAIN RETIREMENT HOTEL HEALTHTRUST In terms of measuring the PMA supply, while we considered management’s opinion of primary competition, we have only included units in the PMA that house seniors that are comparable to the subject. Consequently, we have excluded those facilities considered to be “mom and pop”, generally containing less than 25 beds or operating out of a skilled nursing wing. With regard to assisted living and memory care, we have broken out our supply estimates separately. However, we have added back the memory care supply to assisted living, noting that the former is a subset of assisted living, with prospective memory care residents qualifying for occupancy within a traditional assisted living environment. We estimate the total number of existing and proposed beds/units in this market as presented in the following table(s): AL SUPPLY Assisted Living Beds PMA 2009 65 64 90 101 50 41 50 78 620 1159 1159 1470 Freedom Plaza Care Center Royal Oaks Life Care Center Willow Creek Assisted Living The Woodmark at Sun City Sterling House of Peoria Amethyst Senior Living Baldwin House Subject All Other Total @ 100% from PMA Plus Memory Care 30 2014 65 64 108 101 50 41 50 78 674 1231 1231 1558 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Demand Analysis A major factor in estimating potential market demand for communities such as the subject involves an analysis of the number of residents within the primary market area that are qualified for residency in terms of age and income level. Prospective residents for a seniors housing community such as the subject are at least 65 years of age or older, have sufficient income to cover monthly rental fees and other living expenses. Historical and anticipated growth in the senior age groups, nationally, is presented in the following table: PROPORTION OF TOTAL POPULATION THAT WILL BE 55+ Age 55+ 65+ 75+ 85+ 2005 22.7% 12.4% 6.1% 1.7% 2010 24.7% 13.0% 6.1% 2.0% 2015 27.1% 14.5% 6.3% 2.1% 2020 29.0% 16.3% 6.8% 2.2% 2025 30.0% 18.2% 8.0% 2.3% 2030 30.5% 19.7% 9.2% 2.6% Source: US Census Bureau 2004 "US Interim Projections by Age, Sex, Race and Hispanic Origin 35.0% 30.0% 25.0% 55+ 20.0% 65+ 15.0% 75+ 10.0% 85+ 5.0% 0.0% 2005 2010 2015 2020 2025 2030 The elderly group age 85 and over represents the fastest‐growing segment of the U.S. population. According to the US Census Bureau, there were 4.3 million seniors aged 85+ in 2000 and this segment will swell to 20.9 million by 2050. This is a key market for the seniors housing industry because 44% of those over 85 need long‐term care or assistance with activities of daily living. As a result, industry analysts project strong growth in seniors housing revenue through the end of the decade and beyond. In terms of identifying potential demand, we have begun with the examination of the number of households with persons at least 65 years of age. While we note that residents residing in senior housing communities are generally much older than 65 years of age, we have utilized this cohort as minimum standard for residency in order to better reflect potential demand source across all product types. 31 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Please note that the senior population estimates and projections prepared by Claritas are presented in the addenda of this report. A summary of the estimated senior population and growth rates for the PMA are presented in the following chart: Senior Population Annual Growth 2009‐2014 3.50% 3.00% 55‐64 2.50% 65‐74 2.00% 75‐84 1.50% 85+ 1.00% 65+ 0.50% 0.00% In order to test the viability of the market, we have surveyed current and future supply pattern, analyzing age, size, amenities and service package. Moreover, we have analyzed market occupancy, current and future penetration rates, historical rate growth, development interest and the geographic composition. We firmly believe that characterizing a market based on any single factor can be inaccurate and misleading. Overall, we utilize the following process in identifying demand for senior’s housing communities. PMA Population •Define the subject's primary market area and demographics for current and projected years. •Segment demographics on the basis of market derived age criterion. Age‐Qualified Income‐ Qualified Acuity‐ Qualified Potential Demand Penetration Rate •If needed, further segment the market on the basis of income qualifications, considering both income and assets of age qualified prospects. •If needed, quantify the prevalence and need of acuity‐based services of age and income qualified demand. •Resulting potential demand indications are contrasted to PMA supply and occupancy in both current and projected years resulting in a market penetration rate. •Market penetration rate is then evaluated against macro indications utilizing market penetration rates derived utilizing similar methodology. In terms of care levels, the following criterion is utilized by level of care: 32 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Independent Living • Age‐Qualified • Income‐ Qualified Assisted Living Memory Care • Age‐Qualified • Income‐ Qualified • Acuity‐ Qualified Skilled Nursing • Age‐Qualified • Income‐ Qualified • Acuity‐ Qualified • Age‐Qualified In addition to reviewing the demographics, it is important to account for the ALFA’s 2009 Overview of Assisted Living indicates the following prior residences before moving into an assisted living residence: RESIDENCE PRIOR TO MOVING INTO AN ALR AL/MC 71.6% 9.5% 6.1% 6.8% 6.1% Private Home Family Residence Different ALR Independent Living Community Nursing Home IL/AL 70.1% 6.9% 6.9% 13.8% 2.3% Source: 2009 Overview of Assisted Living As previously mentioned, we have relied on estimates and projections of senior population in the subject PMA prepared by Claritas. During discussions with senior management at Claritas, we learned that per census procedures, Claritas’ household estimates only reflect seniors living in their primary residence acting as head of household. Therefore, the income statistics will not reflect that portion of the demand that emanates from nursing homes (institutionalized population) or within a family residence not acting as head of household. Thus, we have calculated a factor for each level of care in order to more accurately reflect demand sources not captured within the census data provided by Claritas. Based on this premise, we have adjusted the household numbers, which we refer to as a Claritas Factor, as follows: DEMAND CAPTURED BY CLARITAS Private Home Different ALR Independent Living Community AL/MC 71.6% 6.1% 6.8% IL/AL 70.1% 6.9% 13.8% Total Corresponding Claritas Factor (Inverse of Total) 84.5% 1.18 90.8% 1.10 Source: 2009 Overview of Assisted Living Thus, we can, nonetheless, reasonably estimate total demand in the PMA by using the information prepared by Claritas and dividing it by the ratio of total demand the private residence component represents. For example, for independent living, if we calculated the current total of age/need/income‐ qualified households in the market, we can divide it by 90.8% to reach an estimate of total private pay demand: 33 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Claritas Household Demand/90.8% = 100% of IL demand = 1/0.908 = 1.10 Please note that for the purposes of this analysis, we have also applied the relevant factors for the AL and memory care populations of 1.18. Additionally, we need to adjust the household data in order for it to be viewed in terms of population. This is only done for assisted living and memory care, as independent living communities generally only attract the entire household, and rarely utilized semi‐private accommodations of unrelated individuals. Accordingly, on the supply side, we only view the number of units as opposed to the number of residents or beds. Therefore for assisted living and memory care, we have adjusted the household figures by dividing the adjusted 65 and up population by the number of 65 and up households. The adjusted population is calculated by subtracting the institutionalized nursing home population from the overall population. This is referred to as the Household/Population Factor in the following tables. Independent Living According to the American Seniors Housing Association (ASHA) 2003 study The Benefits of Independent Living Communities surveyed residents and non‐residents of independent living communities, and found the following conclusions and key findings: There were no differences between the abilities of residents of an ILC and those who are not in walking, getting out of bed, bathing, dressing, or toileting. Residents and non‐residents view their health status equally, despite residents having been more likely to have been in a hospital, used an assistive device, report difficulty in climbing stairs and lift heavy objects in the previous two years. A statistically greater proportion of ILC residents have long term care insurance when compared to those not residing in an ILC. Primary reasons for residents choosing the particular community included Location Layout and design of community Friendliness of staff Cost Primary reasons for residents moving out of their primary residence include: Health problems of respondent or spouse Passing away of spouse Desire to be relieved of home maintenance Desire for social contact Because the respondent and/or spouse needed nursing care services 34 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Overall, independent living is ultimately viewed as a lifestyle choice, as opposed to a need based services. Consequently, we have only viewed the age and income criterion as driving factors for residency at the subject. Assisted Living The National Health Interview Survey is conducted by the Center for Disease Control and utilizes data based on household interviews of a sample of the civilian non‐institutionalized population identifying personal care needs among those aged 65 and up. Personal care needs are defined as requiring assistance with any Activity of Daily Living (ADL). The NHIS has been conducted continuously since 1957, with the primary objective of monitoring the health of the United States population. The cross sectional study includes a sample size of approximately 35,000 households and 87,500 persons, allowing for the valid reporting of health status and limitations, injuries, healthcare access and utilization in the US. The publication is widely accepted throughout the industry, including the American Seniors Housing Association. Over the last seven years the survey has found the following, though we note that the while there are variances year to year, they have not been defined as statistically significant: % 65+ NEEDING PERSONAL CARE 95% CI Interval % 6.1% ‐ 7.1% 6.6% 5.9% ‐ 6.8% 6.3% 5.8% ‐ 6.9% 6.4% 5.9% ‐ 6.9% 6.4% 6.0% ‐ 7.0% 6.5% 5.7% ‐ 6.7% 6.2% 6.0% ‐ 7.1% 6.5% 5.8% ‐ 6.8% 6.3% 5.8% ‐ 6.8% 6.3% 5.4% ‐ 6.7% 6.1% 6.2% ‐ 7.6% 6.9% 5.8% ‐ 7.0% 6.4% 5.8% ‐ 7.2% 6.5% % 65+ NEEDING PERSONAL CARE 7.0% 6.8% 6.6% 6.4% 6.2% 6.0% 5.8% 5.6% % 65+ NEEDING PERSONA L CARE 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Sep‐09 Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Sep‐09 Source: NHIS Thus, in order to estimate potential demand for assisted living services we have applied the following personal care factors to the respective age groups: PERSONAL CARE NEEDS Age Group 65‐74 75‐84 85+ Percent 3.4% 7.0% 19.9% Source: CDC National Health Interview Survey Alzheimer’s Care In estimating potential demand for Alzheimer’s care we have surveyed the Prevalence of Dementia in the United States: The Aging, Demographics and Memory Study published in October, 2007 and performed by Plassman, et al for Duke University Medical Center in which a nationally representative sample of individuals 71 and older from the Health and Retirement Study were evaluated for dementia 35 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST vie a comprehensive in‐home examination. This is the first nationally representative population‐based study of dementia within the United States. Based on the study the prevalence of Alzheimer’s Dementia among those 71 and older was 9.7%; however, this statistic does not differentiate between the level of Alzheimer’s Dementia, thus not all would be candidates for traditional memory care units. The most recent data we have found on prevalence of moderate and severe dementia is from a study released by the GAO in 1998, which found the following prevalence rates: ALZHEIMER'S PREVALENCE RATES 65‐74 75‐84 85+ Mild, Moderate & Severe 1.63% 6.45% 24.58% Moderate or Severe 0.92% 3.53% 14.54% Source: GAO Alzheimer's Disease Accordingly, we have only considered the statistics relevant to moderate or severe dementia to be eligible for occupancy within memory care units. Income‐Qualifications (IL/AL/MC) Based on the subject’s in‐place rents and rental comparables, we have estimated a minimum monthly fee for the subject, multiplied by 12 months and assuming that the rental fee would account for 75% of all living expenses. We note it is inappropriate to utilize an average rent as we are estimating the actual demand for units in the subject’s price range. Therefore, the following annual minimum incomes (rounded) would be required: ANNUAL INCOME THRESHOLD Level of Care Assisted Living Minimum Monthly Rate $1,075 Income Threshold $17,200 Claritas household income demographics are compiled from census data, which generally defines income as receipts for the previous year. Consequently, we find that while household income is generally a good indicator of affordability for the subject’s services, it does not necessarily correlate into a prospective resident’s ability to pay for services. Moreover, in terms of affordability a prospective resident’s net worth must be considered as assets are often spent down and home equity is tapped in order to meet housing and expense obligations. As provided within the 2008 Seniors Housing Statistical Handbook, the following income vs. net worth characteristics were comprised residents of independent, assisted and CCRC residents: 36 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST INCOME AND NET WORTH OF RESIDENTS Overall In Thousands In Thousands Income Less than $15 $15 ‐ 24.9 $25 ‐ 34.9 $35 ‐ 49.9 $50 ‐ 99.9 $100+ Net Worth Under $50 8.4% 14.3% 18.8% 22.9% 26.4% 9.1% Independent Living Assisted Living CCRC $11.5 Lower Quartile $18.9 Median $26 Lower Quartile $40 Median $60 Upper Quartile $21 Median for AL $27.5 Median for SNF $48.8 Median for IL $36.0 Upper Quartile 11.5% $50 ‐ 99.9 9.1% $100 ‐ 299.9 21.3% $100 Lower Quartile $400 Median $300 ‐ 499.9 16.8% $500 ‐ 749.9 13.6% $750+ 27.7% $62 Lower Quartile $250 Median for SNF $205 Median $281 Median for AL $564 Upper Quartile $569 Median for IL $800 Upper Quartile Source: American Seniors Housing Association The Benefits of Independent Living Communities, 2003 Assisted Living Federation of America, with AAHSA, ASHA, NCAL< and NIC, Overview of Assisted Living, 2009. American Association of Homes and Services for the Aging, with ASHA and NIC, Continuing Care Retirement Communities: 2005 Profile Income Net Worth Under $50 Less than $15 $50 ‐ 99.9 $15 ‐ 24.9 $100 ‐ 299.9 $25 ‐ 34.9 $300 ‐ 499.9 $35 ‐ 49.9 $500 ‐ 749.9 $50 ‐ 99.9 $750+ $100+ The 2006 and 2009 Overview of Assisted Living indicated the following sources of primary payment: PRIMARY PAYMENT SOURCE 2006 2009 2006 AL/ALZ Self Family Insurance Medicaid SSI VA Unknown 57.9% 30.9% 4.7% 2.6% 1.3% 2.6% 0.0% 2009 IL/AL 63.5% 14.7% 7.1% 12.2% 1.9% 0.0% 0.6% 66.3% 14.7% 3.3% 13.6% 2.2% 0.0% 0.0% 82.6% 7.0% 3.5% 5.8% 1.2% 0.0% 0.0% Source: 2006 and 2009 Overview of Assisted Living As seen in the foregoing, residents are not typically responsible for their entire fee within senior housing communities. Further, if we view typical incomes of residents with current average fees, it is apparent that a resident’s income is not the primary source of funds: 37 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST INCOME TO CHARGE COMPARISON Independent Living Assisted Living Average Monthly Rate^ $2,500 $3,496 Annual Income Threshold* $39,993 $55,942 Median Income of Resident** $40,000 $18,900 $ Surplus/ Shortfall $7 $‐37,042 % Shortfall/ Surplus 0.02% ‐66.21% ^NIC MAP 1st Quarter 2010 *Average Monthly Rate/75%*12 **The Benefits of Independent Living Communities, 2003 & Overview of Assisted Living, 2009. Therefore, while our analysis will focus on the income‐qualified senior, we must recognize that for private pay communities, adult children and long‐term care insurance policies are often covering a senior who has lower than required annual income and resources. Moreover, residents are also likely to spend down their assets in order to utilize care, particularly for higher levels of care (assisted living and memory care). Because household income statistics provided by Claritas only include money receipts (pension income, social security income, etc.) for a given year, they do not include the following sources that could also fund residency: Stocks, bonds and other liquid assets Assistance from family Home equity Medicaid Waivers Consequently, we have adjusted our income‐qualifications below that of the income threshold calculated previously to account for these additional sources of income. We have viewed those residents indicating incomes of $25,000 ‐ 100,000 for assisted living. We note that the difference between the required minimal income and the concluded income qualification used reflects spending down of assets associated with a resident’s net worth, assistance from adult children and other sources including long‐term care insurance. Finally, based on the foregoing, we have calculated the potential demand for seniors housing as shown: 38 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST DEMAND INDICATIONS Assisted Living PMA 2009 2014 51,323 56,038 1,457 1,482 49,866 54,556 31,722 34,154 $17,200 $166,632 $185,237 $25,000 ‐ 100,000 65+ Population Nursing Home Population Adjusted 65+ Population^ 65+ Households Annual Minimum Income Threshold Median Owner‐Occupied House Value Income Qualification: Age and Income Qualified Households 65‐74 7,707 75‐84 7,874 85+ 3,718 Personal Care Factor by Age 65‐74 3.40% 75‐84 7.00% 85+ 19.90% Households Meeting Income and Acuity 1,553 Household/Population Factor* 1.57 Claritas Factor 1.18 Potential Assisted Living Demand 2,893 *Adjusted Population/Households ^General Population less Nursing Home Population Source: HealthTrust, LLC 39 8,879 8,208 4,191 3.40% 7.00% 19.90% 1,710 1.60 1.18 3,237 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Penetration Analysis For the purpose of this analysis, the market penetration rate is measured as the number of residents from the PMA living in seniors housing communities divided by the total number of age/income/need qualified households. It can be expressed as: [Market Occupancy x Supply x Ratio from the PMA]/Income‐Qualified Demand The market penetration rate is viewed as a comparison of supply and demand relative to a snapshot in time for both the current year and projected year based on information available as of the date of the inspection. Based on the PMA average occupancy level, we find that the market is currently demonstrating the following penetration level: PENETRATION ANALYSIS Assisted Living PMA 2009 1470 Total Supply Market Occupancy Total Potential Demand Penetration Rate 2014 1558 91% 2,893 46.04% 3,237 43.60% Source: HealthTrust, LLC Penetration rates are indices that represent the relationship between supply and demand, which allow for meaningful comparison to the broader market. Unlike other real estate asset classes, penetration rates are not to be analyzed on the basis of their absolute value, but rather used for their relative values when compared to the larger market. More clearly, due to the imperfect nature of the available data, resulting penetration rates can sometimes lead to indications that could be construed as being misleading. For example, a penetration rate in excess of 100% is not necessarily indicative of a saturated market, but only to the extent of how it relates to other market derived penetration rates using identical methodology. In doing hundreds of appraisals and market studies annually of senior housing properties, we have found the following significant trends and conclusions: Markets with high penetration rates have better‐educated populations with regards to the seniors housing product type. Further, among the 100 MSAs, there is a positive correlation between penetration rates and occupancy levels. Conversely, as penetration rates increase, average rents decrease, indicative of a competitive market. Based on our analysis of the 100 largest MSAs, we find a significant variance in assisted living and memory care penetration rates for the largest 31 MSAs relative to that of the smaller MSAs (32‐100). Generally, the latter indicates on average, 25% to 35% higher penetration rates, depending on age and income qualifications. Further, in our experience, we find this variance to be even more pronounced within tertiary markets. While, it’s anecdotal, we attribute this to the following: o Greater in‐migration from rural out bounding areas due to availability of healthcare resources. 40 HEALTHTRUST FOUNTAIN RETIREMENT HOTEL o Fewer living options available within the secondary markets relative to the larger, metropolitan markets. Smaller sized markets allow for increased education and product awareness. o Adult Children (45‐64 age cohorts) play a primary role in the decision process for a prospective resident with regard to assisted living and even more so to memory care. Higher penetration rates among adult children reflect net‐in migration for the particular service and result in increased penetration. This is not necessarily the case for independent living, where no correlation is found among adult children. Availability of State Assistance (Medicaid) is a driving demand force for senior housing properties. The utilization of such programs allows for increased access to residents who could otherwise not afford the product, thereby resulting in higher penetration rates. States with high utilization of State Assistance include North Carolina, Oregon and Washington. Overall, while penetration rates provide a barometer for the makeup of a particular market, in analyzing any market, primary weight is placed on market occupancy levels, once adjusted for variances among the age and quality of assets available. Market Categorization In order to categorize the market, we have compared the subject’s PMA against the 100 largest MSAs. In order to provide for industry benchmarks, we have utilized supply estimates from 1st Quarter NIC MAP and applied our supply and demand methodology previously described. The subject’s PMA relative to the broader market is as follows: ASSISTED LIVING Average Occupancy Average REVPOR Median House Value Penetration Rates $25,000 ‐ 100,000 Top 100 MSA Benchmark Median Lower Quartile Upper Quartile 89.30% 87.21% 91.55% $3,496 $3,222 $3,741 $173,333 $131,269 $234,703 41.7% 31.3% 54.7% MSA Phoenix, AZ 89.06% $3,506 $208,311 30.4% Subject PMA 2009 2014 90.60% 90.60% N/A N/A $166,632 $185,237 46.0% 43.6% Conclusions Based on its estimated stabilized occupancy level, we find the market’s AL penetration is above the median and the memory care penetration is above the median of the 100 MSAs, but within the quartile range. Relative to the Phoenix MSA, the subject’s penetration and occupancy rate are higher. Our observations of hundreds of markets annually resulted in the following general interpretation of market indicators: 41 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST MARKET ANALYSIS INTERPRETATION Category Occupancy Penetration I PMA > NIC MAP Median & PMA > Median II PMA < NIC MAP Median & PMA > Median III PMA < NIC MAP Median & PMA < Median IV PMA > NIC MAP Median & PMA < Median Market Conclusion PMA has positive rate growth and absorption. May have net in‐migration and/or prevalence of state assistance. Experienced and highly competitive market with potential of moving into II or IV depending on demographic growth and/or proposed supply. PMA is overbuilt, low/negative rate growth and low/negative absorption. Market may be skewed by dated, uncompetitive communities. PMA’s consumers are not fully accepting or are inexperienced with seniors housing and/or market has net out‐migration PMA has significant potential and is under‐served with high rate growth and occupancy, indicating unmet demand. Source: HealthTrust LLC Market Categorization IV Median Occupancy I II III Median Penetration The subject is best characterized as a Type I market, and is expected to remain so over the next five years. While this model is not an indicator of outright feasibility for the subject, this does suggest that at present, and over the next five years, the market risk will not increase significantly enough to offset demand and that were the subject introduced during this period, it would not cause a significant change in the current balance between supply and demand. Therefore, our review of the local market indicates that there is positive demand for seniors housing properties to support development of the subject. Furthermore the following valuation analysis suggests that it is feasible as well. 42 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST HIGHEST AND BEST USE Highest and best use is an appraisal concept defined as that use of many possible and legally allowable alternative uses, which may reasonably be expected to produce the greatest net return to the property in the foreseeable future. In order to estimate the highest and best use of the subject property, we have considered the possible and most probable uses of the site, including those uses for which the land is adapted with respect to size, configuration, contour, and location. In particular, we considered those uses that are legally permissible, physically possible, and in conformity with existing improvements in the area, and which result in the highest economic return to the land. Legal uses permitted under local zoning ordinances have been analyzed as well as probable uses stemming from an analysis of economic aspects affecting the use of the land. This analysis is conducted as if the site were vacant to identify the ideal improvements for the site, and then as improved to compare the existing improvements to the ideal improvements. As If Vacant Physically Possible: The site is comprised of one parcel containing a gross land area of 1.35 acres. The site's shape is regular and its terrain is level. The building site lies in an X500 flood zone, and drainage is adequate. All utilities are available to the site and we are unaware of any soil conditions that may hinder development. Hence, the site appears to be readily developable from a physical standpoint. The subject's immediate vicinity is developed with the following: Residential Industrial Uses Single‐Family Residential Vacant Land In summary, the site “as vacant” has few physical restrictions that would impact development of the site. Legally Permissible: The subject is zoned R (Rural District). Permitted uses include churches, golf courses, hospitals, medical clinics, and pharmacies. The subject property is permitted as a legally non‐ conforming use, but we understand that it could not be rebuilt; it is our understanding, however, that the subject was zoned Rural District at the time it was built and given that the use is complementary to permitted uses, we believe that the subject would likely be approved if the site were currently vacant. Economic Feasibility: Based on the subject’s existing use, we have focused the remainder of our efforts on seniors housing, particularly an Assisted Living Residence. As mentioned in the preceding Competitive Market Analysis, the subject’s primary market area (PMA) is a five‐mile radius. Further, our supply and demand analysis indicates positive demand for the subject property, while the following valuation analysis suggests it is feasible as well. Therefore, we have concluded the subject is economically feasible. Maximally Productive: We have identified a seniors housing development as the only use which is immediately financially feasible and would therefore provide the greatest return to the site. Hence, we have concluded that a seniors housing use is the highest and best use of the property, as vacant. 43 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST As Currently Improved Financially Feasible: Both physical and legal issues were discussed previously in the highest and best use, as if vacant scenario. Demand within the subject's market area is considered to be adequate for the existing units, as presented in the previous analysis. Hence, we feel that continued operation of the subject is economically feasible. Maximally Productive: It is clearly apparent that the subject is worth more as an operational enterprise than it would be were the improvements demolished and the land sold separately. As previously discussed, no other uses were considered feasible. The subject's existing improvements do meet the first three criteria for highest and best use; hence, they are also considered to represent the maximally productive use of the site. Therefore, we conclude that the subject's highest and best use “as currently improved,” is to continue operation of the Assisted Living Residence. 44 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST VALUATION ANALYSIS Income Approach We have been provided with the income and expense data for the subject. A copy of these statements may be found in the addenda of this report. We have carefully examined the data, deducted expenses that are not associated with the operation of an Assisted Living Residence and compared the adjusted totals with the experience of other communities. The resulting net income estimates are the basis for our valuation of the subject. We have surveyed comparable and competitive communities in and near the subject’s primary market area. These communities are described on the following pages: RENT COMPARABLE MAP 45 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SUBJECT Record ID: Property Type: Name: Address: 201007190 Assisted Living Residence Fountain Retirement Hotel 12030 113th Ave, Youngtown, Maricopa, , 85363 Verification: With: Rob Hess at 623‐977‐4273 Year Opened: Number Of Buildings: Number Of Stories: Land Area: BUILDING CHARACTERISTICS 1971 Quality: 1 Condition: 2 Construction Type: 1.35 acres Gross Building Area: PROPERTY MIX Level IL AL ALZ SN Capacity ‐‐‐ 65 units ‐‐‐ ‐‐‐ Average Average Wood Frame 37,102 LEVEL OF CARE TYPE % Occupancy ‐‐‐ 77% ‐‐‐ ‐‐‐ Meals ‐‐‐ 3 daily ‐‐‐ ‐‐‐ Level Type ‐‐‐ ‐‐‐ ‐‐‐ AL ALZ ‐ AL Other Min ‐‐‐ ‐‐‐ ‐‐‐ Max ‐‐‐ ‐‐‐ ‐‐‐ PROJECT AMENITIES Activity rooms Arts & crafts rooms Assistance w/ ADLs Dining room ‐ main Game/billiards rooms Housekeeping Laundry facilities Linen Service Lounge areas Postal services Reception Area Social activities Swimming Pool Utilities Private baths UNIT AMENITIES Cable/satellite TV Emergency pull‐cords Fire/smoke detectors Full kitchens Individually controlled HVAC Kitchenettes Water/Sewer Cable/Satellite TV Electricity Housekeeping SERVICE PACKAGE ASSISTED LIVING RENTAL ANALYSIS Unit Type Fee basis Min Fee Max Fee Semi‐Private Studio 1‐Bedroom Monthly Monthly Monthly $1,075 $1,600 $2,000 ‐‐‐ ‐‐‐ ‐‐‐ Community Fee Min ‐‐‐ ‐‐‐ ‐‐‐ Community Fee Max ‐‐‐ ‐‐‐ ‐‐‐ REMARKS: Respite charges are $75 per day. 46 Beds Units Min Size Max Size 26 46 6 13 46 6 280 280 354 ‐‐‐ ‐‐‐ ‐‐‐ FOUNTAIN RETIREMENT HOTEL HEALTHTRUST RENTAL COMPARABLE #1 Record ID: Property Type: Name: Address: Verification: With: 8061394 Continuing Care Retirement Community Freedom Plaza 13373 N. Plaza del Rio Boulevard, Peoria, Maricopa, AZ, 85381 Dawn at (623) 815‐6100 BUILDING CHARACTERISTICS 1985 Quality: Year Opened: Number Of Buildings: Number Of Stories: Land Area: PROPERTY MIX Level IL AL ALZ SN Capacity 347 units 65 units 20 units 111 beds ‐‐‐ Condition: ‐‐‐ 10.94 acres Construction Type: Gross Building Area: Above Average Above Average Masonry ‐‐‐ LEVEL OF CARE TYPE % Occupancy ‐‐‐ 97% 95% 80% Meals ‐‐‐ 3 daily 3 daily 3 daily Level Type All‐inclusive ‐‐‐ ‐‐‐ AL ALZ ‐ AL Other Min ‐‐‐ ‐‐‐ ‐‐‐ Max ‐‐‐ ‐‐‐ ‐‐‐ PROJECT AMENITIES Activity rooms Assistance w/ ADLs Beauty/barber shop Courtyard Dining room ‐ main Dining room ‐ private Exercise facilities Game/billiards rooms General store Housekeeping Ice cream parlor Laundry facilities Library Linen Service Lounge areas Postal services Reception Area Scheduled transportation Cable/satellite TV Emergency pull‐cords Fire/smoke detectors Full kitchens Individually controlled HVAC Kitchenettes Security 24 hour Skilled nursing care Social activities Swimming Pool Therapy Room Private baths Housekeeping UNIT AMENITIES SERVICE PACKAGE Water/Sewer Electricity ASSISTED LIVING RENTAL ANALYSIS Unit Type Fee basis Min Fee Max Fee Studio 1‐Bedroom 2‐Bedroom Monthly Monthly Monthly $3,400 $5,800 $6,700 ‐‐‐ ‐‐‐ ‐‐‐ Community Fee Min $3,000 $3,000 $3,000 Community Fee Max ‐‐‐ ‐‐‐ ‐‐‐ 47 Beds Units Min Size Max Size ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ FOUNTAIN RETIREMENT HOTEL HEALTHTRUST RENTAL COMPARABLE #1 SKILLED NURSING RENTAL ANALYSIS Unit Type Fee basis Min Fee Max Fee Private Semi‐Private Daily Daily $258 $215 ‐‐‐ ‐‐‐ Community Fee Min ‐‐‐ ‐‐‐ Community Fee Max ‐‐‐ ‐‐‐ Beds Units Min Size Max Size ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ CENSUS Care Level AL SN SN SN Payor Type Private pay Private pay Medicare Other % of Current Census 100.0% 25.0% 37.0% 38.0% REMARKS: Freedom Plaza is owned and operated by Brookdale. It attracts most of its residents from the Sun City market area. An assisted living building containing 65 units opened in April 2001. There are 2 skilled nursing facilities (Freedom Care and Plaza Del Rio) with a combined total of 239 beds. The information above is for Freedom Care only. Plaza Del Rio is written up separately. The facility offers a couple different plans including a 0% and 80% refundable entrance fee. The rates above reflect the 0% refundable option. An 80% refundable plan is designed for those who wish to preserve the majority of their entry fee and also want protection against future healthcare expenses. It provides an 80% refund, and carries the maximum healthcare benefit. When a resident transfers into Health Center, they continue paying monthly service fee for the apartment. The 0% refundable plan provides similar healthcare benefits to that of the 80% plan, while the other 0% refundable plan has lower entrance fee but less healthcare benefits. Only skilled nursing and assisted living information was obtained at this time. The assisted living rates are all inclusive of additional care needed. 48 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST RENTAL COMPARABLE #2 Record ID: Property Type: Name: Address: 8061517 Assisted Living/Memory Care Residence The Woodmark at Sun City 17207 North Boswell Blvd., Sun City, Maricopa, AZ, 85373 Verification: With: Penny at (623) 583‐7600 Year Opened: Number Of Buildings: Number Of Stories: Land Area: BUILDING CHARACTERISTICS 2001 Quality: ‐‐‐ Condition: ‐‐‐ Construction Type: ‐‐‐ Gross Building Area: PROPERTY MIX Level IL AL ALZ SN Capacity ‐‐‐ 101 units 36 units ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ LEVEL OF CARE TYPE % Occupancy ‐‐‐ 94% 94% ‐‐‐ Meals ‐‐‐ 3 daily 3 daily ‐‐‐ Level AL ALZ ‐ AL Other Type Points All‐inclusive ‐‐‐ Min $490 ‐‐‐ ‐‐‐ Max ‐‐‐ ‐‐‐ ‐‐‐ PROJECT AMENITIES Activity rooms Assistance w/ ADLs Beauty/barber shop Dining room ‐ main Game/billiards rooms Housekeeping Linen Service Lounge areas Cable/satellite TV Emergency pull‐cords Fire/smoke detectors Individually controlled HVAC Water/Sewer Electricity Medications Reception Area Social activities Utilities Housekeeping UNIT AMENITIES SERVICE PACKAGE ASSISTED LIVING RENTAL ANALYSIS Unit Type Fee basis Min Fee Max Fee Studio 1‐Bedroom 2‐Bedroom Extra Person Monthly Monthly Monthly Monthly $2,795 $3,095 $3,595 $800 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ Unit Type Fee basis Min Fee Max Fee Semi‐Private Studio Monthly Monthly $3,295 $4,195 $4,495 $5,395 Community Fee Min $1,000 $1,000 $1,000 ‐‐‐ Community Fee Max ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ Beds Units Min Size Max Size ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ Beds Units Min Size Max Size ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ MEMORY CARE RENTAL ANALYSIS Community Fee Min $1,000 $1,000 Community Fee Max ‐‐‐ ‐‐‐ 49 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST RENTAL COMPARABLE #2 CENSUS Care Level AL Payor Type Private pay % of Current Census 100.0% REMARKS: This community offers independent living, assisted living, and a 36‐unit Alzheimer's/ dementia facility. The independent living is just the base rate without any additional levels of care, and all beds are licensed for assisted living. They charge a $1,000 move‐in fee. The assisted living care is offered on a points system. These services average around $490/month for residents. The memory care rates are all inclusive. 50 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST RENTAL COMPARABLE #3 Record ID: Property Type: Name: Address: 8061531 Assisted Living/Memory Care Residence Ventana Winds f.k.a. Willow Creek 12322 N. 113th Avenue, Youngtown, Maricopa, AZ, 85363 Verification: With: Kathleen at (623) 583 2460 Year Opened: Number Of Buildings: Number Of Stories: Land Area: BUILDING CHARACTERISTICS 2001 Quality: 1 Condition: 3 Construction Type: ‐‐‐ Gross Building Area: PROPERTY MIX Level IL AL ALZ SN Capacity ‐‐‐ 90 units 18 units ‐‐‐ Good Good ‐‐‐ ‐‐‐ LEVEL OF CARE TYPE % Occupancy ‐‐‐ 85% 83% ‐‐‐ Meals ‐‐‐ 3 daily 3 daily ‐‐‐ Level Type Levels Levels ‐‐‐ AL ALZ ‐ AL Other Min $100 $100 ‐‐‐ Max $1,000 $1,000 ‐‐‐ PROJECT AMENITIES Activity rooms Assistance w/ ADLs Beauty/barber shop Courtyard Dining room ‐ main Dining room ‐ private Exercise facilities Game/billiards rooms Housekeeping Laundry facilities Library Linen Service Balconies/porches Cable/satellite TV Emergency pull‐cords Fire/smoke detectors Individually controlled HVAC Kitchenettes Private baths Walk‐in closets Water/Sewer Electricity Lounge areas Medications Reception Area Scheduled transportation Social activities Swimming Pool Housekeeping UNIT AMENITIES SERVICE PACKAGE ASSISTED LIVING RENTAL ANALYSIS Unit Type Fee basis Min Fee Max Fee Community Fee Max ‐‐‐ ‐‐‐ Beds Units Min Size Max Size ‐‐‐ ‐‐‐ Community Fee Min $500 $500 1‐Bedroom 1‐Bedroom DX 2‐Bedroom Monthly Monthly $2,595 $2,795 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ 830 945 ‐‐‐ ‐‐‐ Monthly $3,495 ‐‐‐ $1,000 ‐‐‐ ‐‐‐ ‐‐‐ 1015 ‐‐‐ Unit Type Fee basis Min Fee Max Fee Beds Units Min Size Max Size Semi‐Private Studio Monthly Monthly $3,295 $3,975 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ 340 182 ‐‐‐ ‐‐‐ MEMORY CARE RENTAL ANALYSIS Community Fee Min $500 $500 Community Fee Max ‐‐‐ ‐‐‐ 51 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST RENTAL COMPARABLE #3 CENSUS Care Level AL AL Payor Type Private pay Medicaid % of Current Census 60.0% 40.0% REMARKS: This is a three‐story assisted living residence with a one‐story secured Alzheimer's/dementia care wing. The improvements are in good condition and the access and visibility are both good from the residential thoroughfare. They have a one‐time community fee of $500 and offer additional levels of care from $100 up to $1,000/month. They are planning on adding an additional 18 unit enhanced memory care wing by fall 2010. Rates for the enhanced wing are expected to be $3,995 for a private room and $3,595 for a semi‐private room. These rooms will be completely private pay. 52 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Estimates of Market Rent ‐ Seniors Housing We have surveyed the following properties that offer services similar to the subject. ASSISTED LIVING ASKING RENTAL ANALYSIS Semi‐Private Min Max $1,075 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ $1,075 $1,075 ‐‐ $1,075 ‐ $1,075 Property Fountain Retirement Hotel Freedom Plaza The Woodmark at Sun City Ventana Winds f.k.a. Willow Creek Median Average Mode Range Studio Min Max $1,600 ‐‐ $3,400 ‐‐ $2,795 ‐‐ ‐‐ ‐‐ $2,795 $2,598 ‐‐ $1,600 ‐ $3,400 1‐Bedroom Min Max $2,000 ‐‐ $5,800 ‐‐ $3,095 ‐‐ $2,595 ‐‐ $2,845 $3,373 ‐‐ $2,000 ‐ $5,800 The subject’s rental rates represent the low end of the range of the comparable properties. According to management rates concessions are not offered at the subject, nor are they prevalent in the market. Occupancy at the subject is mostly stable and typically operates below market levels. We requested, but were not provided with ac current rent roll. Placing most weight on the asking rates within the market, our analysis yielded the following conclusions for the subject’s market rent: ASSISTED LIVING MARKET SUMMARY Semi‐Private Studio 1‐Bedroom Reconciled $1,075 $1,600 $2,000 Average $1,075 $2,598 $3,373 Median $1,075 $2,795 $2,845 Source:HealthTrust LLC; *Unadjusted Market Range 53 Mode N/A N/A N/A Subject Asking $1,075 $1,600 $2,000 Street Rate Range* $1,075 ‐ $1,075 $1,600 ‐ $3,400 $2,000 ‐ $5,800 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Stabilized Occupancy The subject and comparables indicate the following as of the day of the most recent inspection: OCCUPANCY ANALYSIS Property Fountain Retirement Hotel Freedom Plaza The Woodmark at Sun City Ventana Winds f.k.a. Willow Creek Median Average Mode Range PMA Average Occupancy AL 77% 97% 94% 85% 90% 89% ‐‐ 77% ‐ 97% 91% Overall, the subject’s occupancy history and projections (based on set‐up capacity) are summarized as follows: OPERATIONAL SUMMARY Appraisal ‐ Stabilized Occ % Total/RD AL 77% $47.86 Average Occupancy 77% Total Revenues $47.86 Profit Margin 19.9% Source: HealthTrust LLC and Fountain Level of Care 2010 Annualized Occ % Total/RD 70% $48.40 70% $48.40 25.9% 2009 Actual Occ % Total/RD 78% $47.38 78% $47.38 18.9% There are 88 beds entering the market and average market occupancy at 91% for assisted living, we have estimated a stabilized occupancy level for the subject of 77%, reconciling between historical levels, market indications and current occupancy. 54 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Following our estimates of rental levels and occupancy, we have estimated the subject’s effective gross rental income as shown: SUMMARY OF REVENUE PROJECTIONS Year: No. Units/Beds AL Revenues Semi‐Private Studio 1‐Bedroom Total Potential AL Base Fee Income Less AL Vacancy/Collection Loss 26 46 6 78 1 2 3 Stabilized $335,400 $883,200 $144,000 $1,362,600 $343,785 $905,280 $147,600 $1,396,665 $352,380 $927,912 $151,290 $1,431,582 $335,400 $883,200 $144,000 $1,362,600 23.00% ‐$313,398 $0 $1,049,202 23.00% ‐$321,233 $0 $1,075,432 23.00% ‐$329,264 $0 $1,102,318 23.00% ‐$313,398 $0 $1,049,202 Monthly Rent $1,075 $1,600 $2,000 @ Lifecare Utilization Discount Effective Gross AL Base Fee Income Source: HealthTrust, LLC Total Revenue Estimates Incorporating the estimates of market rents, stabilized occupancies, and ancillary income, we have prepared the following statements of estimated revenues for the subject. In order to determine an inflation factor we have reviewed the consumer price index trends over the past ten years, as shown in the following table: 10‐YEAR CONSUMER PRICE INDEX TRENDS Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 10‐Year Annual Average CPI 172.2 177.1 179.9 184.0 188.9 195.3 201.6 207.3 215.3 214.5 Ann. Increase ‐‐‐ 2.8% 1.6% 2.3% 2.7% 3.4% 3.2% 2.8% 3.9% ‐0.4% 2.5% Source: US Department of Labor Considering the rate increases evident in the market and the CPI changes above, we have incorporated an annual rate of increase for revenues of 2.50%. 55 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SUMMARY OF REVENUE PROJECTIONS 2010 Annualized 1 2 3 Stabilized $967,266 $967,266 $1,049,202 $1,049,202 $1,075,432 $1,075,432 $1,102,318 $1,102,318 $1,049,202 $1,049,202 $967,266 $14,881 $48.40 $1,049,202 $16,142 $47.86 ‐1.11% $1,075,432 $16,545 $49.06 2.50% $1,102,318 $16,959 $50.28 2.50% $1,049,202 $16,142 $47.86 Summary of Effective Gross Fee Income AL Revenues Total Effective Gross Base Fee Income Ancillary and Other Fees Total Effective Gross Income EGI/Unit (Bed) EGI/Resident Day Change % (per resident day) Source: HealthTrust, LLC Operating Expenses Operating expenses are based upon an analysis of historical operating expense data of the subject, as well as those of comparable properties. Based upon our careful analysis of these data and our judgment and experience, we have estimated operating expenses and staffing at what we considered reasonable and customary levels for the subject property. Fixed expenses include liability insurance and property taxes. In addition to the tax comparables presented earlier in the PMA, we have examined tax levels at comparable properties within the region. Placing most weight on the subject’s current assessment and likely changes, we have estimated property taxes at $10,400 annually. REAL ESTATE TAXES Total Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $0 $11,159 $10,400 $0 $172 $160 $0.00 $0.50 $0.47 0.00% 1.06% 0.99% HT Year 1 $10,400 $160 $0.47 0.99% HT Year 2 $10,660 $164 $0.49 0.99% HT Year 3 Comp Min Comp Max $10,927 $168 $381 $883 $0.50 $1.09 $1.63 0.99% 1.17% 2.15% Comp Median $460 $1.35 1.38% Source: HealthTrust, LLC Building and liability insurance is estimated based primarily on national and regional comparables. The insurance expense does not reflect an umbrella insurance program but does include general and professional liability as well as worker’s comp. INSURANCE Insurance (General, Professional) Worker's Comp Other Insurance Total Insurance Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $29,612 $18,486 $19,500 $679 $12,603 $13,000 $3,842 $816 $3,250 $34,132 $31,906 $35,750 $525 $491 $550 $1.71 $1.43 $1.63 3.53% 3.02% 3.41% HT Year 1 $19,500 $13,000 $3,250 $35,750 $550 $1.63 3.41% HT Year 2 $19,988 $13,325 $3,331 $36,644 $564 $1.67 3.41% HT Year 3 Comp Min Comp Max $20,487 $13,658 $3,415 $37,560 $578 $329 $909 $1.71 $0.96 $3.09 3.41% 0.95% 3.22% Comp Median $624 $1.15 1.51% Source: HealthTrust, LLC We have estimated utilities expenses including water, gas, trash, electricity and sewer as shown, noting that this amount falls as shown relative to the comparable properties. 56 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST UTILITIES Water Gas Trash Electricity Total Utilities Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $7,265 $10,927 $11,022 $10,524 $12,863 $12,976 $1,609 $1,587 $1,601 $36,182 $45,344 $41,652 $55,580 $70,721 $67,251 $855 $1,088 $1,035 $2.78 $3.17 $3.07 5.75% 6.70% 6.41% HT Year 1 $11,022 $12,976 $1,601 $41,652 $67,251 $1,035 $3.07 6.41% HT Year 2 $11,298 $13,300 $1,641 $42,693 $68,932 $1,060 $3.14 6.41% HT Year 3 Comp Min Comp Max $11,580 $13,633 $1,682 $43,760 $70,655 $1,087 $1,263 $2,015 $3.22 $1.99 $6.51 6.41% 2.52% 6.78% Comp Median $1,900 $5.56 5.49% Source: HealthTrust, LLC The maintenance department includes salaries for the maintenance administration, grounds, security personnel, drivers, maintenance crew and clerical support. In addition, the department includes the supplies and repairs, purchased services and vehicle expense. Our estimate relative to the subject’s performance and that of comparables is shown: MAINTENANCE Repairs and Supplies Maintenance Salaries Total Maintenance Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $2,791 $46,086 $32,883 $20,131 $18,278 $18,438 $22,921 $64,364 $51,320 $353 $990 $790 $1.15 $2.89 $2.34 2.37% 6.10% 4.89% HT Year 1 $32,883 $18,438 $51,320 $790 $2.34 4.89% HT Year 2 $33,705 $18,899 $52,603 $809 $2.40 4.89% HT Year 3 Comp Min Comp Max $34,548 $19,371 $53,919 $830 $749 $1,536 $2.46 $2.17 $4.46 4.89% 2.30% 4.65% Comp Median $1,339 $2.84 3.74% Source: HealthTrust, LLC Management fees are estimated at 5.0% of effective gross income, primarily based on our experience with comparable properties. Management fees also include general bookkeeping and various incidental and legal consultation fees. This amount falls within the range of 3.5% to 7.0% that we see at most communities. The administration department includes supplies, telephone, bad debt and office expenses required to operate the administrative office. Other expenses reflect the subject's historical performance. We note that some of the expense comparables account for all of their payroll and related costs in this department. A summary of our estimate compared to the subject’s performance and regional trends is presented; please note that many of the comparables include payroll in this category, whereas the subject’s history and our projections break that expense out departmentally: ADMINISTRATIVE AND GENERAL Admin Supplies & Other Admin Admin Salaries Total Administrative Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $27,619 $68,626 $65,766 $67,146 $82,190 $82,909 $94,765 $150,815 $148,675 $1,458 $2,320 $2,287 $4.74 $6.77 $6.78 9.80% 14.29% 14.17% HT Year 1 $65,766 $82,909 $148,675 $2,287 $6.78 14.17% HT Year 2 $67,410 $84,982 $152,392 $2,344 $6.95 14.17% HT Year 3 Comp Min Comp Max $69,095 $87,106 $156,201 $2,403 $2,060 $12,067 $7.13 $7.01 $22.30 14.17% 7.30% 29.39% Comp Median $3,917 $11.46 11.32% Source: HealthTrust, LLC Housekeeping and laundry expenses include both staffing and miscellaneous supply expenses. The subject contains in‐house laundry facilities. HOUSEKEEPING AND LAUNDRY Housekeeping and Laundry Supplies Housekeeping and Laundry Salaries Total Housekeeping and Laundry Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $7,049 $13,660 $13,780 $100,520 $100,467 $101,346 $107,569 $114,127 $115,126 $1,655 $1,756 $1,771 $5.38 $5.12 $5.25 11.12% 10.81% 10.97% Source: HealthTrust, LLC 57 HT Year 1 $13,780 $101,346 $115,126 $1,771 $5.25 10.97% HT Year 2 $14,124 $103,880 $118,004 $1,815 $5.38 10.97% HT Year 3 Comp Min Comp Max $14,477 $106,477 $120,954 $1,861 $443 $981 $5.52 $1.30 $2.09 10.97% 1.28% 2.39% Comp Median $723 $1.81 2.15% FOUNTAIN RETIREMENT HOTEL HEALTHTRUST One of the three major departmental expenses is the dietary department, which provides food service for the residents and employees. Good quality food and service are priority considerations in seniors housing communities. Our analysis of this department is based on the staffing levels at this property type in general and information provided by other national and regional operators. Based upon the estimated occupancy ratios, we have estimated a raw food cost of $3.59 per resident day. Our estimate, relative to comparable properties and the subject’s performance, is summarized as follows: DIETARY Food Cost Supplies & Other Dietary Costs Dietary Salaries Total Dietary Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $62,334 $78,021 $78,704 $2,352 $4,741 $4,782 $96,817 $92,219 $93,026 $161,503 $174,981 $176,512 $2,485 $2,692 $2,716 $8.08 $7.86 $8.05 16.70% 16.58% 16.82% HT Year 1 $78,704 $4,782 $93,026 $176,512 $2,716 $8.05 16.82% HT Year 2 $80,672 $4,902 $95,351 $180,925 $2,783 $8.25 16.82% HT Year 3 Comp Min Comp Max $82,688 $5,025 $97,735 $185,448 $2,853 $1,914 $4,537 $8.46 $5.60 $11.02 16.82% 5.53% 11.69% Comp Median $3,806 $8.38 11.05% Source: HealthTrust, LLC One of the most costly services provided by the subject property is nursing care. Staffing requirements are estimated based on the subject's current staffing and our experience with comparable communities. NURSING Nursing Supplies & Other Nursing/Personal Care Salaries Total Nursing Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $616 $7,458 $7,523 $70,431 $80,164 $76,727 $71,047 $87,621 $84,250 $1,093 $1,348 $1,296 $3.55 $3.93 $3.84 7.35% 8.30% 8.03% HT Year 1 $7,523 $76,727 $84,250 $1,296 $3.84 8.03% HT Year 2 $7,711 $78,645 $86,356 $1,329 $3.94 8.03% HT Year 3 Comp Min Comp Max $7,904 $80,611 $88,515 $1,362 $4,314 $7,215 $4.04 $8.48 $21.10 8.03% 10.72% 20.85% Comp Median $5,372 $13.92 14.77% Source: HealthTrust, LLC Activities and social expenses include entertainment, transportation expenses, supplies and associated salaries. Our estimate, in comparison to the subject’s performance and the comparable properties, is as follows: ACTIVITIES/SOCIAL Activities/Social Supplies Activities/Social Salaries Total Activities/Social Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $0 $4,388 $4,427 $15,695 $16,326 $16,469 $15,695 $20,714 $20,895 $241 $319 $321 $0.79 $0.93 $0.95 1.62% 1.96% 1.99% HT Year 1 $4,427 $16,469 $20,895 $321 $0.95 1.99% HT Year 2 $4,537 $16,880 $21,418 $330 $0.98 1.99% HT Year 3 Comp Min Comp Max $4,651 $17,302 $21,953 $338 $523 $1,043 $1.00 $1.19 $2.21 1.99% 1.50% 2.54% Comp Median $700 $1.73 1.91% Source: HealthTrust, LLC Typically, seniors housing communities will either charge these expenses to the staffed departments (i.e., administrative, dietary, nursing, housekeeping, and maintenance) or charge them all to administrative. We have allocated these expenses to each operated department. Nationally, we have seen a predominant range of payroll taxes and benefits of 18‐40% of wages and salaries, depending on how holiday, vacation and sick time are accounted. Some regions, notably the Northeast, will produce higher payroll taxes and benefits. Additionally, not‐for‐profit operations typically report higher levels of payroll taxes and benefits. For the purposes of this appraisal, we have estimated payroll taxes of 8% of payroll with a benefit load of 7%, incorporating the subject’s trend and market parameters. 58 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Payroll taxes and benefits may actually be greater for salaried and full time staff and lower for part time staff and those at lower wage levels. Although expenses are estimated by department, staff employed in one department may occasionally perform other duties on an as needed basis, in order to maintain efficient operation of the property. OTHER PAYROLL Payroll Taxes Benefits Total Other Payroll Costs Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $31,941 $31,153 $31,113 $54,137 $25,801 $27,224 $86,078 $56,953 $58,337 $1,324 $876 $897 $4.31 $2.56 $2.66 8.90% 5.40% 5.56% HT Year 1 $31,113 $27,224 $58,337 $897 $2.66 5.56% HT Year 2 $31,891 $27,905 $59,796 $920 $2.73 5.56% HT Year 3 Comp Min Comp Max $32,688 $28,602 $61,290 $943 $1,803 $2,175 $2.80 $6.13 $6.30 5.56% 6.39% 6.68% Comp Median $1,989 $6.21 6.54% Source: HealthTrust, LLC In order to estimate staffing for the subject, we have relied on actual staffing patterns presently exhibited by the operator and have tempered that staffing schedule with patterns presented by the expense comparables at the conclusion of this section as well as our experience with comparable operations. Finally, we have also allocated a reserve for replacement fund used to replace short‐lived items such as appliances, furniture, fixtures, equipment, roofing, and carpeting. Most lenders and agencies with whom we have spoken use between $250 and $450 per unit (and per bed for skilled nursing). We have utilized $300 per unit for the estimate of replacement reserve. Operating Expense Summary Total forecasted operating expenses, exclusive of management fee and reserves are estimated at $768,516 for year one. Including management fees and reserves, we estimate operating expenses to be $840,476 for the same period. A summary of our total expense forecasts relative to the subject’s performance and the expense comparables is as follows: OPERATING EXPENSES Total Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $717,154 $855,631 $840,476 $11,033 $13,164 $12,930 $35.88 $38.41 $38.34 74.14% 81.07% 80.11% Source: HealthTrust, LLC; Excludes Management Fee and Reserves 59 HT Year 1 $840,476 $12,930 $38.34 80.11% HT Year 2 $861,488 $13,254 $39.30 80.11% HT Year 3 Comp Min Comp Max $883,025 $13,585 $19,556 $31,774 $40.28 $47.90 $66.53 80.11% 59.77% 77.39% Comp Median $21,423 $61.25 65.80% FOUNTAIN RETIREMENT HOTEL HEALTHTRUST EXPENSE COMPARABLE SUMMARY Property State No. IL No. AL No. ALZ No. SN Total Units/Beds Year Occupancy Total Resident Days EGI/RD EXPENSES Real Estate Taxes Insurance Utilities Maintenance Marketing Administrative Dietary Housekeeping/Laundry Nursing/Personal Care Activities Other Payroll, Taxes & Benefits Management Fees Reserves Total $/RD $0.47 $1.63 $3.07 $2.34 $0.00 $6.78 $8.05 $5.25 $3.84 $0.95 $2.66 $2.39 $0.89 $38.34 Subject Arizona 0 65 0 0 65 1 AZ 0 41 38 0 79 2 AZ 0 102 0 0 102 3 AZ 0 102 0 0 102 4 AZ 0 65 0 0 65 5 AZ 0 62 0 0 62 Stabilized 77% 21,922 $47.86 12/31/09 94% 27,010 $101.21 10/31/09 81% 29,982 $95.99 12/31/08 95% 35,239 $94.24 12/31/05 98% 41,182 $79.10 12/31/05 84% 33,547 $75.88 $/Unit $160 $550 $1,035 $790 $0 $2,287 $2,716 $1,771 $1,296 $321 $897 $807 $300 $12,930 %EGI 1.0% 3.4% 6.4% 4.9% 0.0% 14.2% 16.8% 11.0% 8.0% 2.0% 5.6% 5.0% 1.9% 80.1% $/RD $1.35 $0.96 $5.56 $3.92 $1.81 $11.46 $5.60 $1.30 $21.10 $1.53 $0.00 $5.05 $0.87 $60.49 $/Unit $460 $329 $1,900 $1,339 $619 $3,917 $1,914 $443 $7,215 $523 $0 $1,727 $298 $20,683 %EGI 1.3% 1.0% 5.5% 3.9% 1.8% 11.3% 5.5% 1.3% 20.9% 1.5% 0.0% 5.0% 0.9% 59.8% $/RD $1.51 $3.09 $6.51 $4.46 $2.29 $7.01 $10.76 $2.06 $14.68 $2.21 $6.13 $4.80 $1.02 $66.53 $/Unit $443 $909 $1,913 $1,312 $674 $2,060 $3,163 $607 $4,314 $649 $1,803 $1,411 $299 $19,556 Source: HealthTrust, LLC 60 %EGI 1.6% 3.2% 6.8% 4.7% 2.4% 7.3% 11.2% 2.2% 15.3% 2.3% 6.4% 5.0% 1.1% 69.3% $/RD $1.10 $1.42 $5.83 $2.17 $5.55 $7.03 $11.02 $2.09 $13.92 $0.00 $6.30 $4.71 $0.87 $62.01 $/Unit $381 $492 $2,015 $749 $1,918 $2,429 $3,806 $723 $4,809 $0 $2,175 $1,628 $300 $21,423 %EGI 1.2% 1.5% 6.2% 2.3% 5.9% 7.5% 11.7% 2.2% 14.8% 0.0% 6.7% 5.0% 0.9% 65.8% $/RD $1.09 $1.00 $1.99 $2.29 $0.00 $18.68 $7.06 $1.33 $8.48 $1.19 $0.00 $3.95 $0.83 $47.90 $/Unit $692 $631 $1,263 $1,453 $0 $11,837 $4,475 $842 $5,372 $752 $0 $2,501 $526 $30,345 %EGI 1.4% 1.3% 2.5% 2.9% 0.0% 23.6% 8.9% 1.7% 10.7% 1.5% 0.0% 5.0% 1.1% 60.6% $/RD $1.63 $1.15 $2.78 $2.84 $0.00 $22.30 $8.38 $1.81 $11.12 $1.93 $0.00 $3.79 $0.98 $58.72 $/Unit $883 $624 $1,507 $1,536 $0 $12,067 $4,537 $981 $6,019 $1,043 $0 $2,049 $530 $31,774 %EGI 2.2% 1.5% 3.7% 3.7% 0.0% 29.4% 11.1% 2.4% 14.7% 2.5% 0.0% 5.0% 1.3% 77.4% FOUNTAIN RETIREMENT HOTEL HEALTHTRUST We have attempted to reconcile our estimates with the market while considering the subject’s actual performance. Consequently, we find our estimates reasonable. Net Operating Income Estimate In terms of net operating income (NOI), our estimated Year 1 NOI of $208,726 compares to the subject’s 2010 Annualized NOI of $250,113. In prior periods, the subject has reported NOI of $199,749. Our estimates are 20% lower than the 2010 Annualized performance, as we have placed primary weight on the subjects’ full year expense indications. Alternatively, in comparison to the 2009 Actual total NOI of $199,749 our estimate is similar, with a variance of less 3%. A summary of our forecasts relative to the subject’s performance is as follows: NET OPERATING INCOME Total Per Unit/Bed Per Resident Day Ratio of EGI 2010 Annualized 2009 Actual HT Stabilized $250,113 $199,749 $208,726 $3,848 $3,073 $3,211 $12.51 $8.97 $9.52 25.86% 18.93% 19.89% HT Year 1 $208,726 $3,211 $9.52 19.89% HT Year 2 $213,944 $3,291 $9.76 19.89% HT Year 3 Comp Min Comp Max $219,293 $3,374 $8,659 $19,770 $10.00 $29.46 $40.72 19.89% 22.61% 40.23% Comp Median $11,135 $31.72 34.20% Source: HealthTrust, LLC Our year estimates are presented on the following page juxtaposed with the subject’s adjusted budget: 61 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SUMMARY OF APPRAISAL ESTIMATES AND SUBJECT'S ADJUSTED FINANCIAL STATEMENTS Year Total Resident Days Total Units/Beds Occupancy Total $ Revenues AL Rental Revenues Total Effective Gross Revenue HT Year 1 21,922 65 77% $/Unit $/RD % EGI Total $ 2010 Annualized 19,986 65 70% $/Unit $/RD % EGI Total $ 2009 Actual 22,275 65 78% $/Unit $/RD % EGI $1,049,202 $1,049,202 $16,142 $16,142 $47.86 $47.86 100.0% 100.0% $967,266 $967,266 $14,881 $14,881 $48.40 $48.40 100.0% 100.0% $1,055,380 $1,055,380 $16,237 $16,237 $47.38 $47.38 100.0% 100.0% Expenses Real Estate Taxes Insurance Utilities Maintenance Marketing Administrative/General Housekeeping/Laundry Dietary Nursing/Personal Care Activities/Social Other Payroll, Payroll Taxes & Benefits Total Operating Expenses $10,400 $35,750 $67,251 $51,320 $0 $148,675 $115,126 $176,512 $84,250 $20,895 $58,337 $768,516 $160 $550 $1,035 $790 $0 $2,287 $1,771 $2,716 $1,296 $321 $897 $11,823 $0.47 $1.63 $3.07 $2.34 $0.00 $6.78 $5.25 $8.05 $3.84 $0.95 $2.66 $35.06 1.0% 3.4% 6.4% 4.9% 0.0% 14.2% 11.0% 16.8% 8.0% 2.0% 5.6% 73.2% $0 $34,132 $55,580 $22,921 $0 $94,765 $107,569 $161,503 $71,047 $15,695 $86,078 $649,291 $0 $525 $855 $353 $0 $1,458 $1,655 $2,485 $1,093 $241 $1,324 $9,989 $0.00 $1.71 $2.78 $1.15 $0.00 $4.74 $5.38 $8.08 $3.55 $0.79 $4.31 $32.49 0.0% 3.5% 5.7% 2.4% 0.0% 9.8% 11.1% 16.7% 7.3% 1.6% 8.9% 67.1% $11,159 $31,906 $70,721 $64,364 $0 $150,815 $114,127 $174,981 $87,621 $20,714 $56,953 $783,362 $172 $491 $1,088 $990 $0 $2,320 $1,756 $2,692 $1,348 $319 $876 $12,052 $0.50 $1.43 $3.17 $2.89 $0.00 $6.77 $5.12 $7.86 $3.93 $0.93 $2.56 $35.17 1.1% 3.0% 6.7% 6.1% 0.0% 14.3% 10.8% 16.6% 8.3% 2.0% 5.4% 74.2% Management Fee Reserve for Replacement Total Expenses $52,460 $19,500 $840,476 $807 $300 $12,930 $2.39 $0.89 $38.34 5.0% 1.9% 80.1% $48,363 $19,500 $717,154 $744 $300 $11,033 $2.42 $0.98 $35.88 5.0% 2.0% 74.1% $52,769 $19,500 $855,631 $812 $300 $13,164 $2.37 $0.88 $38.41 5.0% 1.8% 81.1% Net Operating Income (EBITDAR) $208,726 $3,211 $9.52 19.9% $250,113 $3,848 $12.51 25.9% $199,749 $3,073 $8.97 18.9% Source: HealthTrust, LLC 62 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Capitalization Rate Derivation In selecting an appropriate capitalization rate for the subject property, we conducted an investor survey and considered indications provided by the comparable sales, the Band of Investment, Mortgage‐Equity Method, and the Debt Coverage Ratio. Overall, rates will be higher than more traditional multifamily property types. In fact, as care level increases, rates generally increase. Our analysis of cap rate trends shows a definite uptick in the last few years that leveled off in 2009: Capitalization Rate Trends (median) 17.0% 15.0% AL AL/ALZ IL IL/AL CCRC 13.0% 11.0% 9.0% 7.0% 5.0% 2000 2003 2006 2009 We have also consulted the 2010 Senior Housing Investment Survey. This publication includes the participation of owner/operators, financial institutions/investors, brokers/mortgage bankers, and appraisers/consultants. Our largest concern with this survey, however, is that there appears to be no uniform handling of management fees and reserves. As only 26% of the respondents were appraisers, we assume that most of the participants did not include reserves and may or may not have included management fees. Furthermore, there is no distinction between for‐profit and not‐for‐profit properties. As not‐for‐profit properties have little or no real estate and personal property taxes and a different cost of capital, we question the reliability of these indications but will at least review them for this analysis. OVERALL CAPITALIZATION RATE Unlicensed Congregate Care (IL) Licensed Assisted Living Licensed Alzheimer/Dementia Licensed Skilled Nursing‐Long Term Care Licensed Skilled Nursing‐Subacute Care Continuing Care Retirement Community 2010 All Responses Range Average 7.0‐10.5% 8.5% 7.0‐12.3% 9.1% 7.5‐12.0% 9.7% 8.5‐18.0% 12.6% 8.5‐15.0% 12.7% 7.0‐15.0% 9.7% Source: 2010 Senior Housing Investment Survey 63 2010 Adjusted Responses Range Average 7.0‐9.0% 8.5% 7.5‐10.6% 9.1% 8.5‐11.5% 9.7% 10.0‐14.0% 12.5% 9.3‐14.0% 12.8% 9.4% 8.0‐12.5% Basis Point Change From 2009 +10 ‐10 ‐10 0 +40 0 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST The exclusion of the expenses would yield higher capitalization rates than if the expenses were deducted. Each of the abstracted rates considers the requirement of debt and equity in order to reach an appropriate capitalization rate. Therefore, we have incorporated the subject’s anticipated, weighted‐ average interest rate of 7.00%, a 75% loan‐to‐value ratio, an amortization period of 25 years, and a debt coverage ratio of 1.40. Equity requirements include an equity dividend (cash on cash) rate of 12.00% and an equity yield rate of 20.00%. The Band of Investment technique develops an overall rate by weighing the return requirement of both debt and equity positions. Incorporating the debt and equity requirements cited above, this method produces an overall capitalization rate of 9.36%. The Debt Coverage Ratio Analysis is technique used by institutional lenders in an effort to provide a cushion to determine if a borrower can meet debt service obligations if the property income declines. Based on our assumed requirements, an overall capitalization rate of 8.91% is indicated. The Mortgage‐Equity method utilizes a mortgage‐equity technique that considers available mortgage terms, provisions for equity build‐up and estimated property appreciation during the estimate period. In this analysis, this technique indicated an overall capitalization rate of 11.18%. The comparable sales presented in the following section of this report suggest a range of 7.84% to 9.93% in overall capitalization rates: Capitalization rates measure risk. One of the challenges of the valuation process is to insulate the process against short term fluctuations and insure that longer term trends are adequately reported. To the extent that a temporary decrease or imbalance exists, valuation theory should dilute this in favor of the longer term value trends, much like the stock market and the valuation of individual stocks. Thus the temporary low level of long term interest rates is not perceived to be long lasting by the market participants, hence has not affected cap rates as significantly as one would expect. Other factors (operational and market risk) mitigate the impact below a certain threshold. The National Investment Center collects capitalization rate from regional and national appraisal firms who work on all seniors housing properties types. Over the last five years, indications for the independent and assisted living sectors have varied as follows: 64 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST IL CAPITALIZATION RATES Period Q4, 2004 Q1, 2005 Q2, 2005 Q3, 2005 Q4, 2005 Q1, 2006 Q2, 2006 Q3, 2006 Q4, 2006 Q1, 2007 Q2, 2007 Q3, 2007 Q4, 2007 Q1, 2008 Q2, 2008 Q3, 2008 Q4, 2008 Q1, 2009 Q2, 2009 Q3, 2009 Q4, 2009 Low 8.00% 7.00% 7.00% 6.25% 6.70% 7.00% 7.00% 5.80% 5.90% 6.70% 7.00% 4.90% 5.80% 5.80% 6.60% 6.50% 7.50% 7.00% 8.00% 8.00% 8.00% High 10.00% 12.00% 10.50% 12.50% 10.30% 10.30% 10.20% 10.00% 9.00% 10.00% 10.00% 10.00% 9.70% 9.20% 8.75% 13.00% 10.60% 9.50% 9.50% 9.50% 10.00% Average No. Transactions 9.10% 17 9.00% ‐‐‐ 8.20% 27 8.20% 28 8.50% 29 8.20% 40 8.30% 36 7.70% 33 7.70% 35 7.70% 44 7.90% 15 7.40% 32 7.30% 17 7.60% 12 7.80% 13 8.70% 15 8.70% 19 8.10% 22 8.50% 14 8.80% 12 8.80% 31 Source: NIC Key Financial Indicators 14.00% 13.00% 12.00% 11.00% 10.00% Low 9.00% High 8.00% Average 7.00% 6.00% 5.00% 65 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST AL CAPITALIZATION RATES Period Q4, 2004 Q1, 2005 Q2, 2005 Q3, 2005 Q4, 2005 Q1, 2006 Q2, 2006 Q3, 2006 Q4, 2006 Q1, 2007 Q2, 2007 Q3, 2007 Q4, 2007 Q1, 2008 Q2, 2008 Q3, 2008 Q4, 2008 Q1, 2009 Q2, 2009 Q3, 2009 Q4, 2009 Low 8.50% 7.50% 7.25% 7.50% 7.20% 7.20% 7.30% 7.50% 6.50% 6.80% 6.60% 6.00% 6.60% 7.10% 7.00% 7.10% 7.90% 7.20% 8.20% 8.50% 8.40% High 20.00% 12.00% 10.50% 14.50% 10.50% 10.50% 11.00% 15.00% 12.50% 12.50% 12.00% 12.50% 14.90% 11.30% 12.20% 12.20% 13.00% 11.50% 13.50% 13.00% 16.60% Average 10.50% 10.00% 9.20% 9.25% 8.90% 8.90% 8.70% 9.20% 8.70% 8.80% 8.50% 9.00% 9.10% 8.80% 9.00% 9.20% 9.30% 9.40% 9.50% 9.60% 9.90% No. Transactions 76 ‐‐‐ 40 50 22 53 92 74 132 111 85 70 81 41 82 39 50 50 42 37 133 Source: NIC Key Financial Indicators 21.00% 19.00% 17.00% 15.00% Low 13.00% High 11.00% Average 9.00% 7.00% 5.00% The consensus of the Valuation Panel at the Winter Board meeting of the American Seniors Housing Association was that quality assets comparable to the subject have simply not traded in the last 18 months. However, with the increased equity requirements and increasing spreads on debt cost, intuitively, cap rates have increased 50‐125 basis points since 2007. The quoted range of IL capitalization 66 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST rates was 7.00‐8.00% with AL/ALZ properties exhibiting a wider range of 8.50‐10.00%. We have considered these industry indications as well in our capitalization rate selection. Factors that influence our selection of the subject’s capitalization rate include: Risk associated with caring for the subject’s targeted population Size of 65 beds – permits economies of scale Older age and lower quality asset Below market occupancy performance Net operating income estimate reflecting modest change Therefore, we have reconciled to a going‐in rate of 9.50%. To account for the greater risk involved with the property at the time of reversion due to unknown factors of the market and the condition of the buildings at that time, an additional 50 basis points have been added to the overall capitalization rate to derive a terminal capitalization rate of 10.00%. SUMMARY OF CAPITALIZATION RATE INDICATIONS MORTGAGE INTEREST RATE AMORTIZATION TERM LOAN TO VALUE RATIO DEBT COVERAGE RATIO EQUITY DIVIDEND RATE EQUITY YIELD RATE BAND OF INVESTMENT DEBT COMPONENT: EQUITY COMPONENT: ROUNDED TO: DEBT COVERAGE ROUNDED TO: MORTGAGE‐EQUITY DEBT COMPONENT: EQUITY COMPONENT: 7.00% 25 75.00% 140.00% 12.00% 20.00% 75% 25% x x 0.0848 0.1200 75% x 1.4 75% 25% x x 0.0848 0.2000 LESS PRINCIPAL REDUCTION: BASIC RATE PROPERTY VALUE CHANGE OVERALL CAPITALIZATION RATE ROUNDED TO: IMPROVED SALE INDICATIONS = = x 0.0636 0.0300 0.093610128 9.36% 0.0848 0.0891 8.91% = = 7.84% SELECTED OVERALL CAPITALIZATION RATE: 0.0636 0.0500 0.1136 ‐0.0014 0.1122 ‐0.0004 0.1118 11.18% to 9.93% 9.50% Source: HealthTrust, LLC 67 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Discount Rate Derivation The 2010 Senior Housing Investment Survey suggests the following ranges for discount rates in the seniors housing and nursing markets. INTERNAL RATE OF RETURN / (DISCOUNT RATE) 2010 All Responses Range Average Unlicensed Congregate Care (IL) Licensed Assisted Living Licensed Alzheimer/Dementia Licensed Skilled Nursing‐Long Term Care Licensed Skilled Nursing‐Subacute Care Continuing Care Retirement Community 8.0‐25.0% 8.8‐30.0% 9.3‐30.0% 11.0‐30.0% 11.0‐30.0% 10.0‐25.0% 2010 Adjusted Responses Range Average 13.1% 14.3% 14.8% 16.1% 16.4% 14.4% 10.0‐20.0% 11.5‐20.0% 11.0‐20.0% 12.0‐20.0% 12.0‐20.0% 11.0‐20.0% 12.4% 13.6% 14.1% 15.2% 15.6% 14.0% Basis Point Change From 2009 ‐50 ‐40 ‐20 0 +20 +30 Source: 2010 Senior Housing Investment Survey Based on our estimated cash flows, growth rates and capitalization rate, the sensitivity analysis for the subject’s discount rate is as follows: RATE ANALYSIS Fountain Retirement Hotel July 19, 2010 K = [1 ‐ (1 + C)^n / S^n] / (Y ‐ C) * An Ro = [(Y ‐ D*1/Sn) / K] where: K = factor C = constant ratio change in income S = future value factor An = present value factor for ordinary level annuity Y = yield rate, or discount rate D = total change in property value over holding period Inferred Change Components of DCF: # of Years Amount Change _____________ _____________ _____________ Change Attributable to Net Operating Income: Period 1 Stabilized NOI Terminal Year Stabilized NOI Annualized Constant Ratio Change (C) 10 $208,726 $267,187 2.50% Inferred Change in Property Value: Current Stabilized Property Value Terminal Net Sale Proceeds Change in Property Value (D) 10 $2,251,901 $2,564,992 13.90% Inferred Stabilized Ro for Individual Y Estimates: Discount Rate Assumptions (Y) K‐factor Annualized Change in Property Value Inferred Stabilized Overall Cap. Rate (Ro) Discounted Cash Flow Anaysis Direct Capitalization Analysis Stabilized Ro Selection 10.00% 10.50% 11.00% 11.50% 12.00% 1.099013 1.098035 1.097065 1.096105 1.095154 0.87% 0.85% 0.83% 0.81% 0.79% _____________ _____________ _____________ _____________ _____________ 8.31% 8.79% 9.27% 9.75% 10.23% $2,398,432 $2,323,583 $2,251,901 $2,183,231 $2,117,426 $2,197,114 $2,197,114 $2,197,114 $2,197,114 $2,197,114 9.50% 9.50% 9.50% 9.50% 9.50% Value Differential Rate Differential (basis points) ‐9.16% ‐119 ‐5.76% ‐71 ‐2.49% ‐23 0.63% 25 3.63% 73 Source: HealthTrust, LLC Considering the calculation‐derived indications and investor surveys, we have used an 11.00% discount rate in this analysis. Our assumptions for the discounted cash flow analysis and direct capitalization are as follows: 68 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST GLOBAL VALUATION ASSUMPTIONS Fountain Retirement Hotel Revenue Growth Rate Expense Growth Rate Management Fee Reserves (Capex) Per Unit Stabilized Occupancy Rent Loss Projection Period (Yrs) Capitalization Rate Terminal Capitalization Rate Discount Rate Sale Costs 2.50% 2.50% 5.00% $300 77% $0 10 9.50% 10.00% 11.00% 4.00% Source: HealthTrust, LLC Income Approach Conclusion As Is: Applying a reversion capitalization rate of 10.00% and a discount rate of 11.00% to the estimated cash flows developed in this report results in a total estimated “as is” value for the subject (after deducting 4% from the reversion value for sale costs) of $2,300,000, rounded. Alternatively, direct capitalization suggests a value of $2,200,000, rounded. Overall, we have more confidence in the market support for the direct capitalization rate than the discount rate and have placed more weight on its indication. Therefore, we have reconciled to the direct capitalization indication of $2,200,000. The discount cash flow analysis is presented on the following page followed by the direct capitalization. 69 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST DISCOUNTED CASH FLOW ANALYSIS 1 REVENUES Effective Gross Rental Revenues Entrance Fee Revenues Ancillary Revenues TOTAL EFFECTIVE GROSS REVENUE 2 3 4 5 6 7 8 9 10 Reversion $1,049,202 $0 $0 $1,049,202 $1,075,432 $0 $0 $1,075,432 $1,102,318 $0 $0 $1,102,318 $1,129,876 $0 $0 $1,129,876 $1,158,123 $0 $0 $1,158,123 $1,187,076 $0 $0 $1,187,076 $1,216,753 $0 $0 $1,216,753 $1,247,171 $0 $0 $1,247,171 $1,278,351 $0 $0 $1,278,351 $1,310,310 $0 $0 $1,310,310 $1,343,067 $0 $0 $1,343,067 Real Estate Taxes Insurance Utilities Maintenance Marketing Administrative/General Housekeeping/Laundry Dietary Nursing/Personal Care Activities/Social Other Payroll, Payroll Taxes and Benefits SUB‐TOTAL OPERATING EXPENSES $10,400 $35,750 $67,251 $51,320 $0 $148,675 $115,126 $176,512 $84,250 $20,895 $58,337 $768,516 $10,660 $36,644 $68,932 $52,603 $0 $152,392 $118,004 $180,925 $86,356 $21,418 $59,796 $787,729 $10,927 $37,560 $70,655 $53,919 $0 $156,201 $120,954 $185,448 $88,515 $21,953 $61,290 $807,422 $11,200 $38,499 $72,422 $55,267 $0 $160,106 $123,978 $190,084 $90,728 $22,502 $62,823 $827,608 $11,480 $39,461 $74,232 $56,648 $0 $164,109 $127,077 $194,837 $92,996 $23,065 $64,393 $848,298 $11,767 $40,448 $76,088 $58,064 $0 $168,212 $130,254 $199,707 $95,321 $23,641 $66,003 $869,505 $12,061 $41,459 $77,990 $59,516 $0 $172,417 $133,511 $204,700 $97,704 $24,232 $67,653 $891,243 $12,362 $42,496 $79,940 $61,004 $0 $176,728 $136,848 $209,818 $100,146 $24,838 $69,344 $913,524 $12,671 $43,558 $81,938 $62,529 $0 $181,146 $140,270 $215,063 $102,650 $25,459 $71,078 $936,362 $12,988 $44,647 $83,987 $64,092 $0 $185,674 $143,776 $220,440 $105,216 $26,095 $72,855 $959,771 $13,313 $45,763 $86,087 $65,695 $0 $190,316 $147,371 $225,951 $107,847 $26,748 $74,676 $983,766 Management Fee Reserve for Replacement TOTAL EXPENSES $52,460 $19,500 $840,476 $53,772 $19,988 $861,488 $55,116 $20,487 $883,025 $56,494 $20,999 $905,101 $57,906 $21,524 $927,728 $59,354 $22,062 $950,922 $60,838 $22,614 $974,695 $62,359 $23,179 $999,062 $63,918 $23,759 $1,024,039 $65,515 $24,353 $1,049,640 $67,153 $24,962 $1,075,881 NET OPERATING INCOME (EBITDAR) $208,726 $213,944 $219,293 $224,775 $230,394 $236,154 $242,058 $248,109 $254,312 $260,670 $267,187 $2,671,867 ‐$106,875 $2,564,992 0.900900901 0.811622433 0.731191381 0.658730974 0.593451328 0.534640836 0.481658411 0.433926496 0.390924771 0.352184479 0.352184479 $188,041 $173,642 $160,345 $148,066 $136,728 $126,258 $116,589 $107,661 $99,417 $91,804 $903,350 EXPENSES DISCOUNTED @ NPV SUMMARY 11.00% Reversion Revenue Reversion Expenses Reversion NOI Terminal Rate Reversion Value Less: Broker Fee (4.00%) Total Reversion $1,343,067 $1,075,881 $267,187 10.00% $2,671,866.75 ‐$106,875 $2,564,992.08 Source: HealthTrust, LLC 70 NPV Cash Flows Less Deferred Maintenance: Plus Excess Land/CON: $2,251,901 $0 $0 Discounted Cash Flow Value: $2,251,901 Rounded to: $2,300,000 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST DIRECT CAPITALIZATION REVENUES Effective Gross Rental Revenues Entrance Fee Revenues Ancillary Revenues Total Effective Gross Revenue $1,049,202 $0 $0 $1,049,202 EXPENSES Real Estate Taxes Insurance Utilities Maintenance Marketing Administrative/General Housekeeping/Laundry Dietary Nursing/Personal Care Activities/Social Other Payroll, Payroll Taxes and Benefits SUB‐TOTAL OPERATING EXPENSES $10,400 $35,750 $67,251 $51,320 $0 $148,675 $115,126 $176,512 $84,250 $20,895 $58,337 $768,516 Management Fee Reserve for Replacement TOTAL EXPENSES $52,460 $19,500 $840,476 80.11% NET OPERATING INCOME (EBITDAR) $208,726 Capitalized @ Less Deferred Maintenance: Plus Excess Land/CON: Less Rent Loss Direct Capitalization Value: 9.50% Rounded to: $2,197,114 $0 $0 $0 $2,197,114 $2,200,000 Source: HealthTrust, LLC 71 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SALES COMPARISON APPROACH The sales comparison approach is predicated upon the principle of substitution that asserts that the amount a buyer will pay for a property is limited by the cost of comparable properties with similar utility. In order to apply this approach in the analysis, we have selected sales of communities throughout the subject’s region, as this type of property (senior housing or healthcare usage) does not transfer frequently. Further, given the changes in market conditions over the last 12‐24 months, we have attempted to utilized the most recent and pertinent transactions, ultimately resulting in a larger geographic area. We have attempted to select sales that are operationally as similar to the subject as possible. “Operationally” is more a matter of the quality of care and community (i.e., no mom and pops or troubled properties which would trade for under $30,000 per bed) than ILC versus ALR as anymore these distinctions can change rapidly; in fact many ILCs are purchased for ALR use. As the pool of institutional grade communities is limited; few transactions (less than 75) occur annually. The bulk of transactions occur where the largest senior populations are located (i.e., Florida and Arizona) as well as the two coasts (CA and the Northeast). Therefore, every time we find ourselves outside of these pockets, we must stretch for “comparable” sales. The sales selected from a database including hundreds of transactions are deemed most comparable to the subject. Although we have attempted to select sales most similar to the subject, significant differences remain between the subject and these properties. Consequently, when comparing the sales on the basis of price per bed, or unit (the most consistent unit of measure). Transaction prices will be affected by a number of variables such as: Financing/Conditions of Sale: Favorable financing or unusual conditions of sale (such as assemblage, seller duress, related parties, sale lease‐ or sale management‐back, etc.) can impact the sales price of a property. Time/Market Conditions: The time adjustment reflects changes in market conditions (e.g., supply, demand, macro economic conditions) between those existing at the time of sale and those as of the effective date of appraisal. Statistical data gathered and contained in our proprietary database (HealthComps©) has been tracked over the past twelve years is presented below relative to US transaction trends occurring over the past five years. 73 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Location: Location factors such as visibility, access, size of market (including regional, local, rural, metropolitan buyer perceptions) and neighborhood composition often will impact the selling price. Occupancy: Effective gross income and profit margins will be directly impacted by a properties historical, and potential occupancy levels. Whether a property has maintained a stabilized occupancy at the time of sale will have a material impact on a selling price. Age: As part of a research project we were engaged for by the American Senior Housing Association, HealthTrust found that the age of a physical plant has a significant impact on sale price and capitalization rates. Next, as the remaining economic life of an asset decreases, the capitalization rate typically increases reflecting the higher risk associated with an older property that may suffer competitive disadvantages due to its failure to keep up with recent development trends. Senior housing facilities demonstrate the following relationship over the last ten years: Relationship of Age and Capitalization Rate 5 or Fewer Years 6‐9 Years Capitalization Rate 10‐19 Years 20+ Years 9.00% 9.50% 10.00% 10.50% 11.00% 11.50% Source: ASHA, HealthTrust, LLC Census: Properties that sell with a high ratio of private pay residents are typically more desirable than those with low quality mixes due to profitability margins. Census is more relevant when analyzing long term care, and to some extent assisted living transactions. Size: The relative size of a property (total number of units/beds) should be considered relative to the economies of scale, or the tendency for larger assets to sell for less than smaller assets on a price per square foot, or per unit/bed basis. For our valuation analysis, we have applied adjustments via a Sales Grid Analysis accounting for the NOI per Unit/Bed. In addition to making adjustments to the sales via the sales grid, we have included a second valuation analysis tool. An EGIM analysis was developed to support, and or contrast the value indication via the comparison grid. The selected sales are described in summary on the following pages along with a map identifying the location of each property. Complete detailed sale information has been provided in the Addenda of this report. 74 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST IMPROVED SALES MAP SENIOR HOUSING/HEALTHCARE TRANSACTIONS Sale No. 1 Name/Location Morningstar at Littleton Littleton, Colorado Date May‐09 No. Units/Beds 85 Year Built 2006 Sale Price $25,250,000 $/Unit $297,059 NOI/Unit $26,141 Occ. 91% OAR 8.80% 2 Timber Ridge at Eureka Eureka, California Feb‐09 90 1998 $11,625,000 $129,167 $12,826 97% 9.93% 3 Caruth Haven Court Dallas, Texas Jan‐09 91 1999 $20,500,000 $225,275 $18,247 91% 8.10% 4 Adobe House Petaluma, California Dec‐08 40 1996 $14,540,000 $363,500 $35,877 75% 9.87% 5 Prestonwood Court Plano, Texas Mar‐08 124 2006 $29,000,000 $233,871 $18,335 90% 7.84% Source: HealthTrust, LLC 75 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Sales Grid Analysis The transactions selected and the subject will vary in terms of conditions of sale, date, location, size, age and condition, census and construction quality. In addition, market factors ‐ especially those involving the market’s supply and demand ‐ are important as they have a material impact on a property’s ability to generate income. Another major influence on the value of a seniors housing community is the management characteristics of the owner. All of these factors directly relate to the property’s ability to produce profits, the motivation of the sale. We have adjusted the sales to account for these differences. A property exhibiting superiority to the subject receives an overall downward adjustment while one that is inferior receives an overall upward adjustment. The adjustment formula is as follows: Subject NOI per unit/bed MINUS Comparable NOI per unit/bed DIVIDED BY Comparable NOI per unit/bed EQUALS Percent of Adjustment NOI versus Price/Unit $420,000 $370,000 $320,000 $270,000 $220,000 $170,000 $120,000 $70,000 $20,000 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 Price/Unit Linear (Price/Unit) We have operating data on a majority of the sale properties. In order to account for all the differences between the comparables and the subject, we have examined these communities on the basis of net operating income per unit/bed. This analysis will enable us to make a single adjustment that will inherently recognize all of the differences between the subject and the comparables. This comparison analysis produces a considerably tighter range of adjustments allowing for a more reasonable range to reconcile a probable value for the subject via the Sales Grid Analysis. We have reconciled to a value estimate within the range, following any rent loss deductions, or adjustments for excess land as presented in the following table: 76 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST IMPROVED SALES GRID ANALYSIS SUBJECT NAME/LOCATION/ATTRIBUTES YEAR BUILT OCCUPANCY @ SALE OVERALL CAPITALIZATION RATE EGIM EXPENSE RATIO NO. IL UNITS NO. AL UNITS/BEDS NO. ALZ UNITS/BEDS NO. SN BEDS TOTAL DENSITY LAND AREA (AC) GROSS BUILDING AREA (SF) GBA per UNIT/BED SALE DATE SALE PRICE PRICE PER UNIT/BED PRICE PER SF NOI/UNIT‐BED Fountain Retirement Hotel Youngtown,Arizona 1971 77% ‐‐‐ ‐‐‐ 80% 0 65 0 0 65 1.35 37,102 571 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ $3,211 ADJUSTMENTS (SALE CONDITIONS) FINANCING ADJUSTED INDICATION CONDITIONS OF SALE ADJUSTED INDICATION MARKET CONDITIONS ADJUSTED INDICATION ADJUSTMENTS NOI PER UNIT OTHER NET ADJUSTMENT INDICATED VALUE TREND INDICATOR TOOLS AVERAGE SIZE OF ADJUSTMENT: MINIMUM: MAXIMUM: MEDIAN: AVERAGE: STD. DEVIATION: RECONCILED VALUE: 1 2 3 4 5 Morningstar at Littleton Timber Ridge at Eureka Caruth Haven Court Adobe House Prestonwood Court Eureka, California Dallas, Texas Littleton, Colorado 2006 91% 8.80% 4.67 59% 0 65 20 0 85 3.13 71,080 836 May‐09 $25,250,000 $297,059 $355.23 $26,141 1998 97% 9.93% 3.01 70% 0 68 22 0 90 1.76 45,762 508 Feb‐09 $11,625,000 $129,167 $254.03 $12,826 1999 91% 8.10% 3.25 74% 0 91 0 0 91 2.215 74,647 820 Jan‐09 $20,500,000 $225,275 $274.63 $18,247 Petaluma, California 1996 75% 9.87% 4.89 52% 0 0 40 0 40 1.68 23,022 576 Dec‐08 $14,540,000 $363,500 $631.57 $35,877 0% $297,059 0% $297,059 0% $297,059 0% $129,167 0% $129,167 0% $129,167 0% $225,275 0% $225,275 0% $225,275 0% $363,500 0% $363,500 0% $363,500 0% $233,871 0% $233,871 0% $233,871 ‐88% 0% ‐88% ‐75% 0% ‐75% ‐82% 0% ‐82% ‐91% 0% ‐91% ‐82% 0% ‐82% $36,491 $32,338 $39,644 $32,535 $40,959 VALUATION SUMMARY 65 $35,000 $2,275,000 $2,300,000 ‐84% $32,338 $40,959 $36,491 $36,393 $3,961 $35,000 Source: HealthTrust, LLC 77 UNITS/BEDS TIMES $/UNIT EQUALS ROUNDED Plano, Texas 2006 90% 7.84% 4.01 69% 0 124 0 0 124 3.8757 117,412 947 Mar‐08 $29,000,000 $233,871 $246.99 $18,335 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST EGIM Analysis In addition to making adjustment to the improved sales via a sales grid analysis, we have examined the indicated EGIMs of each property and the expense ratio. This method compares the subject’s income characteristics with those of the comparable properties and develops a multiplier that is appropriate for the subject. Typically, the higher the expense ratio, the lower the EGIM will result. Based on our analysis, we have concluded to an appropriate EGIM as follows: EGIM ANALYSIS PROPERTY Timber Ridge at Eureka Caruth Haven Court Morningstar at Littleton Prestonwood Court Adobe House Subject EGIM 3.01 3.25 4.67 4.01 4.89 EXPENSE RATIO 70% 74% 59% 69% 52% 80% EXPENSE RATIO EGIM ANALYSIS 85% 80% 75% 70% 65% 60% 55% 50% 0.5 1.5 2.5 3.5 4.5 5.5 EGIM Effective Gross Income of Multiplied by Total Rounded to $1,049,202 2.00 $2,098,404 $2,100,000 Source: HealthTrust, LLC Sales Comparison Approach Conclusion This approach contains two methods (sales grid and EGIM analysis) to reach a value estimate for the subject. Due to the strong correlation between expense ratios and multipliers indicated by the comparable sales, we find the EGIM analysis to be reliable and have attributed equal weight to its indication. Thus, the reconciled value via the sales comparison approach is presented in the following table: 78 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST SALES COMPARISON CONCLUSION Sales Grid Analysis Total Units /Beds 65 X EGIM Method Effective Gross Income $1,049,202 X Value/Unit or Bed $35,000 = EGIM 2.00 = Value $2,275,000 $2,098,404 Reconciled Value Indicated Value Reconciled to: Less Deferred Maintenance Plus Excess Land/CON Less Rent Loss Total $2,186,702 $0 $0 $0 $2,186,702 Final Value Conclusion $2,200,000 Source: HealthTrust, LLC 79 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST COST APPROACH The cost approach is based upon the principle of substitution, which states that a prudent purchaser would not pay more for a property than the amount required to purchase a similar site and construct similar improvements, without undue delay, to produce a property of equal desirability and utility. The procedure begins by estimating the value of the subject site at its highest and best use, based upon a market analysis of recent comparable sales of vacant land similar to the subject site. The next step involves estimating current reproduction costs of the improvements, including an appropriate estimate for entrepreneurial profit, in order to reflect the return a developer would require for the time, expertise, and equity investment. The final step in the cost approach involves estimating accrued depreciation from all causes and adding the depreciated value of the improvements to the estimated land value. Land Valuation In estimating the value of the subject site, we used direct market comparison of the subject site with recent sales of vacant land with similar utility and physical characteristics. Adjustments have been made for the sales as necessary to offset differences in various factors affecting value, such as date of sale, location, size, zoning density and any other significant differences. All sales were adjusted for and analyzed on the basis of cash equivalent sale prices. Land Sales Map 80 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST VACANT LAND TRANSACTIONS Sale No. Location Units Acres Sale Date Sale Price $/Unit $/AC $/SF 1 NE Dynamite & 44th St Cave Creek, Arizona 35 14.44 Apr‐10 $1,200,000 $34,286 $83,102 $1.91 2 SE of Pima Rd and Legacy Blvd Scottsdale, Arizona 465 9.82 Dec‐09 $13,240,000 $28,473 $1,348,269 $30.95 3 685 South Freeway Drive Napa, California 22 1.06 Feb‐09 $1,200,000 $54,545 $1,132,075 $25.99 4 SE Corner of Imola Avenue and Golden Gate Drive Napa, California 17 0.86 Feb‐09 $850,000 $50,000 $988,372 $22.69 5 2975 Dutton Meadow Santa Rosa, California 96 4.00 Aug‐08 $2,800,000 $29,167 $700,000 $16.07 Source: HealthTrust, LLC Seniors housing community site purchasers typically buy property on the basis of price per unit. Demographics, existing and proposed supply, and location relative to health care properties are all factors that most influence these buyers. As a result, the markets for these sites tend to be regional rather than local, as it is with other commercial property types. When necessary, we have expanded our search to include non‐senior housing developments, multifamily developments, and other developments that best compared to the land acquired for the construction of the subject. Due to the prevalent land sales data available, we have valued the subject’s site on the basis of price per unit. Subsequent to our research, we have identified the following sales that are summarized below, with detailed write‐ups located within the Addenda of this report. Adjustments shown in the Land Sales Analysis chart are discussed in the following paragraphs. All of the sales involved fee simple interests. Therefore, we consider financing/condition of sale, market conditions, location/access/visibility, size and density as the most relevant factors of adjustment. Transaction prices will be affected by a number of variables such as: Financing/Conditions of Sale: Favorable financing or unusual conditions of sale (such as assemblage, seller duress, etc.) can impact the sales price of a property. Time/Market Conditions: The time adjustment reflects changes in market conditions (e.g., supply, demand, macro economic conditions) between those existing at the time of sale and those as of the effective date of appraisal. Location: Location factors such as visibility, access, size of market (including regional, local, rural, metropolitan buyer perceptions) and neighborhood composition often will impact the selling price. Zoning/Density: The permissible uses in a zoning district and the density to which these uses are permitted can affect the price of a vacant property. Density adjustments for land analyzed on a per unit basis are negative for less developed sites (more green area per unit, less crowded) and positive for more densely developed sites. Conversely, on a per‐square‐foot basis, higher density is favorable and would require a downward adjustment. Size: Size adjustments consider the economies of scale, or the tendency for larger tracts to sell less than smaller tracts on a price per square foot, or per unit/bed basis. 81 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST LAND SALES ANALYSIS SUMMARY PROPERTY LOCATION USE SIZE: UNITS ACRES DENSITY SALE DATE SALE PRICE PRICE/UNIT PRICE/SF ADJUSTMENTS: FINANCING ADJUSTED INDICATION CONDITIONS OF SALE ADJUSTED INDICATION MARKET CONDITIONS ADJUSTED INDICATION OTHER ADJUSTMENTS: LOCATION SIZE ZONING/DENISTY OTHER SUBJECT 12030 113th Ave Youngtown, Arizona ALR SALE 1 NE Dynamite & 44th St Cave Creek, Arizona Master Planned Community / Single Family Development SALE 2 SE of Pima Rd and Legacy Blvd Scottsdale, Arizona 465 unit CCRC SALE 3 685 South Freeway Drive Napa, California Multi‐family residential SALE 4 SE Corner of Imola Avenue and Golden Gate Drive Napa, California Multi‐family residential SALE 5 2975 Dutton Meadow Santa Rosa, California Apartments 65 1.35 48.1 35 14.44 2.4 Apr‐10 $1,200,000 $34,286 $1.91 465 9.82 47.4 Dec‐09 $13,240,000 $28,473 $30.95 22 1.06 20.8 Feb‐09 $1,200,000 $54,545 $25.99 17 0.86 19.8 Feb‐09 $850,000 $50,000 $22.69 96 4.00 24.0 Aug‐08 $2,800,000 $29,167 $16.07 0% $34,286 0% $34,286 0% $34,286 0% $28,473 0% $28,473 0% $28,473 0% $54,545 0% $54,545 0% $54,545 0% $50,000 0% $50,000 0% $50,000 0% $29,167 0% $29,167 0% $29,167 Similar Superior Superior Similar Superior Inferior Similar Similar Superior Superior Superior Similar Superior Superior Superior Similar Similar Similar Superior Similar NET ADJUSTMENT ‐50% ‐40% ‐70% ‐70% ‐40% INDICATED VALUE $17,143 $17,084 $16,364 $15,000 $17,500 MINIMUM: MAXIMUM: AVERAGE: STD. DEVIATION: $15,000 $17,500 $16,618 $994 ESTIMATED VALUE OF SUBJECT: 65 UNITS @ $16,500 EXCESS LAND VALUE: ROUNDED TO Source: HealthTrust, LLC 82 $1,072,500 $0 $1,070,000 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Land Value Conclusion The comparable land sales grid indicated adjusted values for the subject property, which we reconciled based on necessary adjustments, as presented. Therefore, we have reconciled within the range, or at $16,500 per unit, resulting in a concluded land value of $1,070,000, rounded. Improvement Valuation Direct/Hard Costs: Based upon our inspection of the subject improvements, and our knowledge of construction quality, the construction of the various buildings is best represented by the Marshall and Swift Valuation Service: Multiple Residences – Seniors Housing, Multiple Residences – Elderly Assisted Living (AL), Convalescent Hospitals (SN), and Clubhouses for Senior Citizens (Clubhouse/Commons Buildings). We have estimated the hard construction costs for the building improvements as follows: SUMMARY OF BASE BUILDING COSTS Component Class/Quality Base Building Cost Add for Sprinklers Subtotal FAR Multiplier Local Multiplier Current Multiplier Subtotal Ratio to total Final Building Cost IL ‐‐ $0.00 $2.00 2.00 0.000 0.000 0.000 0.00 0% AL Class D, Average $79.29 $2.00 81.29 0.950 0.970 0.970 72.66 100% SN ‐‐ $0.00 $2.00 2.00 0.000 0.000 0.000 0.00 0% Cottage ‐‐ $0.00 $0.00 0.00 0.000 0.000 0.000 0.00 0% Clubhouse ‐‐ $0.00 $2.00 2.00 0.000 0.000 0.000 0.00 0% Total $72.66 Source: Marshall Valuation Service/HealthTrust, LLC The table above indicates values per square foot given to the various buildings that comprise the property. Other hard costs include paving estimated, landscaping and site work/retention. Personal Property: Furniture, fixtures, and equipment (FF&E) are estimated based upon our knowledge of these costs for similar type properties, including the development cost comparables presented at the conclusion of this section. The comparables range from $0 to $10,788 and we reconciled to $5,000 per unit for FF&E. Other Indirect/Soft Costs: We have estimated typical soft cost amounts for legal, accounting, professional fees, real estate taxes during hold, and insurance at a lump sum; research into remaining contingency and other miscellaneous items leads us to conclude at a rate of 5% of the total hard costs. Premarketing/Stabilization Costs: Total costs to bring the property into production to a stabilized occupancy level include marketing and pre‐marketing expenses, operating losses incurred during fill‐up, promotional and public relations expenses, marketing consultants, and professional advertising through the various media. Based upon our knowledge of these expenses for similar properties, and discussions with marketing specialists and consultants, we estimated the total costs to bring the property into production at stabilized occupancy to be approximately $5,000 per unit. We note that this estimate presumes a healthy market and a competent marketing/management team. Entrepreneurial Incentive: The last accountable cost is entrepreneurial incentive and overhead essential to complete a project of this size. Our discussion with developers active in the retirement community market suggests a range in anticipated returns of 10% to 20% of the project costs (excluding land). However, our experience with Erickson Retirement, Sunrise Senior Living, and Life Care Services is that 83 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST developers take a smaller return on larger projects, more in the neighborhood of 5% to 10%. We also point out that barriers to entry in any given market, or risk play an integral role in developer incentive. Given the size, scope, and risk of the subject development, we have incorporated entrepreneurial incentive of 15% of project costs. Total Replacement Cost New (RCN): We have applied cost estimated from a reliable cost estimator (Marshall & Swift) to derive a reasonable RCN for the subject. The chart on the following page includes recently constructed senior housing/healthcare projects throughout the region/country. We therefore conclude that these comparable properties support our estimated replacement cost new for the subject. 84 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST COST COMPARABLE SUMMARY PROPERTY DATE LOCATION NO. UNITS/BEDS GROSS BUILDING AREA CONSTRUCTION TYPE Arizona 65 37,102 Wood Frame 1 2010 Arizona 140 125,316 Steel Frame 2 2009 California 124 113,708 Steel Frame 3 2009 Texas 80 81,163 Steel Frame 4 2008 Texas 74 57,000 5 2008 Texas 134 0 Unknown LAND COST $1,070,000 $1,945,500 $2,500,000 $468,000 $1,500,000 $0 SITE WORK HARD COSTS FF&E SOFT COSTS TOTAL ENTREPRENEURIAL INCENTIVE REPLACEMENT COST NEW $29,403 $2,776,009 $325,000 $794,562 $3,924,974 $588,746 $4,513,720 $900,000 $11,005,020 $1,429,088 $5,557,500 $18,891,608 $2,833,741 $21,725,349 $4,300,000 $18,286,870 $790,260 $10,783,103 $34,160,233 $5,124,035 $39,284,268 $0 $9,123,989 $863,076 $2,886,597 $12,873,662 $1,931,049 $14,804,711 $0 $5,700,000 $500,000 $943,218 $7,143,218 $1,071,483 $8,214,701 $0 $14,400,000 $0 $0 $14,400,000 $2,160,000 $16,560,000 $69,442 $121.66 $155,181 $173.36 $316,809 $345.48 $185,059 $182.41 $111,009 $144.12 $123,582 N/A COSTS PER UNIT COSTS PER SF SUBJECT Source: HealthTrust, LLC Note: Costs may be combined in some categories 85 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Depreciation Depreciation is allocated between the various types of curable and incurable depreciable items. Depreciation is defined as a loss in value from any cause, and consists of physical deterioration, functional obsolescence, and economic or external obsolescence. Physical curable depreciation (deferred maintenance) includes all items of maintenance that should be corrected on the date of appraisal to maximize profit or minimize loss that would result if the property were sold. A measure of physical curable deterioration is the cost to perform this maintenance and includes such items as interior and exterior painting, roof repair, etc. The estimated physical incurable depreciation includes both short‐lived and long‐lived components and represents general wear and tear on the property that does not warrant immediate repair. Deducting this replacement cost new from the property’s total, results in a depreciable base for the long‐lived components. Based on the estimated effective age of the subject, assuming an economic life of 50 years, we were able to estimate total long‐lived incurable depreciation for the subject. Functional obsolescence includes items of deficiency or superadequacy that impact the structure’s utility. Curable items are economically feasible to correct while incurable items cannot be fixed for less than the resulting contribution to value. External obsolescence results from factors and influences outside the property. This type of obsolescence is usually incurable because the tenant and landlord are typically powerless to remove or change the influence creating the obsolescence. Examples of external obsolescence include government fees and regulations, the presence of a landfill or equally undesirable neighbor, and market conditions that do not support development costs. We have noted no evidence of external obsolescence impacting the subject. Cost Approach Conclusion The final step in the cost approach is adding the previously estimated land value of the subject site to the estimated depreciated replacement cost new of the improvements. Therefore, the market value of the subject, via the cost approach, is presented in the following exhibit. 86 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST COST APPROACH SUMMARY HARD COSTS Main Structure Other Structure Walkways & Paving Landscaping Site Work/Retention Furniture, Fixtures, & Equipment Total Hard Costs: SOFT COSTS Professional Fees, Title, Ins., Taxes, etc. Miscellaneous & Contingency @ Pre‐marketing expenses @ Total Soft Costs: ENTREPRENEURIAL INCENTIVE @ REPLACEMENT COST NEW DEPRECIATION Physical Curable: Physical Incurable (Short‐Lived): COMPONENT Roof FF&E Flooring HVAC Site Improvements Physical Incurable (Long‐Lived): Replacement Cost New Less Short‐Lived Items Depreciable Basis Effective Age/Economic Life Functional Obsolescence: External Obsolescence: TOTAL ESTIMATED ACCRUED DEPRECIATION VALUATION SUMMARY DEPRECIATED VALUE OF IMPROVEMENTS ADD EXCESS CON VALUE @ LAND VALUE EXCESS LAND VALUE ADD TOTAL LAND VALUE PRELIMINARY COST APPROACH VALUE LESS ADJUSTMENT FOR LACK OF STABILIZATION ESTIMATED VALUE VIA COST APPROACH ROUNDED TO 37,102 ‐ 14,702 2,940 58,806 65 SF @ SF @ SF @ SF @ SF @ Units/Beds @ $72.66 $0.00 $5.00 $2.25 $0.50 $5,000 $2,695,886 $0 $73,508 $6,616 $29,403 $325,000 $3,130,412 $313,041 $156,521 $325,000 5% $5,000 Per Unit $794,562 $588,746 15% $69,442 /Per Unit $121.66 /Square Foot $4,513,720 $0 Cost New $74,204 $325,000 $148,408 $185,510 $73,508 $806,630 Effective Age 18 9 8 18 10 Economic Life 25 12 10 25 25 Amount $53,427 $243,750 $118,726 $133,567 $29,403 $578,873 ‐$ $ 35 /50 = 70.0% $4,513,720 806,630 3,707,091 $2,594,963 $0 $0 ‐$3,173,837 $0 Per Bed Source: HealthTrust, LLC 87 $1,339,883 $0 $1,070,000 $0 $1,070,000 $2,409,883 $0 $2,409,883 $2,400,000 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Insurable Value Estimate Based on the foregoing, we have also estimated the subject’s insurable value, as shown below: INSURABLE VALUE CALCULATIONS Fountain Retirement Hotel Replacement Cost New Less: Site Work/Retention Entrepreneurial Incentive INSURABLE VALUE CALCULATION ROUNDED TO $4,513,720 58,806 SF @ $0.50 ‐$29,403 ‐$588,746 $3,895,571 $3,900,000 Source: HealthTrust, LLC 88 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST RECONCILIATION AND FINAL VALUE ESTIMATES The purpose of this appraisal is to assist with underwriting a potential loan involving the subject of the fee simple interest in the subject. We have applied three approaches to estimate the subject’s value. The value estimates provided by these approaches are: VALUATION SUMMARY Value Indication(s) As‐Is 19‐Jul‐2010 The Cost Approach ‐ Fee Simple The Income Approach ‐ Fee Simple The Sales Approach ‐ Fee Simple $2,400,000 $2,200,000 $2,200,000 The Income Approach ‐ Leased Fee The Income Approach ‐ Leasehold ‐‐‐ ‐‐‐ Value Conclusion(s) Market Value of Going Concern (TAB) Market Value of Leased Fee Estate Market Value of Leasehold Estate $2,200,000 ‐‐‐ ‐‐‐ Five land sales are used in the Cost Approach to provide an estimate of the subject’s value. These sales offered a reliable indication of the subject’s site value. The replacement cost new reflects current costs as estimated by a reliable cost manual, national averages for retirement community development, development cost comparables, and our experience. However, the depreciation estimates are more subjective and have less direct market support. The older the improvements, the less reliable this approach becomes due to the necessarily significant depreciation estimates applied. Hence, while we believe this approach provides a reliable estimate of the subject’s value, less weight was place on this approach rather than the income approach. The Income Approach has been employed to estimate the present value of the cash flows generated by the subject’s operation. Our estimates of revenues and expenses reflect the performance of numerous similar properties and are well supported. The going‐in/terminal capitalization and discount rates used are extracted from the market and reflect the subject’s financing terms. This approach has the most support from the market and best reflects the manner in which the probable purchaser would examine the subject; that is, because a senior housing and healthcare assets are income‐producing properties, a buyer will most strongly consider the cash flows that an asset can generate. The income approach is thus the most reliable and has been accorded the most weight for our valuation analysis. We typically employ direct capitalization and discounted cash flow methods, weight the strengths of each, and reconciling accordingly. The Sales Comparison Approach includes five sales of senior housing/healthcare assets that have transferred recently. These sales differ from the subject but were able to produce a reliable estimate of the subject’s value. We do point out that this approach is heavily dependent on whether there is sufficient and active sales volume. Historically, while a number of sales do exist in this product niche, the number of sales is considerably less than that of traditional commercial or residential properties. Hence, significant adjustments are often required and this approach is largely used to provide benchmarks to 89 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST test for reasonableness of the primary valuation tool (income approach). Consequently, this approach has received secondary weight. Asset Value Allocation According to the 2010 Edition of the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, it is necessary to identify any personal property, trade fixtures or intangible items that are not real property but are included in the appraisal. Business value or “intangible assets” is generally created when a property such as the subject has achieved stabilized operations. An Assisted Living Residence is a unique property because it contains elements of all three types of values. It is often very difficult to separate the going concern business value from the real estate value, for example, because neither can exist without the other. However, we have attempted to allocate the relative contribution values of the real property, personal property and intangible assets as a going concern. Several schools of thought exist with regard to how these components are allocated. Hotel appraisers will typically deduct a franchise fee paid for the use of a brand name (i.e., Marriott, Ritz Carlton, Hilton, etc.), and a passive management fee of say 3.0% to 5.0% from gross revenue to derive NOI that is capitalized into a business value. Others have advocated numerous other deductions for work force in place, original cost to hire and train the work force, and other intangibles that should be deducted from the Total Assets of the Business (TAB) to isolate the value of the real estate only. We understand this methodology has had very limited success in the courts thus far. A course offered by the Appraisal Institute (Course 800) was based on similar theories. However, it was so controversial the Appraisal Institute suspended teaching the course in 2007. We have attempted to allocate the values to each of the components through a combination of methods (Income Residual, Management Capitalization, and Cost Residual), thus reconciling to a final allocation for each component. Income Residual Method: In this case, we begin with the total estimated NOI of the going concern, as estimated in our valuation analysis. From this we deduct the return associated with FF&E to arrive at a purely real estate based income stream which we capitalized at a lower rate than the going concern to account for the lower risk factor. Hence, we deduct the depreciated cost of the FF&E and the Real Estate value from the total concluded property value. The remainder reflects the indicated business value. Management Capitalization Method: This is a simplistic version of the Income Residual Method whereby we utilize and assume the management fee reflects the income attributable to the business. We thus capitalize the management fee at a significantly higher rate to account for the increased perception of risk associated with and isolated to the business. Cost Residual Method: In this instance, it is assumed a cost approach analysis has been completed. Therefore, when we allocate value, first we satisfy the personal property component; this estimate represents the depreciated value of the FF&E presented in the cost approach and rounded to the nearest $100,000. Then, we will allocate value to real estate. When the cost approach conclusion (before deduction for a lack of stabilized occupancy) is higher than the final value estimates, we estimate the real estate by deducting the FF&E from the final value conclusions. When the cost approach conclusion (before deduction for a lack of stabilized occupancy) is lower than the final value estimates, we deduct the FF&E from the cost approach conclusion (before deduction for a lack of stabilized occupancy). Typically, in the appraisal of a successful retirement property, our business value 90 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST allocation method is supported by virtue of the differential between the cost approach conclusion and the final value estimate. In other words, anything remaining after personal and real property have been satisfied constitutes business value. In this instance, we have allocated value as follows: VALUE ALLOCATION SUMMARY As‐Is (1) (2) Income Residual Method Estimated NOI (Going Concern) Less: Return on FF&E of 20.00% Income Attributable to Real Estate Value of Real Estate @ = = = 9.00% = Rounded: = @ @ $100,000 Total Property Value Concluded via Appraisal Less: Personal Property (FF&E) Less: Real Estate Value Remainder (Indicated Business Value) (3) Management Capitalization Method Management Fee, or income to business of Capitalized at business capitalization rate of 30.00% Indicated Business Value (4) (5) (6) (1) (2) (3) (4) (5) (6) $208,726 ‐$20,000 $188,726 $2,096,953 $2,100,000 $2,200,000 ‐$100,000 ‐$2,100,000 = $0 = = $52,460 $174,867 Rounded: $200,000 Cost Residual Method Total Property Value Concluded via Appraisal Preliminary Cost Approach Conclusion Value of Real Estate (Cost less Excess CON, less FF&E) Value of FF&E and Excess CON Value of Business (Total value less RE, less FF&E, less excess CON = = = = = $2,200,000 $2,400,000 $2,100,000 $100,000 $0 Reconciled Business Allocation @ $100,000 Reconciled Personal Property Allocation @ $100,000 Remainder Real Estate Allocation @ $2,000,000 NOI of going concern including intangible assets, or TAB 50 basis points less than going concern cap rate Substantially higher cap rate than going concern to account for risk Excludes any adjustment for lack of stabilization Certificate of Need (CON) considered chattel or movable personal property Business value if > Total Property Value; otherwise zero Source: HealthTrust, LLC 91 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST Marketability Analysis The definition of “market value” incorporates the assumption that the subject of the appraisal has been exposed on the market for a reasonable period of time. The Appraisal Standards Board (ASB) made the following comment to Standard 6 of USPAP: Reasonable exposure time is one of a series of conditions in most market value definitions. Exposure time is always presumed to precede the effective date of the appraisal. Exposure time may be defined as follows: The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. The statement continues with remarking that this exposure time is not a prediction of a date of sale and should not be confused with a marketing period. The Appraisal Standards Board distinguishes marketing time as the period required to sell a property immediately after the effective date of appraisal. This estimate is not part of the appraisal process and has no impact on market value. Because we are estimating market value, we have made an estimate of the subject's exposure time that is presumed to have occurred prior to the effective date of the appraisal. In accordance with our conclusion of highest and best use, we believe that the most probable purchaser of the subject property would be a nursing home/retirement community owner/operator or possibly a limited partnership with specialized expertise in elderly care. Financing for the subject property would most likely be obtained through a commercial bank with strong local ties, life insurance company or through tax‐exempt bond issues. In the current market, lenders now place much more underwriting emphasis on the financial position and credit‐worthiness of the borrower and less weight on the real estate as security collateral. We understand this to hold true in the nursing home and retirement industry as well. We also contacted three well‐known brokerage firms that specialize in marketing healthcare properties nationally. Both Mel Gamzon, principal of Senior Housing Investment Advisors and Allen McMurtry, a broker with CLW Realty Group, Inc. indicated current marketing periods ranging from six to twelve months from listing to closing. Since both of these firms are familiar with this product type, we are confident that if the subject were actively marketed to this group of potential buyers at a price near our estimates of market value, it would sell within twelve months. Dave Rothschild of CB Commercial concurs with the six‐ to twelve‐month marketing period. In this case, marketing time and exposure time are the same. The key to estimating a probable exposure time for the subject is the relationship between its net income, its competitive market, and the final value estimate developed. We note that nationally there is activity in the retirement market as many of the national players are positioning themselves to increase market share. Hence, we believe that if the subject were actively marketed to this group of potential buyers at a price near our estimates of market value, it would sell within twelve months. 92 FOUNTAIN RETIREMENT HOTEL HEALTHTRUST ADDENDA 93 HEALTHTRUST Subject Photographs and Exhibits ADDENDA HEALTHTRUST Provided Financial Statements ADDENDA 11:11 PM Fountain Retirement Center, Inc 06/22/10 Profit & Loss January through March 2010 Accrual Basis Jan - Mar 10 Ordinary Income/Expense Income 4000 · Room & Board 4010 · Room & Boaard - Private 4040 · Medi-Set 4000 · Room & Board - Other Total 4000 · Room & Board 4200 · Revenue Deductions 4210 · Private Deductions Total 4200 · Revenue Deductions Total Income Gross Profit Expense Payroll Expenses 5000 · Supervisory Expenses 5010 · Supervisory Salaries 5000 · Supervisory Expenses - Other Total 5000 · Supervisory Expenses 5100 · Dietary Expenses 5110 · Dietary Salaries 5120 · Dietary Food 5130 · Dietary Supplies 5150 · Dietary Purchased Services Total 5100 · Dietary Expenses 5200 · Housekeeping Expenses 5210 · Housekeeping Salaries 5220 · Housekeeping Supplies 5230 · Housekeeping Repairs Total 5200 · Housekeeping Expenses 5300 · Laundry Expenses 5310 · Laundry Salaries Total 5300 · Laundry Expenses 5400 · Social Service Expenses 5410 · Social Service Salaries Total 5400 · Social Service Expenses 5500 · Maintenance Expenses 5510 · Maintenance Salaries 5530 · Maintenance Repairs 5540 · Maintenance Purchased Service 5550 · Waste Management 5560 · Natural Gas 5570 · Water/Sewer 5580 · Electricity 5500 · Maintenance Expenses - Other Total 5500 · Maintenance Expenses 5600 · Janitor Expenses 162,065.10 81,855.00 400.00 244,320.10 -5,816.06 -5,816.06 238,504.04 238,504.04 22.50 17,366.66 151.77 17,518.43 23,872.78 15,369.95 418.90 160.95 39,822.58 19,940.75 1,015.13 473.00 21,428.88 4,845.00 4,845.00 3,870.07 3,870.07 4,963.76 -1,303.31 1,911.41 396.75 2,594.95 1,791.27 8,921.61 80.00 19,356.44 250.00 Page 1 11:11 PM Fountain Retirement Center, Inc 06/22/10 Profit & Loss January through March 2010 Accrual Basis Jan - Mar 10 5700 · Administration Expenses 5710 · Administration Salaries 5730 · Administration Purch Services 5750 · Accounting Fees 5840 · Insurance General 5845 · Insurance Medical & Life 5850 · Insurance Vehicle 5855 · Insurance Workmans Comp 5875 · Miscellaneous Expense 5900 · Postage 5950 · Rent 5970 · Taxes/Licenses 5980 · Telephone Total 5700 · Administration Expenses 6000 · Employee Benefits 6020 · Sun Country Credit Union 6030 · Payroll Taxes 6040 · Unemployment Taxes 6060 · Vacation - Holiday Pay Total 6000 · Employee Benefits 16,556.66 137.84 1,800.00 7,301.53 12,885.73 947.22 167.47 1,610.65 176.00 59,537.61 108.20 2,477.42 103,706.33 500.00 7,140.71 735.21 463.00 8,838.92 Total Expense 219,659.15 Net Ordinary Income 18,844.89 Other Income/Expense Other Expense 8500 · Other Expenses 8530 · Interest Expense Total 8500 · Other Expenses Total Other Expense Net Other Income Net Income 4,837.50 4,837.50 4,837.50 -4,837.50 14,007.39 Page 2 9:56 AM Fountain Retirement Center, Inc 04/19/10 Profit & Loss October through December 2009 Accrual Basis Oct - Dec 09 Ordinary Income/Expense Income 4000 · Room & Board 4010 · Room & Boaard - Private 4040 · Medi-Set 4000 · Room & Board - Other Total 4000 · Room & Board 4200 · Revenue Deductions 4210 · Private Deductions 4230 · Other Deductions Total 4200 · Revenue Deductions Total Income Gross Profit Expense Payroll Expenses 5000 · Supervisory Expenses 5010 · Supervisory Salaries 5020 · Supervisory Central Supplies 5030 · Supervisory Repairs 5040 · Supervisory Purchased Services 5050 · S/C - Finger Printing Total 5000 · Supervisory Expenses 5100 · Dietary Expenses 5110 · Dietary Salaries 5120 · Dietary Food 5130 · Dietary Supplies 5150 · Dietary Purchased Services Total 5100 · Dietary Expenses 5200 · Housekeeping Expenses 5210 · Housekeeping Salaries 5220 · Housekeeping Supplies 5230 · Housekeeping Repairs 5240 · Housekeeping Purchased Service Total 5200 · Housekeeping Expenses 5300 · Laundry Expenses 5310 · Laundry Salaries 5320 · Laundry Supplies 5330 · Laundry Repairs Total 5300 · Laundry Expenses 5400 · Social Service Expenses 5410 · Social Service Salaries 5420 · Social Service Supplies 5440 · Social Service Purchased Servic Total 5400 · Social Service Expenses 5500 · Maintenance Expenses 5510 · Maintenance Salaries 5520 · Maintenance Supplies 5530 · Maintenance Repairs 5540 · Maintenance Purchased Service 5550 · Waste Management 5560 · Natural Gas 5570 · Water/Sewer 5580 · Electricity 5500 · Maintenance Expenses - Other Total 5500 · Maintenance Expenses 1,002,298.23 62,805.00 100.00 1,065,203.23 -9,528.69 -295.00 -9,823.69 1,055,379.54 1,055,379.54 0.00 80,163.58 5,925.05 26.00 1,467.79 138.00 87,720.42 92,218.62 78,021.26 2,517.95 2,223.02 174,980.85 81,723.45 8,918.01 1,632.29 76.00 92,349.75 18,743.50 1,195.49 1,838.17 21,777.16 16,325.76 2,234.33 2,154.03 20,714.12 18,277.65 5,191.85 13,422.60 26,251.75 1,587.00 12,863.37 10,926.58 45,344.08 1,220.00 135,084.88 Page 1 9:56 AM Fountain Retirement Center, Inc 04/19/10 Profit & Loss October through December 2009 Accrual Basis Oct - Dec 09 5700 · Administration Expenses 5710 · Administration Salaries 5730 · Administration Purch Services 5740 · Ads/Help Wanted 5750 · Accounting Fees 5780 · Bank Charges 5790 · Board of Directors Fees 5810 · Depreciation 5820 · Donations 5830 · Dues/Subscriptions 5840 · Insurance General 5845 · Insurance Medical & Life 5850 · Insurance Vehicle 5855 · Insurance Workmans Comp 5870 · Legal Fees 5875 · Miscellaneous Expense 5880 · Office Supplies 5890 · Permits/Fees 5900 · Postage 5910 · Printing/Duplication 5930 · Property Tax 5950 · Rent 5960 · Seminar/Education 5970 · Taxes/Licenses 5980 · Telephone 5990 · Vehicle Expenses Total 5700 · Administration Expenses 6000 · Employee Benefits 6030 · Payroll Taxes 6040 · Unemployment Taxes Total 6000 · Employee Benefits 82,189.73 74.24 1,318.63 10,415.10 9.73 1,000.00 35,461.00 1,000.00 1,059.70 18,486.34 25,800.87 816.00 12,603.20 1,000.00 -1,812.53 2,272.15 -135.00 1,233.07 5,597.80 11,159.30 229,148.88 970.00 3,768.50 3,973.60 36,880.69 484,291.00 31,152.52 0.00 31,152.52 66900 · Reconciliation Discrepancies 0.00 Total Expense 1,048,070.70 Net Ordinary Income 7,308.84 Other Income/Expense Other Income 8000 · Other Income 8010 · Meal Income 8030 · Interest Income Total 8000 · Other Income Total Other Income Other Expense 8500 · Other Expenses 8530 · Interest Expense 8540 · Penalties/Fines Total 8500 · Other Expenses Total Other Expense Net Other Income Net Income 382.00 1,289.21 1,671.21 1,671.21 3,225.00 -18.41 3,206.59 3,206.59 -1,535.38 5,773.46 Page 2 HEALTHTRUST Improved Sales ADDENDA IMPROVED SALE #1 Record ID: Property Type: Name: Address: 8054704 --- Verified with: By: Grantee, Grantor, Senior Care Investor Colleen H. Blumenthal, MAI & David Rey Salinas, AS on 3/22/2009 Morningstar at Littleton 5344 South Ripling Parkway, Littleton, Jefferson, CO, 80127 Sale Price: Adjusted Sale Price: Sale Date: Cap Rate: EGIM: Grantor: Grantee: Property Rights: Financing: Occupancy at sale: Private Pay Census: Medicaid Census: Effective Gross Income: Operating Expenses: NOI: Exp per Capacity: SALE DATA MH MS Littleton, LLP (MacKenzie House, LLC) AEW Senior Housing Investors, LP Fee Simple Cash to seller 91% 100% --$5,401,384 $3,178,988 $2,222,396 $37,400 Year Opened: Major Renovation: Gross Building Area: Number of Buildings: Number of Stories: Elevators: Construction: Quality: Condition: Parking Garage: Parking Spaces: PROPERTY MIX Level IL AL ALZ SN HPL Total Capacity Capacity --65 units 20 units ----85 Land Area: Description: Improvements: Parcel / Legal: Proposed Use: Zoning: KEY INDICATORS $25,250,000 Price per Capacity: --Price per Acre: 5/2009 Price per SF: 8.80% Time on Market: 4.67 Exp as Percent of EGI: $297,059 $8,067,093 $185.19 --58.86% PHYSICAL PLANT DATA 2006 --71,080 ------Steel Frame --------- LAND DATA 3.13 Acres Slightly irregular parcel on well-traveled road. 3.13 acres. 85-unit assisted living and memory care residence 195809 --P-D (Planned Development) Jefferson County REMARKS: The financial indicators are based on the 2009 budget adjusted to reflect a 5% management fee and capital reserves. The property is of excellent quality and was in excellent condition at the time of the sale. Lisa Widmier of Vant*Age Point represented the seller as broker. IMPROVED SALE #2 Record ID: Property Type: Name: Address: 8054703 --Timber Ridge at Eureka 2740 Timber Ridge Lane, Eureka, Humboldt, CA, 95503 Verified with: By: Grantee and Grantor Colleen H. Blumenthal, MAI on 3/22/2009 Sale Price: Adjusted Sale Price: Sale Date: Cap Rate: EGIM: Grantor: Grantee: Property Rights: Financing: Occupancy at sale: Private Pay Census: Medicaid Census: Effective Gross Income: Operating Expenses: NOI: Exp per Capacity: SALE DATA FKS Investment Company Humboldt Walford, LLC Fee Simple Cash to seller 97% 100% --$3,865,984 $2,711,559 $1,154,425 $30,128 Year Opened: Major Renovation: Gross Building Area: Number of Buildings: Number of Stories: Elevators: Construction: Quality: Condition: Parking Garage: Parking Spaces: PROPERTY MIX Level IL AL ALZ SN HPL Total Capacity KEY INDICATORS $11,625,000 Price per Capacity: --Price per Acre: 2/2009 Price per SF: 9.93% Time on Market: 3.01 Exp as Percent of EGI: $129,167 $6,605,114 $151.63 --70.14% PHYSICAL PLANT DATA 1998 --45,762 ------Wood Frame --------LAND DATA Capacity --68 units 22 units ----90 Land Area: Description: Improvements: Parcel / Legal: Proposed Use: Zoning: 1.76 Acres ----------- REMARKS: This transaction reflects the exercise of a lease option negotiated in 1998. According to the lease, the optional purchase price is calculated by multiplying the total development costs by an annual factor of 10% and subtracting the annual lease payments. Based on calculations provided by the operator, we understand this purchase price is $11,625,000. We find this option price is slightly below current market conditions due to the fact it was negotiated in 1998. The financial indicators reflect the actual performance trended to 2009 dollars and adjusted to include a 5% management fee and $300/unit reserves. 2 IMPROVED SALE #3 Record ID: Property Type: Name: Address: 8054899 --- Verified with: By: SeniorCare Investor, Cornerstone REIT Press Release and broker (Megan Fetter) CLW at Anthony Carter on 4/6/2009 Caruth Haven Court 5585 Caruth Haven Lane, Dallas, Dallas, TX, 75225 Sale Price: Adjusted Sale Price: Sale Date: Cap Rate: EGIM: Grantor: Grantee: Property Rights: Financing: Occupancy at sale: Private Pay Census: Medicaid Census: Effective Gross Income: Operating Expenses: NOI: Exp per Capacity: SALE DATA Senior Housing Partners II, LP Cornerstone Real Estate Funds (REIT) Fee Simple Cash to Seller 91% 100% --$6,307,692 $4,647,192 $1,660,500 $51,068 Year Opened: Major Renovation: Gross Building Area: Number of Buildings: Number of Stories: Elevators: Construction: Quality: Condition: Parking Garage: Parking Spaces: PROPERTY MIX Level IL AL ALZ SN HPL Total Capacity Capacity --91 units ------91 Land Area: Description: Improvements: Parcel / Legal: Proposed Use: Zoning: KEY INDICATORS $20,500,000 Price per Capacity: --Price per Acre: 1/2009 Price per SF: 8.10% Time on Market: 3.25 Exp as Percent of EGI: $225,275 $9,255,079 $212.47 --73.67% PHYSICAL PLANT DATA 1999 --74,647 ------Wood Frame --------LAND DATA 2.22 Acres Level; Irregularly shaped; not in a flood zone --005450000P0040000 --PD REMARKS: This is high quality, three story assisted living residence located within an exclusive area (Highland Park) of Dallas. The property was sold by 12 Oaks Management to Prudential in 2003 for $12,950,000. Since the previous sale, NOI has been increased approximately 10% and the previous sale had a substantially higher cap rate at 11.24%. Based on the paired sales, the value has appreciated 8.13% annually or 46% aggregately. Throughout the previous sale and the current sale, 12 Oaks continues to manage the property. Although the subject has 91 units, it is licensed for 95 beds. Thus, this leaves the option to add four second residents. IMPROVED SALE #4 Record ID: Property Type: Name: Address: 8053918 --- Verified with: By: Buyer representative Scott A. McCorvie on 1/12/2009 Adobe House 750 North McDowell Boulevard, Petaluma, Sonoma, CA, 94954 Sale Price: Adjusted Sale Price: Sale Date: Cap Rate: EGIM: Grantor: Grantee: Property Rights: Financing: Occupancy at sale: Private Pay Census: Medicaid Census: Effective Gross Income: Operating Expenses: NOI: Exp per Capacity: SALE DATA Adobe House, LLC Wilkinson 1031, LLC Fee Simple cash equivalent 75% 100% --$2,973,331 $1,537,473 $1,435,858 $38,437 Year Opened: Major Renovation: Gross Building Area: Number of Buildings: Number of Stories: Elevators: Construction: Quality: Condition: Parking Garage: Parking Spaces: PROPERTY MIX Level IL AL ALZ SN HPL Total Capacity Capacity ----40 units ----40 Land Area: Description: Improvements: Parcel / Legal: Proposed Use: Zoning: KEY INDICATORS $14,540,000 Price per Capacity: --Price per Acre: 12/2008 Price per SF: 9.88% Time on Market: 4.89 Exp as Percent of EGI: $363,500 $8,654,762 $198.69 --51.71% PHYSICAL PLANT DATA 1996 --23,022 ------Wood Frame --------LAND DATA 1.68 Acres ----137-061-038 --R-5 REMARKS: This residence is went under contract in May 2008 and was able to close in December 2008. The total purchase price $14,540,000 is allocated as $14,440,000 in real estate and $100,000 in personal property. The financial analysis includes the 2008 annualized performance with a 5% management fee and $300 per unit in replacement reserves. 4 IMPROVED SALE #5 Record ID: Property Type: Name: Address: 8053453 --Prestonwood Court 7001 West Plano Parkway, Plano, Denton, TX, 75093 Verified with: By: Third Party Appraiser Anthony Carter on 11/21/2008 Sale Price: Adjusted Sale Price: Sale Date: Cap Rate: EGIM: Grantor: Grantee: Property Rights: Financing: Occupancy at sale: Private Pay Census: Medicaid Census: Effective Gross Income: Operating Expenses: NOI: Exp per Capacity: SALE DATA Prestonwood Court LTD Aureus Group, LLC Fee Simple --90% 100% --$7,231,920 $4,958,320 $2,273,600 $39,986 Year Opened: Major Renovation: Gross Building Area: Number of Buildings: Number of Stories: Elevators: Construction: Quality: Condition: Parking Garage: Parking Spaces: PROPERTY MIX Level IL AL ALZ SN HPL Total Capacity KEY INDICATORS $29,000,000 Price per Capacity: --Price per Acre: 3/2008 Price per SF: 7.84% Time on Market: 4.01 Exp as Percent of EGI: PHYSICAL PLANT DATA 2006 --117,412 ------Steel Frame --------LAND DATA Capacity --124 units ------124 Land Area: Description: Improvements: Parcel / Legal: Proposed Use: Zoning: 3.88 Acres ----257359 ----- REMARKS: The expenses above include a 5% management fee and $300 per unit for reserves The revenue and expenses reflect the buyers Year 1 proforma. $233,871 $7,482,519 $171.78 --68.56% HEALTHTRUST Land Sales ADDENDA HEALTHTRUST Demographic Data ADDENDA Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census Population by Age Total Population Age 55 - 59 Age 60 - 64 Age 65 - 69 Age 70 - 74 Age 75 - 79 Age 80 - 84 Age 85 and over % 142,630 6,146 7,039 8,780 10,677 11,498 9,245 8,674 Age 55 and over Age 65 and over 62,060 48,875 Total Population, Male Age 55 - 59 Age 60 - 64 Age 65 - 69 Age 70 - 74 Age 75 - 79 Age 80 - 84 Age 85 and over 2009 Estimate 4.31% 4.94% 6.16% 7.49% 8.06% 6.48% 6.08% 195,339 7,885 9,536 10,364 10,146 10,786 9,535 10,492 43.51% 34.27% 68,744 51,323 66,137 2,586 2,961 3,885 4,640 4,844 3,764 3,013 Age 55 and over Age 65 and over % 2014 Projection % 4.04% 4.88% 5.31% 5.19% 5.52% 4.88% 5.37% 225,422 9,140 9,752 12,211 11,551 11,139 9,566 11,571 4.05% 4.33% 5.42% 5.12% 4.94% 4.24% 5.13% 35.19% 26.27% 74,930 56,038 33.24% 24.86% 3.91% 4.48% 5.87% 7.02% 7.32% 5.69% 4.56% 93,042 3,499 4,062 4,624 4,381 4,554 3,908 3,965 3.76% 4.37% 4.97% 4.71% 4.89% 4.20% 4.26% 107,790 4,418 4,071 5,346 4,968 4,657 3,812 4,274 4.10% 3.78% 4.96% 4.61% 4.32% 3.54% 3.97% 25,694 20,146 38.85% 30.46% 28,993 21,432 31.16% 23.03% 31,546 23,057 29.27% 21.39% Total Population, Female Age 55 - 59 Age 60 - 64 Age 65 - 69 Age 70 - 74 Age 75 - 79 Age 80 - 84 Age 85 and over 76,492 3,560 4,077 4,895 6,037 6,655 5,481 5,661 4.65% 5.33% 6.40% 7.89% 8.70% 7.17% 7.40% 102,297 4,386 5,475 5,740 5,765 6,232 5,627 6,527 4.29% 5.35% 5.61% 5.64% 6.09% 5.50% 6.38% 117,631 4,722 5,681 6,865 6,583 6,482 5,754 7,297 4.01% 4.83% 5.84% 5.60% 5.51% 4.89% 6.20% Age 55 and over Age 65 and over 36,366 28,729 47.54% 37.56% 39,751 29,891 38.86% 29.22% 43,384 32,981 36.88% 28.04% Prepared On: Fri Jul 30, 2010 Page 1 Of 11 Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: © 2010 The Nielsen Company. All rights reserved. Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census Population by Single Race Classification White Alone Age 65 and over Black or African American Alone Age 65 and over American Indian and Alaska Native Alone Age 65 and over Asian Alone Age 65 and over Native Hawaiian and Other Pacific Islander Alone Age 65 and over Some Other Race Alone Age 65 and over Two or More Races Age 65 and over 123,102 47,753 3,688 320 781 50 1,855 162 132 21 10,171 360 2,900 209 2000 Census Population by Hispanic or Latino Hispanic or Latino Age 65 and over Not Hispanic or Latino Age 65 and over Prepared On: Fri Jul 30, 2010 % 2 Of 11 8.68% 6.40% 8.73% 15.91% 3.54% 7.21% % 24,688 1,187 117,942 47,688 Page 38.79% 4.81% 40.43% 2009 Estimate 157,847 48,851 8,328 712 1,600 94 3,730 348 256 31 17,054 810 6,525 477 2009 Estimate 48,485 2,732 146,854 48,591 % 2014 Projection 176,438 52,506 11,723 1,041 2,147 159 5,022 511 355 45 20,749 1,106 8,987 670 30.95% 8.55% 5.88% 9.33% 12.11% 4.75% 7.31% % 2014 Projection 5.63% 33.09% Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: © 2010 The Nielsen Company. All rights reserved. 63,328 3,989 162,094 52,049 % 29.76% 8.88% 7.41% 10.18% 12.68% 5.33% 7.46% % 6.30% 32.11% Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census Household Income by Age of Householder Householder Age 55 - 59 Income less than $10,000 Income $10,000 - $14,999 Income $15,000 - $19,999 Income $20,000 - $24,999 Income $25,000 - $29,999 Income $30,000 - $34,999 Income $35,000 - $39,999 Income $40,000 - $44,999 Income $45,000 - $49,999 Income $50,000 - $59,999 Income $60,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $124,999 Income $125,000 - $149,999 Income $150,000 - $199,999 Income $200,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more 3,869 277 180 182 245 272 203 262 241 231 405 503 471 204 77 78 21 11 5 Median Household Income 7.16% 4.65% 4.70% 6.33% 7.03% 5.25% 6.77% 6.23% 5.97% 10.47% 13.00% 12.17% 5.27% 1.99% 2.02% 0.54% 0.28% 0.13% $46,562 Householder Age 60 - 64 Income less than $10,000 Income $10,000 - $14,999 Income $15,000 - $19,999 Income $20,000 - $24,999 Income $25,000 - $29,999 Income $30,000 - $34,999 Income $35,000 - $39,999 Income $40,000 - $44,999 Income $45,000 - $49,999 Income $50,000 - $59,999 Income $60,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $124,999 Income $125,000 - $149,999 Income $150,000 - $199,999 Income $200,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more 3,227 249 164 167 218 238 172 229 196 204 318 400 364 159 60 62 16 9 3 Median Household Income Prepared On: Fri Jul 30, 2010 % 3 Of 11 4,267 225 128 131 132 180 191 207 218 153 362 815 592 470 215 135 63 37 14 % 2014 Projection 5.27% 3.00% 3.07% 3.09% 4.22% 4.48% 4.85% 5.11% 3.59% 8.48% 19.10% 13.87% 11.01% 5.04% 3.16% 1.48% 0.87% 0.33% $63,814 7.72% 5.08% 5.18% 6.76% 7.38% 5.33% 7.10% 6.07% 6.32% 9.85% 12.40% 11.28% 4.93% 1.86% 1.92% 0.50% 0.28% 0.09% $44,505 Page 2009 Estimate 5,166 325 183 210 200 254 299 285 277 201 485 872 648 484 204 131 71 28 11 4.88% 2.73% 2.83% 2.79% 3.34% 3.95% 4.06% 4.55% 4.49% 7.27% 14.45% 18.01% 10.94% 7.01% 4.77% 1.86% 1.56% 0.47% $69,444 6.29% 3.54% 4.07% 3.87% 4.92% 5.79% 5.52% 5.36% 3.89% 9.39% 16.88% 12.54% 9.37% 3.95% 2.54% 1.37% 0.54% 0.21% $57,212 Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: 4,880 238 133 138 136 163 193 198 222 219 355 705 879 534 342 233 91 76 23 % © 2010 The Nielsen Company. All rights reserved. 5,325 289 166 163 185 201 237 271 277 244 404 805 872 511 338 205 79 58 19 $64,197 5.43% 3.12% 3.06% 3.47% 3.77% 4.45% 5.09% 5.20% 4.58% 7.59% 15.12% 16.38% 9.60% 6.35% 3.85% 1.48% 1.09% 0.36% Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census Household Income by Age of Householder Householder Age 65 - 69 Income less than $10,000 Income $10,000 - $14,999 Income $15,000 - $19,999 Income $20,000 - $24,999 Income $25,000 - $29,999 Income $30,000 - $34,999 Income $35,000 - $39,999 Income $40,000 - $44,999 Income $45,000 - $49,999 Income $50,000 - $59,999 Income $60,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $124,999 Income $125,000 - $149,999 Income $150,000 - $199,999 Income $200,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more 6,040 381 430 594 565 623 617 552 407 339 506 374 380 123 48 65 18 14 4 Median Household Income 6.31% 7.12% 9.83% 9.35% 10.31% 10.22% 9.14% 6.74% 5.61% 8.38% 6.19% 6.29% 2.04% 0.79% 1.08% 0.30% 0.23% 0.07% $33,459 Householder Age 70 - 74 Income less than $10,000 Income $10,000 - $14,999 Income $15,000 - $19,999 Income $20,000 - $24,999 Income $25,000 - $29,999 Income $30,000 - $34,999 Income $35,000 - $39,999 Income $40,000 - $44,999 Income $45,000 - $49,999 Income $50,000 - $59,999 Income $60,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $124,999 Income $125,000 - $149,999 Income $150,000 - $199,999 Income $200,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more 5,647 377 433 568 547 598 588 512 363 304 438 331 330 115 43 66 18 13 5 Median Household Income Prepared On: Fri Jul 30, 2010 % 4 Of 11 5,898 350 289 392 442 484 460 437 474 362 585 634 494 252 103 62 44 21 12 % 2014 Projection 5.93% 4.90% 6.65% 7.49% 8.21% 7.80% 7.41% 8.04% 6.14% 9.92% 10.75% 8.38% 4.27% 1.75% 1.05% 0.75% 0.36% 0.20% $41,000 6.68% 7.67% 10.06% 9.69% 10.59% 10.41% 9.07% 6.43% 5.38% 7.76% 5.86% 5.84% 2.04% 0.76% 1.17% 0.32% 0.23% 0.09% $32,564 Page 2009 Estimate 5,857 362 305 441 492 485 473 456 471 361 576 538 417 221 111 62 45 29 12 5.63% 4.37% 5.85% 6.21% 7.05% 7.40% 6.89% 6.63% 6.53% 9.74% 11.16% 11.46% 5.30% 2.35% 1.61% 0.93% 0.58% 0.32% $44,973 6.18% 5.21% 7.53% 8.40% 8.28% 8.08% 7.79% 8.04% 6.16% 9.83% 9.19% 7.12% 3.77% 1.90% 1.06% 0.77% 0.50% 0.20% $39,059 Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: 6,908 389 302 404 429 487 511 476 458 451 673 771 792 366 162 111 64 40 22 % © 2010 The Nielsen Company. All rights reserved. 6,599 391 295 414 479 490 499 463 461 457 653 658 579 345 173 113 58 50 20 $42,906 5.93% 4.47% 6.27% 7.26% 7.43% 7.56% 7.02% 6.99% 6.93% 9.90% 9.97% 8.77% 5.23% 2.62% 1.71% 0.88% 0.76% 0.30% Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census Household Income by Age of Householder Householder Age 75 - 79 Income less than $10,000 Income $10,000 - $14,999 Income $15,000 - $19,999 Income $20,000 - $24,999 Income $25,000 - $29,999 Income $30,000 - $34,999 Income $35,000 - $39,999 Income $40,000 - $44,999 Income $45,000 - $49,999 Income $50,000 - $59,999 Income $60,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $124,999 Income $125,000 - $149,999 Income $150,000 - $199,999 Income $200,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more 9,278 646 911 1,000 928 918 723 661 584 427 840 564 496 262 82 91 71 55 19 Median Household Income 6.96% 9.82% 10.78% 10.00% 9.89% 7.79% 7.12% 6.29% 4.60% 9.05% 6.08% 5.35% 2.82% 0.88% 0.98% 0.77% 0.59% 0.20% $31,633 Householder Age 80 - 84 Income less than $10,000 Income $10,000 - $14,999 Income $15,000 - $19,999 Income $20,000 - $24,999 Income $25,000 - $29,999 Income $30,000 - $34,999 Income $35,000 - $39,999 Income $40,000 - $44,999 Income $45,000 - $49,999 Income $50,000 - $59,999 Income $60,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $124,999 Income $125,000 - $149,999 Income $150,000 - $199,999 Income $200,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more 6,234 512 693 754 650 600 474 427 375 269 493 340 307 141 55 63 40 32 9 Median Household Income Prepared On: Fri Jul 30, 2010 % 5 Of 11 6,820 446 421 601 634 594 560 510 451 371 562 626 477 266 126 77 31 50 17 % 2014 Projection 6.54% 6.17% 8.81% 9.30% 8.71% 8.21% 7.48% 6.61% 5.44% 8.24% 9.18% 6.99% 3.90% 1.85% 1.13% 0.45% 0.73% 0.25% $36,512 8.21% 11.12% 12.09% 10.43% 9.62% 7.60% 6.85% 6.02% 4.32% 7.91% 5.45% 4.92% 2.26% 0.88% 1.01% 0.64% 0.51% 0.14% $29,230 Page 2009 Estimate 6,349 455 431 617 629 568 514 444 418 325 512 533 409 234 95 59 38 51 17 6.00% 5.06% 7.49% 8.58% 8.29% 7.88% 7.52% 6.58% 5.59% 8.48% 9.64% 8.59% 4.73% 2.35% 1.52% 0.57% 0.79% 0.33% $39,457 7.17% 6.79% 9.72% 9.91% 8.95% 8.10% 6.99% 6.58% 5.12% 8.06% 8.40% 6.44% 3.69% 1.50% 0.93% 0.60% 0.80% 0.27% $34,612 Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: 6,971 418 353 522 598 578 549 524 459 390 591 672 599 330 164 106 40 55 23 % © 2010 The Nielsen Company. All rights reserved. 6,325 431 374 519 571 559 480 445 412 360 528 580 482 275 139 67 30 57 15 $37,562 6.81% 5.91% 8.21% 9.03% 8.84% 7.59% 7.04% 6.51% 5.69% 8.35% 9.17% 7.62% 4.35% 2.20% 1.06% 0.47% 0.90% 0.24% Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census Household Income by Age of Householder Householder Age 85 and over Income less than $10,000 Income $10,000 - $14,999 Income $15,000 - $19,999 Income $20,000 - $24,999 Income $25,000 - $29,999 Income $30,000 - $34,999 Income $35,000 - $39,999 Income $40,000 - $44,999 Income $45,000 - $49,999 Income $50,000 - $59,999 Income $60,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $124,999 Income $125,000 - $149,999 Income $150,000 - $199,999 Income $200,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more % 4,258 448 580 539 442 409 307 272 202 178 319 197 165 72 40 41 25 15 6 Median Household Income 10.52% 13.62% 12.66% 10.38% 9.61% 7.21% 6.39% 4.74% 4.18% 7.49% 4.63% 3.88% 1.69% 0.94% 0.96% 0.59% 0.35% 0.14% $26,463 2000 Census Households by Household Income Total Households Income less than $15,000 Income $15,000 - $24,999 Income $25,000 - $34,999 Income $35,000 - $49,999 Income $50,000 - $74,999 Income $75,000 - $99,999 Income $100,000 - $149,999 Income $150,000 - $249,999 Income $250,000 - $499,999 Income $500,000 or more 6,798 586 595 760 666 578 532 442 409 357 490 551 359 181 84 77 51 58 23 % 2014 Projection 7,354 599 536 695 705 617 553 501 447 389 585 608 491 249 123 99 54 71 31 8.62% 8.75% 11.18% 9.80% 8.50% 7.83% 6.50% 6.02% 5.25% 7.21% 8.11% 5.28% 2.66% 1.24% 1.13% 0.75% 0.85% 0.34% $32,017 % 61,482 7,603 9,301 9,530 11,894 12,496 6,111 3,158 1,074 240 74 2009 Estimate 12.37% 15.13% 15.50% 19.35% 20.32% 9.94% 5.14% 1.75% 0.39% 0.12% 2009 Estimate 76,905 6,748 8,231 9,160 13,570 18,130 10,290 8,169 1,895 536 175 % 2014 Projection 8.77% 10.70% 11.91% 17.65% 23.57% 13.38% 10.62% 2.46% 0.70% 0.23% 86,340 6,701 7,901 8,811 14,065 19,569 13,068 12,067 3,136 740 282 $49,610 $61,552 $68,478 Median Household Income $40,431 $51,025 $57,272 Per Capita Income $21,722 $24,481 $26,445 Page 6 Of 11 Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: 8.15% 7.29% 9.45% 9.59% 8.39% 7.52% 6.81% 6.08% 5.29% 7.95% 8.27% 6.68% 3.39% 1.67% 1.35% 0.73% 0.97% 0.42% $34,738 Average Household Income Prepared On: Fri Jul 30, 2010 % © 2010 The Nielsen Company. All rights reserved. % 7.76% 9.15% 10.21% 16.29% 22.67% 15.14% 13.98% 3.63% 0.86% 0.33% Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census All Owner-Occupied Housing Unit Values Total All Owner-Occupied Housing Unit Values Value Less than $20,000 Value $20,000 - $39,999 Value $40,000 - $59,999 Value $60,000 - $79,999 Value $80,000 - $99,999 Value $100,000 - $149,999 Value $150,000 - $199,999 Value $200,000 - $299,999 Value $300,000 - $399,999 Value $400,000 - $499,999 Value $500,000 - $749,999 Value $750,000 - $999,999 Value $1,000,000 or more % 50,462 1,009 1,763 3,181 8,039 11,405 19,242 4,243 1,299 179 25 29 10 38 Median All Owner-Occupied Housing Unit Value 2.00% 3.49% 6.30% 15.93% 22.60% 38.13% 8.41% 2.57% 0.35% 0.05% 0.06% 0.02% 0.08% $99,708 2000 Census Group Quarters by Population Type* 1,533 4 1,503 27 Noninstitutionalized 1,275 0.26% 98.04% 1.76% 2000 Census Tenure of Occupied Housing Units Owner Occupied Renter Occupied Page 7 Of 11 2014 Projection 70,468 477 1,009 1,196 2,094 2,611 14,291 19,236 23,526 4,016 1,045 620 161 187 0.85% 1.66% 2.15% 3.47% 5.34% 26.85% 29.08% 26.13% 2.72% 0.88% 0.53% 0.12% 0.22% 2009 Estimate 1,483 4 1,457 23 % 2014 Projection 1,507 4 1,482 22 0.27% 98.25% 1.55% 1,244 1,260 2014 Projection 62,845 14,060 Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: % 0.68% 1.43% 1.70% 2.97% 3.71% 20.28% 27.30% 33.39% 5.70% 1.48% 0.88% 0.23% 0.27% $185,237 2009 Estimate 50,458 10,886 Prepared On: Fri Jul 30, 2010 62,845 534 1,044 1,353 2,182 3,354 16,875 18,278 16,421 1,707 551 336 73 136 % $166,632 % Institutionalized: Correctional Institutions Nursing Homes Other Institutions 2009 Estimate © 2010 The Nielsen Company. All rights reserved. 70,468 15,872 % 0.27% 98.34% 1.46% Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Tenure By Age of Householder Total % Total Households Owner Occupied Householder 55 to 59 Years Householder 60 to 64 Years Householder 65 to 74 Years Householder 75 to 84 Years Householder 85 and over 61,369 50,462 2,923 3,307 10,608 11,912 4,350 5.79% 6.55% 21.02% 23.61% 8.62% Renter Occupied Householder 55 to 59 Years Householder 60 to 64 Years Householder 65 to 74 Years Householder 75 to 84 Years Householder 85 and over 10,907 353 436 976 1,939 1,823 3.24% 4.00% 8.95% 17.78% 16.71% 2000 Pop 65 and over by HH Type and Relationship Total Total for Pop 65 and over In Households: In Family Households: Householder Male Female Spouse Parent Other Relatives Nonrelatives In Non-Family Households: Male householder Living Alone Not Living Alone Female Householder Living Alone Not Living Alone Nonrelatives In Group Quarters: Institutionalized population Noninstitutionalized population Prepared On: Fri Jul 30, 2010 Page 8 Of 11 % 48,968 46,977 31,514 16,435 14,745 1,690 13,675 666 647 91 15,462 3,585 3,314 271 11,436 11,196 240 441 64.36% 33.56% 30.11% 3.45% 27.93% 1.36% 1.32% 0.19% 31.58% 7.32% 6.77% 0.55% 23.35% 22.86% 0.49% 0.90% 1,992 1,476 515 3.01% 1.05% Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: © 2010 The Nielsen Company. All rights reserved. Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Mobility and Disability Civilian Noninstitutionalized Persons Age 16 and over Totals Total Disability Sensory Disability Physical Disability Mental Disability Self-Care Disability Go-Outside-Home Disability 45,064 7,288 15,661 6,279 4,151 11,685 2000 Mobility and Disability Civilian Noninstitutionalized Persons Age 16 and over Totals Disability by Sex by Age Male With a Disability No Disability Female With a Disability No Disability Totals Total Units With Telephone No Telephone 9 Of 11 44.97% 12.76% 32.21% 55.03% 15.28% 39.75% % 61,369 60,742 627 Page 16.17% 34.75% 13.93% 9.21% 25.93% % 113,162 50,890 14,436 36,455 62,272 17,291 44,981 2000 Occupied Housing Units Prepared On: Fri Jul 30, 2010 % 98.98% 1.02% 65 Yrs And Over 31,660 5,854 11,435 3,775 3,008 7,589 65 - 74 Yrs 19,268 8,462 2,563 5,899 10,806 2,721 8,085 65 - 74 Yrs 11,584 11,513 72 % 18.49% 36.12% 11.92% 9.50% 23.97% % 43.92% 13.30% 30.62% 56.08% 14.12% 41.96% % 99.39% 0.62% Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: © 2010 The Nielsen Company. All rights reserved. 75 Yrs And Over 28,224 11,430 5,061 6,369 16,794 7,561 9,233 75 Yrs And Over 20,025 19,935 90 % 40.50% 17.93% 22.57% 59.50% 26.79% 32.71% % 99.55% 0.45% Senior Life 2009 Radius 1: 12030 N 113TH AVE, YOUNGTOWN, AZ 85363-1241, 0.00 - 5.00 Miles, Total 2000 Census Poverty Status in 1999 Families By Household Type by Age of Householder Totals Population with Known Poverty Status Married-Couple Families In other Families Male householder, no wife present Female householder, no husband present Unrelated individuals Income At or Above Poverty Level Married-Couple Families In other Families Male householder, no wife present Female householder, no husband present Unrelated individuals Income Below Poverty Level Married-Couple Families In other Families Male householder, no wife present Female householder, no husband present Unrelated individuals Prepared On: Fri Jul 30, 2010 % 140,007 97,510 17,706 5,904 11,802 24,791 130,523 94,058 14,704 4,925 9,778 21,761 9,484 3,451 3,002 978 2,024 3,031 Page 10 Of 11 69.65% 12.65% 4.22% 8.43% 17.71% 93.23% 67.18% 10.50% 3.52% 6.98% 15.54% 6.77% 2.46% 2.14% 0.70% 1.45% 2.16% 65 - 74 Yrs 19,268 13,823 788 148 640 4,656 18,461 13,504 745 135 610 4,211 808 319 43 13 30 445 % 71.74% 4.09% 0.77% 3.32% 24.16% 95.81% 70.09% 3.87% 0.70% 3.17% 21.85% 4.19% 1.66% 0.22% 0.07% 0.16% 2.31% Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: © 2010 The Nielsen Company. All rights reserved. 75 Yrs And Over 28,224 15,743 1,160 332 828 11,321 26,546 15,381 1,078 297 781 10,087 1,678 361 82 35 47 1,235 % 55.78% 4.11% 1.18% 2.93% 40.11% 94.05% 54.50% 3.82% 1.05% 2.77% 35.74% 5.95% 1.28% 0.29% 0.12% 0.17% 4.38% Senior Life 2009 Appendix: Area Listing Area Name: Type: Radius 1 Reporting Detail: Aggregate Reporting Level: Block Group Radius Definition: 12030 N 113TH AVE Latitude/Longitude 33.593614 YOUNGTOWN, AZ 85363-1241 Radius 0.00 Project Information: Site: 1 Order Number: 969045949 Prepared On: Fri Jul 30, 2010 Page 11 Of 11 Prepared By: Nielsen Solution Center 1 800 866 6511 Prepared For: © 2010 The Nielsen Company. All rights reserved. - -112.303028 5.00 HEALTHTRUST Engagement Letter ADDENDA HEALTHTRUST Appraiser Qualifications ADDENDA ALAN C. PLUSH, MAI EMPLOYMENT HEALTHTRUST LLC – February 2003 to present Sarasota, Florida President, Senior Partner (Healthcare and Senior Housing Valuation) PRICEWATERHOUSECOOPERS, LLP – 1999 to February, 2003 Sarasota, Florida Director (Senior Advisory Services, Global Real Estate Valuation Group) GULF/ATLANTIC VALUATION SERVICES, INC. – 1994 to 1999 Sarasota, Florida President (Healthcare & Retirement Valuation, Market Studies, and Feasibility Reports) PARDUE, HEID, CHURCH, SMITH AND WALLER OF SARASOTA, INC. – 1992 to 1994 Sarasota, Florida Managing Partner (Healthcare & Retirement Valuation, Market Studies, and Feasibility Reports) PARDUE, HEID, CHURCH, SMITH AND WALLER OF TAMPA, INC. – 1991 to 1992 Tampa, Florida Senior Appraiser (Healthcare & Retirement Valuation) SMITH PARKE AND COMPANY – 1984 to 1990 Sarasota, Florida Vice President (Commercial & Healthcare Real Estate Valuation) EDUCATION UNIVERSITY OF FLORIDA Bachelor of Science, 1981 Business Administration MANATEE JUNIOR COLLEGE AA Degree APPRAISAL INSTITUTE Standards of Professional Practice Principles of Real Estate Appraising Basic Valuation Procedures Capitalization Theory & Techniques ‐ Part A Capitalization Theory & Techniques ‐ Part B Case Studies in Real Estate Valuation Report Writing and Valuation Analysis Demonstration Appraisal Report Comprehensive Examination CONTINUING EDUCATION Online Analyzing Operating Expenses (2010) Office Building Valuation (2008) FHA and the Appraisal Process (2008) Forecasting Revenue (2008) Florida State Law Update for Real Estate Appraisers (2004, 2006, 2008) Professional Standards USPAP Update, Core Law for Appraisers (1994‐2007) Business Practice and Ethics (2006) Online Appraising From Blueprints and Specifications (2006) Online Analyzing Operating Expenses (2006) Evaluating Commercial Construction (2006) Online Appraisal of Nursing Facilities (2005) 15‐hour National USPAP Course (2003, 2004) Analyzing Commercial Lease Causes (2002) Standards of Prof. Practice, Part C (1999, 2001) Regression Analysis in Appraisal Practice (2001) Real Estate Value Cycles (2001) Advanced Applications (2000) Litigation Valuation Overview (1998) Appraising From Blue Prints & Specifications (1998) Understanding and Using DCF Software (1997) Appraisal of Nursing Facilities (1996) Standards of Professional Practice, Part A & B (1996) Law/Regulations, Richmond Association of REALTORS (1995) National Health Lawyers Association Annual Review (1994) Maximizing the Value of an Appraisal Practice (1994) CERTIFICATIONS & AFFILIATIONS State‐Certified General Appraiser ‐ G00502 (Alabama) State‐Certified General Appraiser ‐ 31350 (Arizona) State‐Certified General Appraiser ‐ CG1371N (Arkansas) State‐Certified General Appraiser ‐ AG027998 (California) State‐Certified General Appraiser ‐ CG40023432 (Colorado) State‐Certified General Appraiser – RCG.0000503 (Connecticut) State‐Certified General Appraiser ‐ RZ 0000566 (Florida) State‐Certified General Appraiser ‐ 3913 (Georgia) State‐Certified General Appraiser ‐ 153.0001571 (Illinois) State‐Certified General Appraiser ‐ CG49400124 (Indiana) State‐Certified General Appraiser ‐ 002055 (Kentucky) State‐Certified General Appraiser ‐ CG00000688 (Maine) State‐Certified General Appraiser ‐ 10806 (Maryland) State‐Certified General Appraiser ‐ 2946 (Massachusetts) State‐Certified General Appraiser ‐ 1201003568 (Michigan) State‐Certified General Appraiser ‐ 20076706 (Minnesota) State‐Certified General Appraiser ‐ GA‐468 (Mississippi) State‐Certified General Appraiser ‐ 589RAG (Montana) State‐Certified General Appraiser ‐ CG970189R (Nebraska) State‐Certified General Appraiser ‐ NHCG313 (New Hampshire) State‐Certified General Appraiser ‐ 42RG00139300 (New Jersey) State‐Certified General Appraiser ‐ 46000010343 (New York) State‐Certified General Appraiser ‐ A5418 (North Carolina) State‐Certified General Appraiser ‐ 000398459 (Ohio) State‐Certified General Appraiser ‐ GA‐001255‐L (Pennsylvania) State‐Certified General Appraiser ‐ A00681G (Rhode Island) State‐Certified General Appraiser‐CG6708 (South Carolina) State‐Certified General Appraiser ‐ TX‐1326778‐G (Texas) State‐Certified General Appraiser ‐ 4001‐003762 (Virginia) State‐Certified General Appraiser ‐ 1100985 (Washington) State of Florida Building Contractor Class B (Inactive) CB C035068 MAI Alan C. Plush, MAI, Member, Appraisal Institute OWNERSHIP ACTIVITIES Proformance Senior Living – 9 assets, sold all in 2006 Rittenhouse Senior Living – 9 assets currently owned, contracted for purchase or under development BOARD SEATS Investment Committee, SHP Investments (on behalf of CalPers Investment Fund), 2002‐2007. American Seniors Housing Association (ASHA), 2001‐present. SPEAKING ENGAGEMENTS – BANKS Regions Bank Private Bank PNC Bank/ARCS GE Healthcare Financial Services HSH Nordbank Fannie Mae DUS Lenders Conference Fleet Bank, Albany, New York Bank United Annual Correspondents Conference, Dallas, Texas Key Bank, Cleveland, Ohio Bank of America Healthcare Task Force, Chicago, Illinois NationsBank, Baltimore, Maryland Prudential Life Insurance/Insignia Mortgage, Atlanta, Georgia LECTURE ASSIGNMENTS & SEMINARS U.S. Department of Housing and Urban Development, Chicago, IL, 2010 Attendee: Lean Section 232 Lender Underwriting Training National Investment Conference (NIC), San Diego, CA , 2010 Speaker, “Practical Realities of HUD Lean & Underwriting & Valuation of Assets”: Stabilized Properties National Medicaid/Medicare Conference, Sarasota, FL 1994 to 1999, 2004 ‐ Present Founding Member/Speaker/Developer/Co‐Sponsor (with GMAC Commercial Mortgage & Capstone Capital) National Investment Conference (NIC), Washington DC, 1991 ‐ Present Attendee, Contributor, Sponsor 2b Alive Mexico Independent and Assisted Living Industry Summit & Expo, La Jolla, CA, 2008 Speaker, “Current Trends in the valuation of Healthcare and Senior Housing Assets” N.C Healthcare Association, 2008 Speaker, “Market Trends for Healthcare and Senior Housing Assets” NIC Western Regional Conference, Las Vegas, NV, 2008 Speaker, “Current Valuation Trends in the Healthcare and Senior Housing Industry” International Association of Assessing Officers (IAAO) annual conferences, Miami Beach, FL, 2001 Speaker, “Valuation Issues for Assessment of Senior Housing and Healthcare Facilities” International Association of Assessing Officers, Florida Chapter, Clearwater, FL, 2001 Speaker, “Valuation Issues for Assessment of Senior Housing and Healthcare Facilities” Commercial Property News “Seniors Housing Symposium”, New York City, NY, 1999 – 2001 Co‐sponsor and presenter, “Market Trends in the Seniors Housing Industry” Information Management Network “Seniors Housing Finance Symposium”, New York City, NY, 1998 ‐1999 Co‐sponsor and presenter, “Market Trends in the Seniors Housing Industry” National Association of Real Estate Financial Intermediaries Annual Meeting, 1997, 1999 Speaker, “Transaction Overview and Unique Valuation Issues Associated with Congregate Properties” Massachusetts ALFA, Boston, MA, 1997 Speaker, “Development Trends in the Assisted Living Industry” Essex County Assessor’s Meeting, Danvers, MA, 1997 Speaker, “Valuation Techniques for Assisted Living Properties” Assisted Living Federation of America (ALFA) Spring Conference, Phoenix, AZ, 1997 Speaker, “The 1994‐1996 Transaction Survey of Congregate and Assisted Living Industries” Appraisal Institute, Boston Chapter, 1997 Attendee, “Healthcare and Retirement Property Appraisal Seminar” Plymouth County Assessor’s Meeting, Duxbury, MA, 1996 Speaker, “Assessing Healthcare and Retirement Properties” International Association of Assessing Officers (IAAO) annual conferences, Seattle, Washington, 1994 Speaker, “Methods Used to Appraise Healthcare and Retirement Properties” PUBLISHED ARTICLES Annual co author and contributor to The State of Seniors Housing, co published by ASHA, NIC, AAHSA Co‐author with ASHA of the annual survey of transactions and economic indicators, 2002‐Present. Co‐author with ASHA of the 2000 Seniors Housing absorption study. Co‐author with ALFA (Assisted Living Federation of America) and ASHA (American Seniors Housing Association) of the 1997, 1998 and 1999 annual survey of transactions and economic indicators. The Appraisal Journal, Appraisal Institute, July 1995 “USPAP Competency Provision and the Appraisal of Healthcare/Retirement Facilities” Force Financial, Quarterly Newsletter, 1995 “The Impact of Assisted Living on CCRCs” APPEARANCE AS AN EXPERT WITNESS SNF, District Court, Polk County, Iowa‐2009 CCRC, Tax appeal case, Atlanta, Georgia – 2008 SNF, Federal Bankruptcy Court, Tampa, Florida – 1999 IL/AL, Superior Court, Lansing, Michigan – prior to 2000 SNF, Circuit Court, Polk County, Florida – prior to 2000 Circuit Court, Duval County, Florida – prior to 2000 SPECIALIZED EXPERTISE & EXPERIENCE Mr. Plush has specialized exclusively in commercial real estate valuation throughout his career and property types he has appraised have included: condominiums, apartment complexes, single‐family subdivisions, golf courses and planned unit developments, vacant land, office buildings, and a variety of retail structures. He is currently the Senior Partner of HealthTrust, LLC, a specialty senior housing and healthcare appraisal and consulting firm. Mr. Plush oversees a staff of highly qualified appraisers at the Sarasota office and, further, has additional resources available from offices in Boston, Massachusetts, and Birmingham, Alabama. In late 1986, Mr. Plush began specializing in the appraisal of a large number of healthcare properties. With a foundation in the appraisal of adult congregate living facilities, his specialized expertise has grown substantially. The specialized service niche was created to satisfy the ever increasing demand for reliable and well‐documented healthcare/retirement valuations, market studies and feasibility reports, as well as market rent/lease analysis. Mr. Plush has overseen the growth of HealthTrust to include its four U.S. locations and an annual volume in excess of 1,000 healthcare and senior housing appraisals in addition to ownership, operations and brokerage activities. CORPORATE/INSTITUTIONAL CLIENTS SERVED Bank of America Citizens Bank Key Bank Merrill Lynch PNC Bank Marine Midland LaSalle Bank GMAC‐CM ‐ Healthcare MediTrust First NH Bank Capstone Capital Brookdale Living Senior Campus Living Banque Paribas Glaser Financial Goldman Sachs SIS Bank PRN Mortgage Peoples Heritage Bank AEW Capital Management Fremont Investment & Loan Manufacturers Bank Bancorp South Bank One Corp Signet Bank New York HFA USTrust SouthTrust Bank of Alabama Prudential Insurance UBS Warburg Pincus Bank of Ireland Norwest Bank Provident Bank of Maryland Dynex Healthcare Continental Wingate DLJ Archon Financial Holiday Retirement Balanced Care AMRESCO AmSouth Bank Zions First National Bank Wells Fargo Greystone & Co. HSBC Bank USA Fleet National Bank First Union M & T Bank Senior Lifestyles Riggs Bank of Wash. DC Emeritus Corporation CareMatrix BankBoston Heller Financial Bank United Credit Suisse First Boston PhyMatrix Berkshire Bank Sunrise Assisted Living Mercantile Safe Deposit Senior Campus Living Solomon Smith Barney Allfirst Mortgage Corp. Union Planters Capital Company of America KBC Bank of New York COLLEEN H. BLUMENTHAL, MAI EMPLOYMENT HEALTHTRUST LLC ‐ 2003 to Present Sarasota, Florida Managing Partner, Partner (Healthcare & Retirement Real Estate Valuation & Market Studies) PRICEWATERHOUSECOOPERS LLP ‐ 1999 to 2002 Sarasota, Florida Senior Manager (Healthcare & Retirement Real Estate Valuation & Market Studies) GULF/ATLANTIC VALUATION SERVICES, INC. – 1994 to 1999 Sarasota, Florida Vice President/Partner (Healthcare & Retirement Real Estate Valuation & Market Studies) PARDUE, HEID, CHURCH, SMITH AND WALLER OF SARASOTA, INC. – 1992 to 1994 Sarasota, Florida Senior Healthcare Appraiser (Healthcare & Retirement Real Estate Valuation & Market Studies) E. GORDON TUCKER ASSOCIATES, INC. – 1990 to 1992 Sarasota, Florida Appraiser (Real Estate Valuation) PANNELL KERR FORSTER – 1988 to 1990 Miami, Florida Consultant, Real Estate Advisory Services –1989 to 1990 Consultant, Management Advisory Services – 1988 to 1989 (Hospitality Valuation & Market Studies) PANNELL KERR FORSTER – 1987 Denver, Colorado Research Assistant (Hospitality Valuation & Market Studies) EDUCATION UNIVERSITY OF DENVER Bachelor of Science Degree, 1987 Business Administration AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS AND APPRAISAL INSITUTE Case Studies in Real Estate Valuation (1992&8) Report Writing (1993) Standards of Professional Practice (1991, 2000, 2003) Capitalization Theory and Techniques, Part B (1992) Real Estate Principles (1990) Basic Valuation (1990) Capitalization Theory and Techniques, Part A (1990) CONTINUING EDUCATION 7‐Hour USPAP Update (1994,96,98,2000,02,04,05,06,07,08) Florida State Law, Tampa, FL (2007) 15‐Hour USPAP, Denver, CO (2003) & Miami, FL (2006) Business Practices and Ethics, Orlando, FL (2005) Condemnation Appraising (2005) Separating Real and Personal Property from Intangible Business Assets (2003) Third Party MAP Technical Training, Jacksonville, FL (2000) Third Party LEAN Technical Training, Seattle, WA (2008) Partial Interests (1999) Special Purpose Properties (1996) Highest and Best Use Analysis (1994) General Demo Appraisal Report Writing (2006) Uniform Standards for Federal Land Acquisitions (2006) CERTIFICATIONS & AFFILIATIONS State‐Certified General Appraiser ‐ G00833 (Alabama) State‐Certified General Appraiser ‐ 31276 (Arizona) State‐Certified General Appraiser ‐ AG043383 (California) State‐Certified General Appraiser ‐ CG100026253 (Colorado) State‐Certified General Appraiser ‐ X1‐0000402 (Delaware) State‐Certified General Appraiser ‐ RZ0001722 (Florida) State‐Certified General Appraiser ‐ 299798 (Georgia) State‐Certified General Appraiser ‐ CG40600349 (Indiana) State‐Certified General Appraiser ‐ 1201072933 (Michigan) State‐Certified General Appraiser ‐ CG270068R (Nebraska) State‐certified General Appraiser ‐ 42RG00223800 (New Jersey) State‐Certified General Appraiser ‐ 46000048804 (New York) State‐Certified General Appraiser ‐ A6404 (North Carolina) State‐Certified General Appraiser ‐ 2003012188 (Ohio) State‐Certified General Appraiser ‐ GA003428 (Pennsylvania) State‐Certified General Appraiser‐ CG6709 (South Carolina) State‐Certified General Appraiser ‐ 00003618 (Tennessee) State‐Certified General Appraiser ‐ 1334017 (Texas) Colleen Blumenthal, MAI, Member, Appraisal Institute Treasurer — Appraisal Institute, Gulf Coast Florida Chapter (1992) Panel Member — FL Dept. of Commerce ‐ Div. of Economic Development Tourism Seminar Licensed Real Estate Salesman — State of Florida (Inactive) CONFERENCES & SEMINARS Medicaid/Medicare Seminar, Sarasota, FL, 1994‐99, 2000‐07 National Investment Conference, Washington, DC & Chicago, IL, 1993,94,96, 1998‐08 Young Advisory Council, Washington, DC, 1994,96 SPECIALIZED EXPERTISE & EXPERIENCE Market demand studies for a variety of seniors housing and healthcare developments throughout the United States. Appraisal analyses for continuing care retirement communities (CCRCs), seniors housing communities, assisted living/memory care residences, hospitals, healthcare facilities, and medical office buildings located throughout the United States. Task Force Leader, State of Seniors Housing, 2006 ‐ 2009 Co‐authorship of Impact of Interest Rates on Seniors Housing Capitalization Rates (2004) Co‐authorship of Investment Trends in the Assisted Living Industry (1997‐8); co‐authorship of Investment Trends in the Senior Housing Industry (1999, 2002, 2003, 2005, 2006) Authorship of Healthcare and Retirement Property Appraisal Seminar. Authorship of Valuation Issues for Healthcare and Retirement Property Assessment Seminar. Co‐author with ASHA of Seniors Housing Absorption Trends 2000. CORPORATE/INSTITUTIONAL CLIENTS SERVED (PARTIAL LIST) AEW Aureus Group Bank of America Brookdale Living Communities CapMark Collateral Real Estate Capital, LLC Eriksson Retirement Communities Fifth‐Third Bank Holiday Retirement HSH‐Nordbank GE Healthcare Finance KeyBank JP Morgan/Chase Johnson Capital Lancaster Pollard Love Funding Morgan Stanley Prudential Mortgage Capital Company Red Mortgage Capital Sunrise Senior Living Teachers Insurance & Annuities Fund Wachovia DAVID REY SALINAS, ASA, MRICS EMPLOYMENT HEALTHTRUST LLC – 2003 to Present Boston, Massachusetts Partner (Healthcare Valuation and Consulting) PRICEWATERHOUSECOOPERS, LLP – 1999 to 2003 Boston, Massachusetts CCRC Product Leader (Senior Advisory Services, Global Real Estate Valuation Group) GULF/ATLANTIC VALUATION SERVICES, INC. – 1994 to 1999 Boston, Massachusetts Regional Vice President (Healthcare & Retirement Valuation, Feasibility Studies) MMC, INC. (MUNICIPAL MANAGEMENT CONSULTANTS, INC.) – 1987 to 1994 Chelmsford, Massachusetts Staff Appraiser to Senior Commercial Appraiser (Ad‐Valorem Tax Appraisal, Real Estate Valuation) SELECTIVE MARKETING, INC. – 1985 to 1987 Boston, Massachusetts Commercial Sales Associate (Commercial Real Estate Sales & Leasing) EDUCATION WENTWORTH INSTITUTE OF TECHNOLOGY Graduate ‐ College of Design & Construction, 1986 APPRAISAL INSTITUTE General Demonstration Report Writing (2010) – Ft. Lauderdale, FL Appraising from Blueprints & Specs (2009) – Online Forecasting Revenue (2008) – Norfolk, VA Office Building Valuation (2007) – Miami, FL Analyzing Operating Expenses (2007) – Online, Chicago, IL Standards of Professional Practice (2008) – Florida International University, Miami, FL Florida Core Law Update (2006) – Florida Atlantic University, Boca Raton, FL Pennsylvania Law Update (2005) – Philadelphia, PA Introduction to Income Capitalization (2005) – Portland, ME Case Studies in Limited Partnership Valuation (2005) – University of San Diego, CA Separating Intangible Business Assets (2003) – Tampa, FL Hotel/Motel Valuation (2003) – Online, Chicago, IL Appraising Nursing/Congregate Care Facilities (1996) (2003) – Claymont, DE Comprehensive Appraisal Workshop (2001) – Tampa, FL Advanced Applications (2000) – Florida Atlantic University, Boca Raton, FL Economic Real Estate Trends (1999) – Boston, MA Mock Trial Presentation (1996) – Needham, MA Narrative Report Writing Seminar (1994) – Norwood, MA Highest & Best Use Market Analysis (1994) – Norwood, MA Demonstration Report Writing Seminar (1993) – Norwood, MA Capitalization Theory & Techniques ‐ Part A (1991) – Tufts University, MA Capitalization Theory & Techniques ‐ Part B (1991) – Tufts University, MA Residential Valuation (1990) – Tufts University, MA Basic Valuation Procedures (1990) – University of San Diego, CA Principles of Real Estate Appraising (1989) – Dartmouth College, NH NATIONAL ASSOCIATION OF REALTORS Commercial Brokerage & Financing (1988) PRICEWATERHOUSECOOPERS FAS University (2002) – Disney World, Orlando, FL CERTIFICATIONS State‐Certified General Appraiser – 31205 (Arizona) State‐Certified General Appraiser – A044449 (California) State‐Certified General Appraiser – RCG.0000896 (Connecticut) State‐Certified General Appraiser – RZ2617 (Florida) State‐Certified General Appraiser – 255867 (Georgia) State‐Certified General Appraiser – CG1533 (Maine) State‐Certified General Appraiser – 2059 (Massachusetts) State‐Certified General Appraiser – 1201073275 (Michigan) State‐Certified General Appraiser – NHCG‐217 (New Hampshire) State‐Certified General Appraiser – 42RG00190300 (New Jersey) State‐Certified General Appraiser – 46000039117 (New York) State‐Certified General Appraiser – 2008001298 (Ohio) State‐Certified General Appraiser – GA‐003351 (Pennsylvania) State‐Certified General Appraiser – A00826G (Rhode Island) State‐Certified General Appraiser – 00211 (Vermont) MEMBERSHIPS & AFFILIATIONS David Rey Salinas, Associate Member, Appraisal Institute American Society of Appraisers – Member, ASA Designation (Certificate 10404) Royal Institution of Chartered Surveyors, Member No. 1294125 (MRICS) AAHSA (American Association of Homes and Services for the Aging) – Member Appraisal Institute, Boston Chapter: Former Co‐Chairman Public Relations Committee Mass ALFA (Massachusetts Assisted Living Facilities Association) – Member State of Massachusetts: Licensed Real Estate Salesman (Inactive) LITIGATION ASSIGNMENTS Appearance as Expert Witness, Bennington County Superior Court, Bennington, VT – 2009 State of Vermont v. Equinox, II, LLP, Docket No. 127‐3‐09 BNCV Appearance as Expert Witness, United States Bankruptcy Court, Tampa, FL – 2009 Chestnut Hill Rehab Hospital v. Participant Banks, Case No. 08:08‐BK‐02150‐PMG Provided Consulting, CCRC Tax Appeal, Reading, PA – 2009 Provided Consulting, CCRC Tax Appeal, Burlington, VT – 2009 Provided Consulting, Entry Fee ILC, Manchester Center, VT – 2009 Provided Consulting, CCRC Tax Appeal, Whiting, NJ – 2009 Prepared Consulting & Appraisal Report, CCRC Tax Appeal, Atlanta, GA – 2008 Park Springs, LLC v. DeKalb County Assessors, Case No. 05CV9893‐1 Provided Consulting, CCRC Tax Appeal, Westchester County, NY – 2004 Provided Consulting, Entry Fee IALC, Duxbury, MA – 1998 Appearance as Expert Witness, Superior Court, Rockingham County, NH – 1993 Town of Durham v. Property Owner Tax Appellant(s) (Expert for Town, 3 Separate Cases) SPEAKING ENGAGEMENTS – BANKS Sovereign – Santander: “Global Market Correction, Healthcare Senior Housing & CCRC Market Trends”, Boston, MA, 2009 Arbor National Mortgage and Law Offices Taylor, Ganson & Perrin, LLP: “CCRCs – Product Overview & Valuation Techniques”, Boston, MA 2001 SENIOR HOUSING CONFERENCES & SEMINARS NIC (National Investment Center) – Attendee; Washington DC, 1995, 97, 2007, 08, 09 National Medicaid/Medicare Conference – Co‐Sponsor; Sarasota, FL 1995‐2007 State of Senior Housing Conference – Attendee; New York, NY 1996, 1999, 2001 ASHA (American Seniors Housing Association) – Attendee; Boca Raton, FL 2004 Ziegler Finance + Strategy Conference – Attendee; Chateau ‘Elan, GA 2004; Lake George, NY 2008 La Costa, CA 2009 Ziegler Capital Markets For‐Profit CCRC Symposium – Attendee; Bonita Springs, FL 2009 HERBERT J. SIMS’ Late Winter Conference – Attendee; TPC Sawgrass, FL 2003; Innisbrook Resort, FL 2004; Walt Disney, FL 2006; Lake Las Vegas Resort, NV 2007; La Costa Resort & Spa, CA 2008 AAHSA (American Association of Homes and Services for the Aging) – Attendee; San Antonio, TX 2005; San Francisco, CA 2006; Chicago, IL 2009 SELECTED CLIENTS SERVED/INDUSTRY RELATIONSHIPS Bank of America Merrill Lynch PNC Bank Hong Kong Shanghai Bank Corp (HSBC) Peoples Bank ‐ Connecticut GMAC – Commercial Mortgage Life Care Services Corp (LCS) Allied Irish Bank (AIB) The Marshall Group Erickson Retirement Communities Mercantile Safe Deposit & Trust Howard Bank Vermont Nationwide Health Care Properties – NHCP KBC Bank Los Angeles Archdiocese of Boston Continental Bank Senior Housing Investment Advisors Citizens Bank (RBS) PRN Mortgage Toronto Dominion ( TD Bank North) Life Care Centers of America Commerce Bank Capmark Leggat McCall Bank of Ireland Sky Bank Radius Senior Housing Herbert J. Sims Capital Westport Senior Living The Freshwater Group Huntington Bank Bank of Scotland Unity Bank Chevy Chase Bank Ziegler Healthcare Capital Affirmative Equities Company Ponus Capital AEW Capital Credit Suisse First Boston (CSFB) Sovereign Bank Rockwood Realty Associates CapitalSource Collateral Mortgage KBC Bank New York Roskamp Management HSH Nordbank G & L Realty Citizens Bank (Ohio) Looking Glass Siemens Financial M & T Bank CCRC & ENTRANCE‐FEE INDEPENDENT & ASSISTED LIVING CAMPUS ENGAGEMENTS Galleria Woods, Birmingham, AL – NFP, entrance fee rental CCRC, valuation/consulting for sponsor, 206 units (3) Edgehill, Stamford, CT – Upscale, entrance fee, Type A life care CCRC, valuation/consulting for Hospital System, 287 units (2) The Fairfax, Fort Belvoir, VA – Entrance fee, life care CCRC, valuation for REIT leaseback position, 487 units The Quadrangle – Haverford, PA – Entrance fee life care CCRC, valuation for REIT leaseback position, 542 units Rydal Park, Rydal, PA – Not‐for‐profit, entrance fee life care CCRC, renovation, 465 units Bethany Village, Mechanicsburg, PA – Not‐for‐profit entrance fee rental CCRC, significant expansion, 523 units Park Regency Village, Chandler, AZ – Owner/Operator; rental CCRC, 186 units Brandon Wild, Augusta, GA – Not‐for‐profit life care CCRC, hospital partner part ownership sale negotiation Buckingham, Houston, TX – NFP entrance fee life care CCRC, third party consultant for IRS submission; 325 units The Cedars, Chapel Hill, NC – Upscale Proposed condo life care CCRC; consultant to investment banker/equity partner, 336 units University Park, Sarasota, FL –(land only), Proposed CareMatrix CCRC; (Abandoned) Pennswood Village, Newtown, PA – Existing life care CCRC; proposed for expansion, 405 units Riderwood Village, Silver Spring, MD – Erickson Retirement Communities; new CCRC, 2,656 units Riverwoods, Exeter, NH – Managed by Life Care Services Corp, not‐for‐profit CCRC; 261 units Village of Duxbury, MA – Entrance Fee IALF, private owner, coop, tax appeal case Glenmeadow, Longmeadow, MA – Entrance Fee IALF, private owner, upscale target market Carleton‐Willard Village, Bedford, MA – Not‐for‐profit CCRC, substantial renovation. The Highlands, Pittsford, NY – A Greystone operated CCRC, new construction, 317 units Cedar Crest, Pequannock, NJ – Erickson Retirement Communities CCRC; 1,865 units Glen Eddy, Niskayuna, NY – Entrance Fee IALF, new construction, bond issuance, letter of credit Cypress, Charlotte, NC – Cypress Properties CCRC, Sister Project of Cypress of Hilton Head Island Ferris Hills, Canandaigua, NY – NFP, FFT Health Systems, bond issuance, letter of credit, 132 units. Goodwin House, Alexandria, VA – Entry Fee, Not‐for‐profit CCRC, substantial renovation & expansion tower Tidepointe, Hilton Head, SC – Coop CCRC, Bankruptcy workout, now Hyatt owned/managed Bentley Village, Naples, FL – A Hyatt community; non‐prototype CCRC acquisition, 743 units Fox Run Village, Novi, MI – Erickson Retirement Communities CCRC, new construction, 1,815 units Golden Years, Fort Wayne, IN – Not‐for‐profit CCRC, private owner; 233 units Blakehurst CCRC, Baltimore (Towson), MD – Life Care Services Corporation CCRC; 227 units (2) Caren Coop House, Adelphia, MD – Entry Fee ILF, new construction; Coop ownership Hunt Community, Nashua, NH – not‐for‐profit owner/operator CCRC, major renovation Brooksby Village, Peabody, MA – Erickson Retirement Communities CCRC; new project, 1702 units (2) Applewood, Amherst, MA – private, not‐for‐profit owner/operator CCRC, off site skilled nursing Reeds Landing, Springfield, MA – Not‐for‐profit owner CCRC, managed by Life Care Services Corp. (2) Coburg Village, Clifton Park, NY – Original entrance Fee IALF, changed to rental. Beverwyck, Slingerlands, NY – Eddy Healthcare Systems owner/operator; NFP CCRC, 227 units Winchester Gardens, Maplewood, NJ – CCRC, designed by Frederick Law Olmstead, major rehab The Glen, Queensbury, NY – IALF, Eddy Healthcare Systems owner/operator; not‐for‐profit, 124 units Bermuda Village, Advance, NC – Clubhouse & 24 unit nursing center split out CCRC Goodwin House West, Falls Church, VA – Entry Fee, Not‐for‐profit CCRC, 408 units Laurel Mead, Providence, RI – Upscale CCRC (co‐op); now operationally separate IL from AL/SN health center. Ann’s Choice, Warminster, PA – Navy Warfare Air Base (decommissioned); proposed CCRC, 1,863 units Whitney Center, Hamden, CT – Not‐for‐profit CCRC; expansion/renovation, rehab, 258 units College Harbor, St. Petersburg, FL – Not‐for‐profit CCRC, Owned by Eckerd College, 174 units (2) Kingsway Manor, Schenectady, NY – Private owner, ALF carve out for collateral loan on CCRC campus Glen at Hilard Meadows, Queensbury, NY – IALF, not‐for‐profit, new construction, bond issuance, LOC Valley View, Boise, ID – Life Care Services Corp, non‐prototype acquisition, rental CCRC Seasons Retirement Community, Cincinnati, OH – Rental CCRC, acquisition, 340 units Westside Village, Indianapolis, IN – Life Care Centers of America, part of a portfolio refinance engagement Hillside, Portland, OR – Sunwest engagement, pending acquisition of troubled asset with Ziegler acting as Receiver Friendship Haven, Fort Dodge, IA – CCRC, Not‐for‐profit, Phase I expansion upgrading of circa 1995 campus Freedom Bay, Portsmouth, RI – (land only), proposed life care & for‐sale (condo) combo active adult CCRC, water view, 310 units Arbor Glen, Somerset, NJ – Existing and stabilized Type B life care CCRC, unique FFS format, 296 units Grandview Terrace, Sun City West, AZ – Exiting life care CCRC, tri‐annual state audit requirement, 466 units Las Ventanas, Las Vegas, NV – Proposed life care, upscale entry fee CCRC operated by Greystone, IRS NFP submission, 400 units (2) Newbury Court, Concord, MA – Existing life care, entry fee CCRC proposed for expansion, 318 units Lake Pointe Woods, Sarasota, FL – Entry Fee IALC, 268 units (R) Rockridge, Northampton, MA – Existing ALR, proposed for expansion with entry fee IL garden/cottage apts., 103 units The Overlook, Charlton, MA – Existing life care, entry fee CCRC proposed for expansion, ILC split out, 219 units New Pond Village, Walpole, MA – Existing Entry Fee operationally separate CCRC, acquisition, condo (lot split IL/AL/SN), 199 units Harbor’s Edge, Norfolk, VA – Proposed, life care, upscale entry fee CCRC, rejuvenated downtown waterfront district, 246 units (2) Harbor Ridge, Port Washington, NY – (land only) Proposed life care, high‐end entry fee CCRC, water view, 400 units St. Mary’s of the Woods, Avon, OH – Proposed life care CCRC, NFP credit enhanced bond issuance, 159 units Hill at Whitemarsh, Philadelphia, PA – Upscale Entry Fee, Type A, life care CCRC, NFP credit enhanced bond issuance, 357 units Orlando Lutheran – Entry fee, Type B CCRC, not‐for‐profit model, bond reissue/release analysis, 420 units Heritage at Green Hills, Reading, PA – (land only) Proposed Entry Fee CCRC, Type C, valuation and market study, 632 units (R)(2) The Osborn, Rye, NY – Type C, entry fee CCRC, litigation support for tax abatement proceedings, 377 units Carriage Club, Naperville, NY – (land only) Proposed entry fee IALF, valuation and market study, supply/demand analysis, 294 units Phoebe Berks Village, Wernersville, PA – Type C, Entry Fee CCRC, not‐for‐profit model, Refinance, 406 units (R) Phoebe Home & Terrace, Allentown, PA – Type B, Entry Fee CCRC, not‐for‐profit model, refinance, 538 units (R) St. Andrews Village, Aurora, CO – Proposed entry fee CCRC (Starwood), Type B, modified fee simple model, 269 units National Benevolent Association (NBA) – 11 CCRCs; litigation support for U.S. Bankruptcy Court proceedings, appraisal review (R) Fountains at Sea Bluffs, Dana Point, CA – Entry Fee IALF, discounted healthcare benefits in ALF, fee simple and rental Fountains at Pacific Regent, La Jolla, CA – Entry Fee CCRC, Type C, fee simple and life estate unit format, 207 units Fountains at Carlotta, Palm Desert, CA – Entry Fee CCRC, Type C (no healthcare benefits), 269 units Fountains at Millbrook, Millbrook, NY – Entry Fee IALF, converted to rental, outstanding refundable basis, 171 units Fountains at Albemarle, Tarboro, NY – Rental CCRC, Type C (no healthcare benefits), rural market, 208 units Fountains at Logan Square, Philadelphia, PA – Entry Fee CCRC, Type B, converting to rental, outstanding refundables, 477 units (2) Fountains at Washington Square, Alexandria, VA – Entry Fee CCRC, Type B, significant renovation, 230 units United Zion Community, Lititz, PA – Entry Fee CCRC, Type C, not‐for‐profit model, 126 units (R) Malden Hospital, Malden, MA – Confidential CCRC consulting engagement for Hallmark Health Hospital System Bell Trace, Bloomington, IN – Existing Entry Fee CCRC, Type C , proposed for expansion, 243 units (R) Freedom Village, Bradenton, FL – Existing Entry Fee CCRC, Type B, contract‐for‐sale, 751 units, (R) RainbowVision, Palm Springs, CA – Vacant Land, Proposed for‐sale (condo) IALC with commercial support space, 240 units (R) Maplewood & Heritage, Bridgeport, WV – Entry Fee CCRC, Type C, transaction support & valuation, contract‐for‐sale, 199 units Redstone Presbyterian at Murrysville, PA – Entry Fee IALC, not‐for‐profit model, refinance bond debt, 134 units (R) Redstone Presbyterian at Huntingdon, PA – Entry Fee IALC, not‐for‐profit model, refinance bond debt, 135 units (R) Redstone Presbyterian at Greensburg, PA, Entry Fee CCRC, Type C, not‐for‐profit model, refinance bond debt, 201 units (R) Hill Farm, Annville, PA – Proposed Entry Fee IALC, existing ALR Mansion on site with Panoramic Views, 200 units Sun Mountain, Las Vegas, NV – Existing Rental CCRC, Type C, , pending acquisition, high acuity vent unit SNF, 357 units Meadow Ridge, Redding, CT – Upscale Entry Fee CCRC, Type A, Life Care Model, proposed expansion, 416 units (2) Talmage Terrace, Athens, GA – Entry Fee IALC, life care model for AL services, valuation & consulting, 80 units Gorham House, Gorham, ME – Rental CCRC, Type C, specialized AL Alzheimer & SN psychiatric wings, 167 units (R) Clover Manor, Auburn, ME ‐ Rental CCRC, Type C, specialized AL Alzheimer wing, first CCRC in state, 272 units (R) Grace Ridge, Morganton, NC – Entry Fee CCRC, Type A, disposition consulting/valuation for hospital system, 231 units Asbury Heights, Mt. Lebanon, PA – Entry Fee CCRC, Type B, refinance coupled with off‐campus expansion, 444 units The Embassy at Asbury Heights, Mt. Lebanon, PA – Entry Fee ILC, off‐campus expansion of existing CCRC, 35 units Sunrise Fox Hill, Bethesda, MD – Condo IALC, former Marriott project, adjacent Burning Tree CC, upscale target market, 323 units, Attleboro Village, Langhorne, PA – Existing Entry Fee CCRC, Type A, three separate buildings, 416 units The Heritage, Brentwood, TN – Consulting assignment for equity bond investor, opine on viability of cash flows, 431 units (2) Knollwood, Washington, DC – Army Distaff CCRC for Retired Career Military Officers, Entry Fee, Type C, expansion, 284 units Preswick Glen, New Hartford, NY – Proposed Entry Fee ILC, large detached cottage component, 126 units (R) Wake Robin, Shelburne, VT – Entry Fee CCRC, Type A, only Lifecare campus in state of Vermont, expansion, 295 units MacKenzie Place, Colorado Springs, CO – Entry fee, for‐sale IALC with cottages, proposed construction, 234 units (R) MacKenzie Place, Fort Collins, CO – Entry fee, for‐sale IALC with cottages, proposed construction, 240 units (R) The Fountains at Logan Square, Philadelphia, PA – Entry Fee, Type B, converting from EF to rental format, 477 units Lake Seminole Square, Seminole, FL – Entry Fee, Type B, IALC, long term life care provided at off‐site SNF, 338 units Freedom Square, Seminole, FL – Entry Fee CCRC, Type B, leased fee and fee simple valuation, 731 units University Village, Tampa, FL – Entry Fee CCRC, Type B, managed by Greystone, 676 units (R) Gleannloch Farms, Spring, TX – Entry Fee CCRC, Type A Lifecare, upscale Greystone development consultant, 216 units 3030 Park, Bridgeport, CT – Former Entry Fee CCRC, consulting/valuation for bankruptcy acquisition, 284 units Hubbard Hill, Elkhart, IN – Entry Fee CCRC, Type C, not‐for‐profit refinance, 255 units La Loma Village, Litchfield Park, AZ – Entry Fee CCRC, Type A Lifecare, Phase II expansion refinance, 225 units Holly Creek, Centennial, CO – Entry Fee CCRC, Type B, Phase II expansion and bond re‐issuance, 262 units Cypress Cove, Ft. Myers, FL – Entry Fee CCRC, Type A, appraisal and consulting for Phase II expansion, 470 units (R)(2) Plymouth Harbor, Sarasota, FL – Entry Fee CCRC, Type B, consulting assignment, proposed expansion and repositioning (R) Park Springs, Stone Mountain, GA – Entry Fee CCRC, Type A, appraisal and consulting for plaintiff litigation, 462 units East Hill Woods, Southbury, CT – Entry Fee CCRC, Type A, appraisal for equity partner and repositioning, 248 units Longhorn Village, Austin, TX – Proposed Entry Fee CCRC, Type A, affiliated with University of Texas, appraisal, 310 units Navesink Harbor, Red Bank, NJ – Entry Fee CCRC, Modified, significant renovation and expansion, 182 units The Colonnade, Surprise, AZ – Proposed Entry Fee CCRC, Type B, affiliated with sister CCRC for SNF benefits, 358 units The Covenant at South Hills, Mt. Lebanon, PA – Entry Fee, Type A, valuation for bankruptcy sale, 232 units (R)(3) Edgewater at Tallyn’s Reach, Des Moines, IA – Proposed Entry Fee, Type B, valuation for LOC financing, 239 units NewBridge on the Charles, Dedham, MA – Proposed Entry Fee, Type C, letter of credit financing, 615 units (R) Meriter Retirement Campus, Madison, WI – Repositioning of Entry Fee, Type C, new bond issue, CCRC, 317 units. Kendal on Hudson, Sleepy Hollow, NY – Upscale Entry Fee CCRC, Type A, valuation for permanent financing, 288 units The Fountains at La Cholla, Tucson, AZ – Entry Fee, Mixed plan IALC, Type C, valuation for financing, 396 units Whiteland Village, Exton, PA –Entry Fee, Type A, Phase I only IL units, redevelopment of Superfund Site, 936 units Woodland at New Paltz, Highland, NY – Entry Fee, Type A, valuation for LOC bond issuance, 301units Sagewood, Phoenix, AZ – Entry Fee, Type A, Lifecare, for‐profit model, upscale market, proposed LCS project, 1,128 units St. Mary’s East, Erie, PA – Entry Fee, Type C, not‐for‐profit sponsor, two asset expansion/upgrade, 232 units St. Mary’s Asbury Ridge, Erie, PA – Entry Fee, Type C, not‐for‐profit sponsor, two asset expansion/upgrade, 196 units Heritage Crossing, Edmond, OK – Entry Fee, Type C, former NBA Bankruptcy asset, 233 units Baycrest Village, North Bend, OR – Entry Fee, Type C, NFP to for‐profit acquisition post refinance, 240 units Longwood at Oakmont, Verona, PA – Entry Fee, Type A, Lifecare, LOC bond issue, expansion project, 439 units (VA) Crane’s Mill, West Caldwell, NJ – Entry Fee, Type A, Lifecare, NFP, for expansion project final phase, 430 units (R) Seabrook Village, NJ – Entry Fee, Type C, Erickson Retirement Communities, final phase construction revolver, 1,692 units Mirabella Portland, OR, Entry Fee, Entry Fee, Lifecare, Type B, proposed, high‐rise, letter of credit financing, 260 units (R) Bradford Village, Edmond, OK – Entry Fee, Type C, CCRC, existing not‐for‐profit, refinance existing debt, 236 Units Cypress Village, Jacksonville, FL – Entry Fee, Type C, CCRC, converting from Type C to Type A, refinance, 480 units (R) Monroe Village, Jamesburg, NJ – Entry Fee, Type B, CCRC, existing campus, refinance, 374 units (R) Meadow Lakes, Hightstown, NJ – Entry Fee, Type B, CCRC, existing campus proposed for expansion, 423 units (R) Crestwood Manor, Whiting, NJ – Entry Fee, Type B, CCRC, existing campus, refinance, 464 units (R) Bixby Knolls, Long Beach, CA – Rental, existing campus, CCRC, not‐for‐profit, refinance 324 units (R) Gold Country, Placerville, CA – Rental, existing not‐for‐profit campus, CCRC, refinance 259 units (R) Bishop’s Glen Retirement Center, Holly Hill, FL – Rental, CCRC, existing campus, not‐for‐profit, refinance 415 units (R) Mayflower Gardens, Lancaster, CA – Rental, CCRC, existing campus, not‐for‐profit, refinance 542 units (R) Courtenay Springs Village, Merritt Island, FL – Rental, CCRC, existing campus, not‐for‐profit, refinance 263 units (R) Westminster Health Care Center, Clarksville, IN – Rental, CCRC, existing campus, not‐for‐profit, refinance 350 units (R) Lucy Corr Village, Chesterfield, VA – Existing ALSN, proposed for IL entry fee continuum, 365 units (R) The Tradition of the Palm Beaches, West Palm Beach, FL – Existing rental, not‐for‐profit CCRC, 424 units (R) Laurel Lake Retirement Community, Hudson, OH – Type A, Entry Fee, CCRC, confidential engagement terms, 434 units (R) Paul’s Run, Philadelphia, PA – Rental CCRC format, refinance, not‐for‐profit, 439 units (VA) Seacoast, Mt. Pleasant, SC – Proposed Entry Fee, IALC, for‐profit, 230 units (VA) Bethel Foundation Community, Woodstock, GA – Proposed Entry Fee CCRC, for‐profit, 250 units (VA) Kendal at Hanover, Hanover, NH, ‐ Entry Fee, Type A, CCRC, not‐for‐profit, refinance, 306 units (R) First Community Village, Upper Arlington, OH – Entry Fee, CCRC, not‐for‐profit, proposed expansion, 411 units (VA) Wood River Village, Bensalem, PA – Entry Fee, Type A, Lifecare CCRC, confidential engagement terms, 355 units. Windsor Run, Mathews, NC – Entry Fee, Type C, Erickson Retirement Communities, construction revolver, 1252 units (VA) North Oaks, Owings Mills, MD – Entry Fee, Type A, Lifecare CCRC, valuation consulting assignment, 232 units (VA)(2) Peachtree Hills Place, Buckhead, GA – High end, Entry Fee, Type A, Lifecare CCRC, LCS to manage, 310 units (VA) La Posada, Palm Beach Gardens, FL – Entry Fee CCRC, developed by Westport, managed by Greystone, 294 units (R) Trillium Woods, Plymouth, MN – Land only, proposed for development with Lifecare CCRC, LCS to develop, 425 units (R) Devonshire at PGA National, Palm Beach Gardens, FL – Entry Fee, Type A, Lifecare CCRC, transaction, 418 units (R) Freedom Village, Lake Forest, CA – Entry Fee, Type B CCRC, pending transaction 380 units (R) The Village, Hemet, CA – Entry Fee, Type B CCRC, pending transaction, 351 units (R) The Village of Germantown, Shelby, TN – Entry Fee Type A, Lifecare CCRC, valuation to test pending contact for sale, 247 units (R) La Vida Llena, Albuquerque, NM – Entry Fee Type B, Lifecare CCRC, refinance, 387 units Providence Point, South Hills, PA – Entry Fee Type B, Lifecare CCRC, finance new construction and bond finance, 403 units (R) StoneRidge, Mystic, CT – Entry Fee Type A, Lifecare CCRC, internal corporate valuation assignment, 322 units Timber Ridge at Talus, Issaquah, WA – Entry Fee Type A, Lifecare CCRC, internal corporate valuation assignment, 220 units (R) Freedom Plaza, Peoria, AZ – Entry Fee Type B, CCRC, leasehold – concluding leased fee analysis, 538 units (R) Whiteland Village, Exton, PA – Entry Fee CCRC, proposed construction and land loan, 936 units (R) Mirabella Seatlle, Seattle, WA – Upscale Downtown, Entry Fee Type A, Lifecare CCRC, valuation update, 365 units (VA) Westminster Village, Terre Haute, IN – Entry Fee Type C CCRC, update valuation for existing loan, 320 units (VA) Bayview Gardens, Clearwater, FL – valuation and consulting for transitional CCRC campus (R) Fox Run, Novi, MI – Entry Fee, Type C, Erickson Retirement Communities, construction revolver, 890 units (VA) Maris Grove, Glen Mills, PA – Entry Fee Type C, Erickson Retirement Communities, construction revolver, 1,089 units (VA) Ashby Ponds, Ashburn, VA – Entry Fee Type C, Erickson Retirement Communities, construction revolver, 456 units (VA) Eagles Trace, Houston, TX – Entry Fee Type C, Erickson Retirement Communities, construction revolver, 470 units Tallgrass Creek, Overland Park, KS – Entry Fee Type C, Erickson Retirement Communities, construction revolver, 227 units (VA) Equinox Village, Manchester Center, VT – Entry Fee ILC, valuation for lender and consulting for tax appeal, 56 units Braecroft, East Aurora, NY – Entrance fee, not‐for‐profit model, IALF, new construction, bond issuance, line‐of‐credit (R) Review (VA) Valuation Assistance Current to November 2009 ANTHONY G. STABLEIN EMPLOYMENT HEALTHTRUST LLC – October 2005 to Present Sarasota, Florida Director CUSHMAN & WAKEFIELD INC – May 2005 to September 2005 Tampa, Florida EDUCATION UNIVERSITY OF FLORIDA Bachelor of Science, 2004 Major: Psychology Minor: Business Administration APPRAISAL INSTITUTE Basic Principles of Appraisal Practice Basic Procedures of Appraisal Practice USPAP (Uniform Standards of Professional Appraisal Practice) General Appraiser Income Approach/Part 1 Advanced Income Capitalization Advanced Sales Comparison and Cost Approaches CERTIFICATIONS & AFFILIATIONS Certified General Appraiser – RZ 3368 (Florida) Anthony G. Stablein, Associate Member, Appraisal Institute CONFERENCES & SEMINARS National Medicaid/Medicare Seminar 2006, 2007 Healthcare Deal Making Summit, 2009 KIMBERLY WALTHER EMPLOYMENT HEALTHTRUST LLC – September 2007 to Present Sarasota, Florida Associate EDUCATION UNIVERSITY OF SOUTH FLORIDA Bachelor of Science, 2010 Major: Finance APPRAISAL INSTITUTE General Appraiser Income Approach Part I (2009) ED KLOPFER SCHOOL OF REAL ESTATE Basic Appraisal Principles (2009) Basic Appraisal Procedures (2009) Florida Appraisal Law, Rules & Procedures (2009) COOKE REAL ESTATE SCHOOL 15 Hour National USPAP (2009) CERTIFICATIONS AND AFFILIATIONS Registered Real Estate Trainee Appraiser – RI23463 (Florida) Kimberly Walther, Student Affiliate Member, Appraisal Institute
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