Executive Summary – Mar 2014

The Cottages of Sun Valley LLC Executive Summary -

The Cottages of Sun Valley are two new senior care facilities to be constructed and operated by The Cottages LLC at 150 N. 1st Ave (Lot 2, Block 1, Northridge VIII) in Hailey, Idaho. The Cottages, an owner/operator management company with 15+ years experience, seeks $4.2MM for construction and $200K for operating capital during lease-up for a total of $4.4MM for the project.

The project consists of building two (2) separate 16-unit single-story home-like 11,400 sq. ft. buildings -- each of the combined 32 units is intended for single occupancy (unit sizes range from 312-425 sq. ft.). One building will be dedicated to assisted living residents, the other to memory care.

The land at 150 N. 1st Ave is owned and of significant value (~$1.25MM); and $125,000 has been invested in soft costs (including site plans, drawings, engineering) to secure building permits with the city. The demand for private pay senior resident care in Blaine County is strong and competition exists only at the low-end of care facilities. The lease-up period (or time to fill-up) is anticipated to take 8 months due to pent up demand and local community enthusiasm. Market surveys and recent inquiries confirm our ability to charge premium rates at our private pay senior care facilities ($3800) especially memory care services ($4500).

At stabilization we forecast The Cottages of Sun Valley to have an annual NOI of $525k. Long-term demographics, the economics of senior care facilities prices rising faster than labor costs and a strong focus on quality private pay senior care are all factors that should strengthen those assumptions. Upon six months stabilized occupancy of the facilities The Cottages will seek a refinance with FHA, HUD or other lender. Further opportunities exist for refinancing or sale after 3 years of stabilized operations.

The Cottages and management team have 20+ years experience developing, operating and managing senior care facilities. Garold Maxfield, the CEO and his team own and manage 16 facilities with 243 senior care beds in ID, TX and MO. In addition, The Cottages has management contracts to provide administrative services to over 10 facilities and 157 senior care beds in WA, MT and ID.

The Cottages seeks to mitigate risks in the construction in a number of ways: we utilize a similar building footprint and facility plans; we refine building drawings for local specifications and site planning requirements; we use the same General Contractor – Alta Construction – past building experience with plans and currently have collaborative construction and oversight project management. The lease-up risk is also reduced by the smaller facility sizes (faster to breakeven) and by the inclusion of two local community members as shareholders and advocates for the project.

The ownership consists of 4 individuals – Garold Maxfield 25% (operator & PG), Justin Yarmark 12.5% (operator & cash investor), Anita Northwood 12.5% (cash investor & local advocate), and Mark Caplow 50% (land owner).

Hailey ID Project - # of homes = 2

Based on

Cost

Cost

$5,656,672

Loan to Value

75.69%

Loan Amount

$4,281,671

Hailey - Sources of Funds

SOURCES

TOTAL

Capital - Owner

$125,000

Land - Owner

$1,250,000

Permanent Financing

$4,281,672

Total Sources

$5,656,672

USES

Hard Costs

$3,222,600

Soft Costs

$359,025

FF&E

$325,000

Working Capital

$206,300

Total Uses

$4,112,925

Equity Required

$(1,543,747)

Land is valued at $1.25MM for 150 N. 1st Ave, Hailey, ID (Lot 2, Bock 1, Northridge VIII)

HAILEY PROJECT ASSUMPTIONS

The Cottages of Sun Valley Equity Investment

Land $1,250,000 Cash $125,000

Total $1,375,000 % of Total Cost 24%

Hailey Facility Costs

Description Amount ($)

Land Cost $1,250,000

Hard Costs $3,316,347

Soft Costs $565,325

FF&E $325,000

Contingency $200,000

Total Project Costs $5,656,672

Project Assumptions

# of Beds 32 # of Units 32

Building Square Footage 22,800 Land Acreage 2

Construction Period (months) 12

Lease-up Period (months) 8

Total RentS

Unit Type # Units Beds/unit

Total Capacity (Beds)

SF Total SF

Rent per Bed (Private)

Rent per Unit

(Private) Rent/SF Monthly

Rent Annual Rent

AL-Private 1 1 1 425 425 $3,600 $3,600 $8.47 $3,600 $43,200

AL-Private 2 1 2 395 790 $3,600 $3,600 $9.11 $7,200 $86,400

AL-Private 1 1 1 354 354 $3,600 $3,600 $10.17 $3,600 $43,200

AL-Private 5 1 5 338 1,690 $3,600 $3,600 $10.65 $18,000 $216,000

AL-Private 7 1 7 312 2,184 $3,600 $3,600 $11.54 $25,200 $302,400

MC-Private 1 1 1 425 425 $4,800 $4,800 $11.29 $4,800 $57,600

MC-Private 2 1 2 395 790 $4,800 $4,800 $12.15 $9,600 $115,200

MC-Private 1 1 1 354 354 $4,800 $4,800 $13.56 $4,800 $57,600

MC-Private 5 1 5 338 1,690 $4,800 $4,800 $14.20 $24,000 $288,000

MC-Private 7 1 7 312 2,184 $4,800 $4,800 $15.38 $33,600 $403,200

Totals 32 32 10,886 $134,400 $1,612,800

Averages 340 $4,200 $4,200 $12.35

Cottages Sun Valley ID - Operating Statement

Year

Const. 2 3 4 5

2014 2015 2016 2017 2018

Income Total Revenue $0 $761,760 $1,568,160 $1,614,125 $1,661,469

Total COGS $87,060 $569,553 $772,308 $795,466 $819,320 Gross Profit ($87,060) $192,207 $795,852 $818,659 $842,149

Total Operating Expenses $45,900 $223,613 $270,750 $278,873 $287,239 Total COGS $87,060 $569,553 $772,308 $795,466 $819,320

Residence Operating Expenses $132,960 $793,166 $1,043,058 $1,074,339 $1,106,558 Operating Expense Ratio % 95% 62% 62% 62% Net Operating Income ($132,960) ($31,406) $525,102 $539,786 $554,911 Operating Margin % 5% 38% 38% 38%

JY#03&18&14# !

Version 1 - more conservative Revenue (no resident service revenue)

Const. 2 3 4 52014 2015 2016 2017 2018

Income$0 $1,612,800 $1,612,800 $1,661,184 $1,711,020$0 $0 $0 $0 $0$0 $1,612,800 $1,612,800 $1,661,184 $1,711,020$0 ($887,040) ($80,640) ($83,059) ($85,551)

55% 5% 5% 5%$0 $725,760 $1,532,160 $1,578,125 $1,625,469

$0 $36,000 $36,000 $36,000 $36,000$0 $36,000 $36,000 $36,000 $36,000

$0 $761,760 $1,568,160 $1,614,125 $1,661,469

$52,500 $70,000 $72,100 $74,263$18,000 $9,000 $9,270 $9,548$41,928 $83,808 $86,311 $88,890

$72,000 $360,000 $480,000 $494,400 $509,232$14,160 $70,800 $94,400 $97,232 $100,149

$900 $4,500 $6,000 $6,180 $6,365$6,750 $9,000 $9,270 $9,548$5,250 $7,000 $7,210 $7,426

$600 $800 $824 $849$1,350 $1,800 $1,854 $1,910$4,500 $6,000 $6,180 $6,365$3,375 $4,500 $4,635 $4,774

$87,060 $569,553 $772,308 $795,466 $819,320($87,060) $192,207 $795,852 $818,659 $842,149

$10,500 $14,000 $14,420 $14,853$5,250 $7,000 $7,210 $7,426$2,100 $2,800 $2,884 $2,971

$30,000 $30,000 $15,000 $15,450 $15,914$1,875 $2,500 $2,575 $2,652

$11,250 $15,000 $15,450 $15,914$600 $800 $824 $849

$3,000 $4,000 $4,120 $4,244$113 $150 $155 $159

$1,050 $1,400 $1,442 $1,485$225 $300 $309 $318

$12,000 $16,000 $16,480 $16,974$900 $1,200 $1,236 $1,273

$7,200 $7,200 $7,200 $7,416 $7,638$6,750 $9,000 $9,270 $9,548

$5,100 $5,100 $6,800 $7,004 $7,214$600 $800 $824 $849

$3,000 $4,000 $4,120 $4,244$51,000 $68,000 $70,040 $72,141

$8,250 $11,000 $11,330 $11,670$1,500 $2,000 $2,060 $2,122

$12,750 $17,000 $17,510 $18,035$1,500 $1,500 $2,000 $2,060 $2,122$2,100 $2,100 $2,800 $2,884 $2,971

$45,000 $60,000 $61,800 $63,654$45,900 $223,613 $270,750 $278,873 $287,239$87,060 $569,553 $772,308 $795,466 $819,320

$132,960 $793,166 $1,043,058 $1,074,339 $1,106,55895% 62% 62% 62%

($132,960) ($31,406) $525,102 $539,786 $554,911 5% 38% 38% 38%

JY#03&18&14

Net Operating IncomeOperating Margin %

Utilities ExpenseTotal Operating ExpensesTotal COGSResidence Operating Expenses Operating Expense Ratio %

Property Taxes ExpenseRepairs & MaintenanceYard MaintenanceTelephone ExpensesTraining FeesTravel & Entertainment

Insurance (key man) ExpenseLicensing ExpenseLegal Fees ExpenseMarketing Wages & Miscellaneous ExpenseOffice Supplies Expense

Quality Assurance ExpenseContract Labor DieticianCopies & Postage ExpenseDues & SubscriptionsIndustry Meetings ExpenseInsurance Building & Contents

Accounting ExpenseActivities & EntertainmentVan - Gas and MaintenanceAdvertising ExpenseComputer & Software ExpenseContract Labor Nurse

Supplies-Nursing-ExpenseSupplies-Household-Expense

Total COGS Gross Profit

Operating Expenses

Payroll Burden ExpenseInsurance & Benefits ExpenseMarketing-Lease upPlacement FeeAdmin-Quality AssuranceSupplies-Cleaning-Expense

Cost of Goods SoldFood ExpenseNew Move-In ExpenseManagement FeePayroll Salaries & Wages

Total Revenue

Operating Expenses

Less Vacancy Vacancy %

Total Rent & Service Income

Community FeesTotal Other Income

Operating Statement

Year

Room & BoardResident ServicesPotential Gross Income

3/18/14 Page 11

Total Number of ALZ Units 16 16 # of Homes 1 1 2Rent Per Month ALZ Units (memory care) $4,500.00 Land Cost $1,250,000Total Number of ALF Units 16 16 Bldg.Cost (for dep.) $3,100,000Rent Per Month ALF Units (assisted living) $3,800.00 Economic Life - Building 35Move-In Fee $1,500 Capitalization Rate 9.25%New Move-Ins per month 1 Reversion Sales Cost 4.0%Vacancy 10.0% Rent Increase 3.0%All Expenses Monthly $78,754 Holding Period (Yrs.) 10Building Cost $3,900,000 Balance of Loan (10th Yr.) $3,672,626 Loan Amount 110% $4,281,671 Tax Rate 0.00% Cash Partners Invested (Net) $125,000 Annual Payment $288,000 Rate 5.25% 1st TD Term (years) 25 Calculated Value (Stabilized) $5,677,751 DSC 1.82

STABILIZED OCCUPANCY Cnstrctn Lease Up Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11GROSS RENT POTENTIAL STABILIZED Sale Rental Income $1,593,600 $1,641,408 $1,690,650 $1,741,370 $1,793,611 $1,847,419 $1,902,842 $1,959,927 $2,018,725 Other Income $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000 $36,000

________ ________ ________ ________ ________ ________ ________ ________ ________TOTAL GROSS INCOME $1,629,600 $1,677,408 $1,726,650 $1,777,370 $1,829,611 $1,883,419 $1,938,842 $1,995,927 $2,054,725 VACANCY (159,360) (164,141) (169,065) (174,137) (179,361) (184,742) (190,284) (195,993) (201,872)

________ ________ ________ ________ ________ ________ ________ ________ ________EFFECTIVE GROSS INCOME $1,470,240 $1,513,267 $1,557,585 $1,603,233 $1,650,250 $1,698,677 $1,748,558 $1,799,934 $1,852,852EXPENSES (945,048) (973,399) (1,002,601) (1,032,679) (1,063,660) (1,095,570) (1,128,437) (1,162,290) (1,197,159)

________ ________ ________ ________ ________ ________ ________ ________ ________NET OPERATING INCOME $525,192 $539,868 $554,984 $570,553 $586,590 $603,108 $620,121 $637,644 $655,694 Interest (TD) (224,788) (221,469) (217,976) (214,300) (210,431) (206,358) (202,072) (197,561) (192,813) Depreciation (88,571) (88,571) (88,571) (88,571) (88,571) (88,571) (88,571) (88,571) (88,571)

________ ________ ________ ________ ________ ________ ________ ________ ________ Sub-total 211,833 229,827 248,436 267,682 287,588 308,178 329,477 351,512 374,309GAIN FROM SALE

________ ________ ________ ________ ________ ________ ________ ________ ________TOTAL TAXABLE INCOME 211,833 229,827 248,436 267,682 287,588 308,178 329,477 351,512 374,309

AFTER TAX CASH FLOWYEAR 1 2 3 4 5 6 7 8 9 10 11NET INCOME $525,192 $539,868 $554,984 $570,553 $586,590 $603,108 $620,121 $637,644 $655,694DEBT SERVICE (TD) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000) (288,000)Preferred Return 0 0 0 0 0 0 0 0 0REVERSION Capitalized Value 11th year NOI/OAR $7,088,582 Less 1st TD Balance (3,672,626) Less Sales Costs (283,543)

$125,000 0 ________ ________ ________ ________ ________ ________ ________ ________ ________ Before tax cash flow $237,192 $251,868 $266,984 $282,553 $298,590 $315,108 $332,121 $3,482,057 $367,694TAX SAVINGS/(LIABILITY) 0 0 0 0 0 0 0 0 0

________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________CASH FLOW $125,000 $0 $237,192 $251,868 $266,984 $282,553 $298,590 $315,108 $332,121 $3,482,057 $367,694

IRR Calculation -$125,000 $0 $0 $35,579 $37,780 $40,048 $113,407 $44,788 $47,266 $49,818 $522,308Loan Balance 1st TD 4,218,459 4,151,928 4,081,904 4,008,204 3,930,635 3,848,993 3,763,065 3,672,626Depreciated Value for the Building 3,011,429 2,922,857 2,834,286 2,745,714 2,657,143 2,568,571 2,480,000 2,391,429

JY#03&18&14

ASSUMPTIONS

MARKET & COMPETITIVE ANALYSIS While the coming demand for state-of-the-art senior housing is abundantly clear, the development and operations team has drawn on its years of experience and knowledge to focus on best locations to maximize return on investment. Through past experience, thoughtful planning and careful development, The Cottages LLC has developed a formula to ensure that facilities are constructed in areas where demand for the product is greatest, we face limited competition and the median household income can support the rates we prefer to charge. This formula includes identifying areas with close proximities to hospitals, the median household incomes of those areas that are aged 45-65 (the children of these seniors in the area that will be financially supporting their parents), and studying local demographics to understand the potential demand for senior housing, including combining Memory Care in every Assisted Living facility.

Once an area has been identified as a potential building site, we perform an in depth market analysis to not only verify its viability, but to also determine the number of senior units the area can support, the occupancy rate of competitive facilities, and the ability of area residents to meet the financial requirements of housing their parents in high-end senior housing. Included in the analysis is a calculation for the cost of the employees required to staff the facility. The Cottages sets aside reserves to accommodate these jobs while the facility is being leased up and stabilized. This usually takes a maximum of 8-12 months for construction and another 8-12 months to reach occupancy depending upon the market and competition.

The Cottages has identified Blaine County and Hailey, ID more specifically as a desirable market to enter. The Cottages has surveyed a 10-mile radius as the most appropriate distance, given the rural nature of the market, senior residents would move to one of our facilities.

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Hailey IDPhase I - (10) Mile Radius

Site InformationCountyCities nearbyCDFI / NMTC CON

ESRI Data for Primary Market Households 2010 2012 2017Total Population - (10) Mile Radius 6,683 7,035 7,429 50-54 yr 1,695 1,720 1,595 55-64 yr 2,866 3,045 3,197 65-74 yr 1,438 1,565 1,891 75+ yr 684 705 746

$357,807 $375,760$107,342 $112,728$250,465 $263,032($22,981) ($24,134)

44,302$ 49,192$ 52.05% 59.35%

Owner Occupied (65+ yr) 20.50% 435 465 541Renter Occupied (65+ yr) 5.80% 123 132 153

242 32168 91

311 412

Independent Living Analysis 2012 2017IL Competition - (10) Mile Radius Total Beds Miles Census RatesNone

Total Beds 0IL Target Annual Rent 1,800$ (Month) 21,600$ 21,600$ Estimated Additional Income Required $ 36,000 (60% Annual Income) 13,019$ 11,866$ Total IL Units Demanded 25 33 IL Supply on Market 0 0Total IL Demand Available 25 33

Assisted Living Analysis 2012 2017AL Competition - (10) Mile Radius Total Beds Miles Census RatesSafe Haven Homes 12 4.9

Total Beds 12AL Target Annual Rent 4,035$ (Month) 48,420$ 48,420$ Estimated Additional Income Required $ 60,525 (80% Annual Income) 37,544$ 36,391$

99 13232 4219 2525 3412 1213 22

Memory Care Analysis 2012 2017MC Competition - (10) Mile Radius Total Beds Miles Census RatesNone

Total Beds 0AL Target Annual Rent 4,293$ (Month) 51,519$ 51,519$ Estimated Additional Income Required $ 64,399 (80% Annual Income) 41,417$ 40,264$

99 13232 4219 2525 340 0

25 34

BlaineBellevue, Ketchum

Median Home Value (50+ yr)30% Mortgage, Closing CostsNet InvestmentAnnuity 5% / 15 YearAverage Median Household Income (65+ yr)Average Percentage $25,000 - 99,999 (65+ yr)

Affordability Index Owners (65+ yr)Affordability Index Renters (65+ yr)Total Affordability Persons (65+ yr)

NoNo

Total AL Demand Available

Total MC Demand Available

ADL / IADL LimitationsPotential Capture RateOutside MarketTotal MC Units DemandedMC Supply on Market

AL Supply on MarketTotal AL Units DemandedOutside MarketPotential Capture RateADL / IADL Limitations

Reporting 1 Race Population Total 38,042 White 90.4% Black 1.4% Asian 1.5% Hispanic 10.3%

9/18/2013

The Hailey location is 150 N. 1st Ave, with the southwestern border of the site on Main Street. "

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SITE PLAN

820 S. Main, Hailey, Idaho

PDF created with pdfFactory trial version www.pdffactory.com

For a detailed site plan submitted and approved by the Hailey, ID city and planning department visit:

http://bit.ly/1hyTQxz - Hailey Site Plan 2 facilities