THE SENIOR LIVING INDUSTRY AND CAPITAL MARKETS TODAY AND TOMORROW

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

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

3. HJ SIMS BANKING TEAM

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

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

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

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

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

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

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

11. SIMS’ DISTRIBUTION SYSTEM

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

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

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

15. 2014 OUTLOOK

16. 2014 OUTLOOK The Overall Environment Interest Rates Senior Living Industry

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

18. 2014 OUTLOOK Interest Rates

19. 2014 OUTLOOK Interest Rates

20. 2014 OUTLOOK Interest Rates

21. 2014 OUTLOOK Interest Rates

22. 2014 OUTLOOK Interest Rates

23. 2014 OUTLOOK Interest Rates

24. 2014 OUTLOOK Senior Living Industry Entrance Fee CCRCs • Strong housing markets – • Improvement in stable housing markets • Limited new supply • 89% average occupancy

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

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

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

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

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

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

31. SIMS RECAPITALIZES A $100 MILLION PORTFOLIO IN cOLORado

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

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

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

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

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

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

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

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

40. CASE STUDIES Anthony Luzzi President Sims Mortgage Funding

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

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

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

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

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

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

47. Essex Plaza I Page 46

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

49. CASE STUDIES Aaron Rulnick Principal HJ Sims

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