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The NIC Bluebook:

An Update on the U.S. Economy

and the Seniors Housing & Care Sectors

Prepared for:

Argentum’s Chief Executive Summit

Boston, MA

September 12, 2018

Maravilla Scottsdale

2©2018 National Investment Center for Seniors Housing & Care (NIC)

National Investment Center for Seniors Housing & Care (NIC)

NIC is a 501(c)3 organization whose mission is

to enable access and choice

by providing data, analytics and connections

that bring together investors and providers.

NIC: Advancing Transparency on Seniors Housing & Care

• Tracks and reports on seniors housing and care data across more than 14,000

properties within 140 U.S. metropolitan markets.

• 12+ years of quarterly time series data for the 31 Primary Markets.

Today’s Presentation


• The Economy: Rising Wage Rates, Rising Interest Rates

• Seniors Housing Risk Premium: Will It Change With Rising Rates?

• Appendix

• The NREI/NIC, ULI/PwC and the IREI Survey Results: Seniors Housing Is Attractive

• Seniors Housing Market Fundamentals: Falling Occupancy Rates

• Demographic Trends: Pig in a Python


The Economy:

Rising Wage Rates, Rising Interest Rates

5

Source: US Bureau of Labor Statistics, Moody’s Analytics

Getting Closer to Record Low Jobless Rates…

U.S. Unemployment Rate (%)

Q1 1948 – Q2 2018

©2018 National Investment Center for Seniors Housing & Care (NIC)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

19

48

Q1

19

50

Q1

19

52

Q1

19

54

Q1

19

56

Q1

19

58

Q1

19

60

Q1

19

62

Q1

19

64

Q1

19

66

Q1

19

68

Q1

19

70

Q1

19

72

Q1

19

74

Q1

19

76

Q1

19

78

Q1

19

80

Q1

19

82

Q1

19

84

Q1

19

86

Q1

19

88

Q1

19

90

Q1

19

92

Q1

19

94

Q1

19

96

Q1

19

98

Q1

20

00

Q1

20

02

Q1

20

04

Q1

20

06

Q1

20

08

Q1

20

10

Q1

20

12

Q1

20

14

Q1

20

16

Q1

Q2 1953: 2.6%Q2 2018: 3.9%Q1 1969: 3.4%

Q4 2000: 3.9%


…Leading to Mounting Wage Pressures?

Source: Moody’s Analytics, U.S. Department of Labor

Average Hourly Earnings (Percent Change from Year Ago)

January 2015 – August 2018

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18

All Sectors SNF Assisted Living


Annual Same-Store Rent Growth Below Wage Growth

Source: NIC MAP® Data Service, Bureau of Labor Statistics

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Annual Asking Rent Growth / Avg. Hourly Earnings*Primary Markets | 4Q06 – 2Q18

Assisted Living Employees

Asking Rent - Assisted Living

Asking Rent - Independent Living


Seniors Housing Rent Growth Varies by Market

Source: NIC MAP® Data Service

Highest and Lowest Seniors Housing Year-over-Year Rent Growth

Primary Markets | as of 2Q18

0% 2% 4% 6%

Portland, OR

San Francisco, CA

Seattle, WA

Los Angeles, CA

Riverside, CA

Las Vegas, NV

Baltimore, MD

New York, NY

San Jose, CA

Washington, DC

0% 2% 4% 6%

Minneapolis, MN

Boston, MA

Tampa, FL

Chicago, IL

Houston, TX

Atlanta, GA

Detroit, MI

San Antonio, TX

Kansas City, MO

Dallas, TX


Slowing Rent Growth and Rising Wage Rates May Impact Margins

Source: State of Senior Housing, 2017

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Freestanding Independent Living Freestanding Assisted Living CCRCs

Lower Quartile Median Upper Quartile

Operating Margins by Property Types

As of 2017


Seniors Housing and Care Transactions:

Weak First Half


Increased Diversity of Buyers for Seniors Housing


Closed Transactions for Seniors Housing & Care by Buyer Type*

2008 – 2Q 2018

* Preliminary Data


Seniors Housing Pricing Hovering at Peak

Source: NIC MAP® Data Service 1. Preliminary Data

Seniors Housing & Care Transactions Rolling 4-Quarter Price Per Unit1

U.S. | 1Q08 – 2Q18

Seniors Housing

Skilled Nursing


Wide Distribution in Price Per Unit (PPU)

U.S. Seniors Housing & Care Transaction Volume*

1Q08 – 2Q18


PPU Summary - Seniors Housing

AverageLower Decile Lower Quartile Median Upper Quartile Upper Decile

$181,000$58,000 $86,000 $126,000 $213,000 $284,000

PPU Summary - Nursing Care

AverageLower Decile Lower Quartile Median Upper Quartile Upper Decile

$84,000$34,000 $44,000 $64,000 $97,000 $152,000

*Deciles/Quartiles are rounded to nearest $1,000

1 Preliminary Data

14

How Do Seniors Housing Cap Rates Stack Up?

Source: NCREIF

Cap Rates

Seniors Housing, Apartment, NPI and Ten-Year Treasury Q1 2006 – Q2 2018


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10-Year Treasury Seniors Housing NPI Multifamily

15

As Interest Rates Have Fallen, Risk Premia Have Fallen

Source: NCREIF

Risk Premium

Difference Between Seniors Housing, Apartment, NPI and Ten-Year Treasury

Q1 2006 – Q2 2018


-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

NPI Seniors Housing Apartment

16

A Change in Sentiment?


Source: Cartoon Bank

17

Rising Interest Rates: Flattening Yield Curve

Source: Moody’s Analytics

Yield Curve for U.S. Treasuries

Q4 2015, Q4 2016, Q4 2017 and August 27, 2018

Maturity Length of U.S. Treasuries


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

3-Month 6-Month 1-Year 2-Year 3-Year 5-Year 7-Year 10-Year 20-Year 30-Year

2015Q4 2016Q4 2017Q4 27-Aug-18


Appendix


2018 NIC/NREI, ULI/PwC

and the

IREI Survey Results

Seniors Housing is An Attractive Investment Option

Seniors Housing as an Investment Opportunity

Investor interest in seniors housing remains strong as opportunities continue to emerge. New investors, developers and operators are testing the waters. But concerns of potential overdevelopment in select markets for different sectors persist. Labor nd emerging trends.Our discussion will highlight:• Construction, inventory growth, and absorption trends• Labor market observations• NIC/NREI Investor Sentiment Survey results• Sales transactions volume and pricing trends• Comparative commercial real estate investment performance returns• Current trends and near-term outlook for seniors housing market fundamentals


“Since this (seniors housing) has been

considered a specialized investment

segment, many are not aware of the rising

liquidity (more than $14 billion in transactions

in the year ending second-quarter 2017) and

returns outpacing the NCREIF NPI

benchmark by 400 basis points. Housing for

seniors topped the list of all residential

segments in this year’s survey in terms of its

development and investment prospects for

2018.”

Source: Emerging Trends in Real Estate 2018, A Publication from

Urban Land Institute and PwC, published October 2017

ULI Emerging Trends 2018

Investor interest in seniors housing remains strong as opportunities continue to emerge. New investors, developers and operators are testing the waters. But concerns of potential overdevelopment in select markets for different sectors persist. Labor and rising wage rates are also becoming worrisome. Join us to learn more about these existing and emerging trends.Our discussion will highlight:• Construction, inventory growth, and absorption trends• Labor market observations• NIC/NREI Investor Sentiment Survey results• Sales transactions volume and pricing trends• Comparative commercial real estate investment performance returns• Current trends and near-term outlook for seniors housing market fundamentals


Key Takeaways Regarding Seniors Housing:

• Seniors housing ranks third among 24 commercial/multifamily

subsectors in 2018 for best investment prospects and development

prospects, behind fulfillment and warehouse

• Seniors housing ranks first among seven residential property types in

2018 for best investment prospects and development prospects.

2018 Institutional Investors Real Estate Trends from IREI

Investor interest in seniors housing remains strong as opportunities continue to emerge. New investors, developers and operators are testing the waters. But concerns of potential overdevelopment in select markets for different sectors persist. emerging trends.Our discussion will highlight:• Construction, inventory growth, and absorption trends• Labor market observations• NIC/NREI Investor Sentiment Survey results• Sales transactions volume and pricing trends• Comparative commercial real estate investment performance returns• Current trends and near-term outlook for seniors housing market fundamentals


• Seniors housing ranks fourth

among the 15 commercial property

types by U.S. investors for

attractiveness of new investment

in 2018.

• Seniors housing ranks second

among the 15 commercial property

types by foreign investors for

attractiveness of new investment

in 2018.

Source: Institutional Real Estate, Inc.(IREI) and Kingsley Associates; published May 2018


Source: NIC/NREI Investor Sentiment Survey, 2015, 2016, 2017, 2018

On-line Survey of 140 Respondents | May 17, 2018 – June 20, 2018

How Do You Rate the Attractiveness of Investing in Each Property Type?

Mean Score, Scale 1 (Extremely Unattractive) to 10 (Extremely Attractive)

NIC/NREI Survey Show Investor Preference For Seniors Housing

7.2 7.3 7.37.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2018 2017 2016 2015

Seniors Housing Apartments Industrial Office Hotels Retail


Source: NCREIF

NCREIF Annualized Total Returns by Property Type (%)

Period Ending 6/30/18

Seniors Housing Investment Returns Are Relatively Strong

0

2

4

6

8

10

12

14

16

One Year Three Years Five Years Ten Years

NPI Apartment Hotel


Despite Recent Consolidation, Seniors Housing Still Fragmented


Percentage of Units Operated by Number of Properties

99 NIC MAP Markets As of 4Q 2017

28%

29%

43%

Single Property 2 to 9 Properties 10+ Properties


Large Chains More Common for IL, AL and MC Communities


Percentage of Units Operated by Number of Properties

By Community Type, 99 NIC MAP Markets, 4Q 2017

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

IL Community

AL Community

MC Community

NC Community

CCRC/LPC

Operated by Chain: 10–24 Properties Operates Single Property

Operated by Chain: 2–9 Properties Operated by Chain: 25+ Properties


Seniors Housing Existing Inventory Is Old

Source: NIC MAP® Data Service 1. Preliminary Data

Seniors Housing Property Age

Primary Markets | 2Q18 (in Years)

Less Than Two 2 to 10 10 to 17 17 to 25 25 Plus


Seniors Housing Market Fundamentals


Seniors Housing Occupancy Slips Further


Seniors Housing Fundamentals

Primary Markets | 1Q06-2Q18

72%

74%

76%

78%

80%

82%

84%

86%

88%

90%

92%

94%

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Inventory Growth Absorption

All Occupancy Stabilized Occupancy


Assisted Living Occupancy Well Below Independent Living


* Wage Data as of Q1 2017

83%

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

IL AL Srs Hsg

Occupancy

Primary Markets | 1Q06 – 2Q18


Annual Inventory Growth Outpacing Annual Absorption


Annual Inventory Growth Rate and Annual Absorption

Primary Markets | 1Q06 – 2Q218

Independent Living

-1%

0%

1%

2%

3%

4%

5%

6%

Annual Inventory Growth

Annual Absorption

-1%

0%

1%

2%

3%

4%

5%

6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Assisted Living

Seniors Housing Occupancy: 17 Markets Down, 12 Up Y/Y



75%

80%

85%

90%

95%

100%

SJ

SA

C

PO

R

BA

L

SD

PIT

SE

A

PH

I

BO

S

NY

SF

CIN

MIN LA

DC

MA

P31

ST

L

RIV

MIA

PH

O

DE

N

OR

L

DE

T

CL

E

TA

M

KC

CH

I

DA

L

AT

L

HO

U

LV

SA

Seniors Housing Occupancy by Metro MarketPrimary Markets | As of 2Q18

Occupancy Range (4Q05 - 2Q18)

Current Quarter Occupancy

Year Ago Occupancy


A One-Year Look Back at Supply and Demand

Seniors Housing Annual Supply-Demand

Primary Markets As of 2Q18



Construction as a Share of Inventory Remains High

Source: NIC MAP® Data Service, Bureau of Labor Statistics* Wage Data as of Q1 2017

Seniors Housing Construction

Primary Markets | 4Q05 - 2Q18

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Spaces Under Construction (L)

Construction as % of Inventory (R)

35

Demographic Trends:

Pig in a Python



We All Focused on Aging…

Source: Cartoon Bank


…and Some of Us Are Part of the Pig in a Python Generation

Source: Cartoon Stock.com

Fertility Rates Help Explain Demographic Patterns


Source: CDC—National Center for Health Statistics

Births Per Thousand Women Ages 15 - 44

1909 - 2015

0

20

40

60

80

100

120

140

19

09

19

12

19

15

19

18

19

21

19

24

19

27

19

30

19

33

19

36

19

39

19

42

19

45

19

48

19

51

19

54

19

57

19

60

19

63

19

66

19

69

19

72

19

75

19

78

19

81

19

84

19

87

19

90

19

93

19

96

19

99

20

02

20

05

20

08

20

11

20

14


Near and Long-term Demographics Are Getting Better

Source: U.S. Census, NIC MAP® Data Service

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

190

9

191

2

191

5

191

8

192

1

192

4

192

7

193

0

193

3

193

6

193

9

194

2

194

5

194

8

195

1

195

4

195

7

196

0

196

3

196

6

196

9

197

2

197

5

197

8

198

1

198

4

198

7

199

0

199

3

199

6

199

9

200

2

200

5

200

8

201

1

Today’s 82-Year Old Resident Was Born in 1936

Greatest Generation55 Million

Silent Generation47 Million

Generation X55 Million

Millennials66 Million

Post Millennials65 Million

And Is Of The Silent Generation

Baby Boomers76 Million

Number of Live Births (1909 to 2013, 000s)

Life Expectancy Keeps Increasing



U.S. Life Expectancy At Birth (Years)

0

10

20

30

40

50

60

70

80

90

1900 1940 1950 1960 1970 1975 1980 1985 1990 1995 2000 2005 2015

Population Pyramid for the U.S


Age and Sex Structure of the U.S.

2012, 2030, 2060


Growth in Younger Old Outstrips Other Older Cohorts


Source: U.S. Census Bureau Projections, 2017

Growth in 75-Plus Population by Select Cohorts

2017 - 2040

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

75 - 82 83 - 87 88-Plus

Fewer Caregivers To Support Seniors


Ratio of Caregivers (45-64 year olds) To Those Over 80 Will Shrink

From 7:1 Today to 4:1 in 2030

• Declining Fertility Rates Among Baby Boomer Women

• Baby Boomers Shift from Being the Caregivers to being the

Receivers of Care

Source: U.S. Census

0

1

2

3

4

5

6

7

2017 2030 2050

Growing Burden on Working Age Population


Source: U.S. Census Bureau Projections, 2017

Dependency Ratio—Share of Over 65 and Under 18 to Working Population

2014 - 2060

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Under 18 Over 65 Total Dependents


2018 NIC Fall ConferenceOctober 17-19

Early Bird Registration Rates End August 8

Register Now:www.nicevent.org

NIC Investment Guide (Fifth Edition) Will be Released This October

Reserve Your Copy:info.nic.org/2018-investment-guide

http://www.nicevent.org/

http://info.nic.org/2018-investment-guide

Upcoming NIC Events:

2018 NIC Fall ConferenceOctober 17 - 19, 2018

Sheraton Grand Chicago

Chicago, IL

3Q18 NIC MAP® Data Service Client WebinarThursday, October 11th, 2018 at 11:00 AM ET

www.nic.org 410-267-0504

Howard Senior Living

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