2017 SENIOR LIVING SYMPOSIUM
THE STATE OF SENIOR LIVING & SENIOR LIVING CAPITAL MARKETS 2017
PRESENTED BY:
DAN HERMANN
LISA MCCRACKEN
KEITH ROBERTSON
Head of Investment Banking Ziegler
Senior Vice President Ziegler
Managing Director Ziegler
March 16, 2017
B.C. Ziegler and Company | Member of SIPC & FINRA
THE ZIEGLER COMPANIES, INC. Ziegler is one of the nation’s oldest and largest investment banking firms serving healthcare providers • •
•
•
Full service financial services firm Founded in 1902 with a focus on healthcare since 1928 –
Celebrated 115 years of service in 2017
–
Over 270 professionals and support staff dedicated to serving our clients
National presence, demonstrated execution expertise and broadbased experience Strong underwriting and sales & trading capabilities. –
• •
Primary and secondary market efforts focused exclusively on muni sector
Ziegler’s mission is to provide tailored financial solutions Ziegler’s goal is to be our client’s trusted advisor and partner 2
ZIEGLER INVESTMENT BANKING – FLOW CHART • Ziegler brings a multidisciplinary approach to addressing the issues facing healthcare providers Ziegler Investment Banking Corporate Finance & For-Profit
Not-For-Profit Institutional
Senior Living Finance Practice
Healthcare Finance Practice
Charter School
Education Finance Practices
Religion Finance Practices
Higher Education
Church & PK to 12
General Municipal & Structured Finance Practices
Alternative Capital Solutions Practice
Corporate Finance Practices
Healthcare
FHA/HUD
Senior Living
• Over 100 employees committed to Ziegler Investment Banking 3
SENIOR LIVING FINANCE PRACTICE-NATIONAL COVERAGE REGIONAL AND PRODUCT FOCUS Midwest: (312) 263-0110 Dan Hermann, Senior Managing Director, Head of Investment Banking Tom Meyers, Managing Director Will Carney, Managing Director Steve Johnson, Managing Director Jennifer Lavelle, Director Matt Mulé, Assistant Vice President Michael Montgomery, Senior Associate Reanae Seth, Senior Associate Jett Saponaro, Analyst Matt Schappell, Analyst Adam Vanucci, Analyst Mid-Atlantic: (312) 705: Michael Kelly, Managing Director (7260) Steve Jeffrey, Managing Director (7265) Amy Castleberry, Director (7258) (804) 793: Tommy Brewer, Managing Director (8490) Tad Melton, Managing Director (8487) Adam Garcia, Senior Vice President (8495) Paul Ballas, Analyst (9494) Northeast: (212) 512-0400 Keith Robertson, Managing Director Chad Himel, Director Tyler Simons, Vice President Jason Choi, Senior Associate Southeast Gulf States: Rich Scanlon, Managing Director: 312-596-1572 Brandon Powell, Managing Director: 804-793-8499 Terry Herndon, Director: 312-705-7340 Zane Hendricks, Analyst: 804-479-8496 West: (800) 327-3666 Mary Muñoz, Managing Director Sarkis Garabedian, Director Daren Bell, Senior Vice President Michael Montgomery, Senior Associate
NorthEast
West Midwest
MidAtlantic
Southeast Gulf States
SENIOR LIVING RESEARCH & DEVELOPMENT Lisa McCracken, Director Senior Living Research and Development Susan McDonough, Specialist, Catholic Healthcare Cathy Owen, Assistant Vice President Kat Dymond, Research Analyst Ι Event Coordinator INTEREST RATE PRODUCTS: Craig Naish, Managing Director Scott Determan, Director Maureen Egan, Trading Specialist
FHA/HOUSING: Bill Mulligan, Managing Director Jeremy Frankel, Senior Vice President Bernie Gawley, SVP, Sr HUD Underwriter CORPORATE FINANCE-SL: Bill Mulligan, Managing Director Dan Revie, Senior Vice President Nick Glaisner, Vice President CORPORATE FINANCE-HC: Neil Borg, Managing Director Grant Chamberlin, Managing Director Andy Colbert, Managing Director Chris Hendrickson, Managing Director Chris Rogers, Managing Director
ZIEGLER SENIOR LIVING FINANCE PRACTICE FINANCE TEAM FOR THE NORTHEAST DANIEL J. HERMANN Senior Managing Director Head of Investment Banking Chicago, IL
KEITH E. ROBERTSON Managing Director New York, NY
CHAD HIMEL Director New York, NY
TYLER SIMONS Vice President Chicago, IL
AMY CASTLEBERRY Director Credit Specialist Davidsonville, MD
JASON CHOI Senior Associate Chicago, IL
LISA MCCRACKEN Director, Senior Living Research & Development Chicago, IL SUSAN MCDONOUGH Specialist, Catholic Healthcare Boston, MA
MICHAEL P. MCDANIEL Senior Managing Director Capital Markets Chicago, IL
MARK A. BAUMGARTNER SMD, Chief Investment & Risk Officer Milwaukee, WI
SCOTT M. DETERMAN Director Interest Rate Products Des Moines, IA 5
ZIEGLER’S MASSACHUSETTS SENIOR LIVING EXPERIENCE The Groves in Lincoln (Deaconess Abundant Life Care), Lincoln Edgewood Retirement Community, North Andover
Brooksby Village, Peabody
Carleton-Willard Village, Bedford
Deaconess Abundant Life Care, Concord New England Deaconess Association, Concord Linden Ponds, Hingham
Sherrill House, Boston Fairing Way, South Weymouth
Jewish Geriatric Services, Inc., Obligated Group, Springfield
Seashore Point (Deaconess), Provincetwon
Sherburne Commons, Nantucket
Glenmeadow Retirement Community, (Chestnut Knoll), Longmeadow
Briarwood Retirement Community, Worcester
North Hill, Needham
Bethesda at Evanswood, Kingston AdventCare, Marblehead
6
ZIEGLER’S SENIOR LIVING RESEARCH, EDUCATION & THOUGHT LEADERSHIP •
•
•
Education – 2017: will host a total of 11 Conferences/ Symposiums – Annual Ziegler Senior Living Finance + Strategy Conference – LeadingAge Ziegler National CFO Workshop – Ziegler National Senior Living Investor Workshop SeriesSM External research – LeadingAge Ziegler 150 – CARF Financial Ratios and Trends Publication (Baker Tilly, CARF) – Resident Contract Study – Statewide CCRC Reports (MD; VA; TX) (My LifeSite) Industry communication – Z-News – White papers – Ziegler CFO HotlineSM
•
Internal information and research – Ziegler CCRC National Listing & Profile – Client-requested research – Client education sessions
•
Secondary Market Investor Research – Surveillance updates on current credits – Supports active secondary trading
•
Investor Market Research – ZieglerResearch.com
•
Databases – Industry Trends (e.g. CCaH, Rental CCRCs) – All Senior Living Financings – All New Communities (start-up CCRCs) since 1990 – Senior Living Rated Organizations 7
ZIEGLER - THE UNDISPUTED LEADER IN SENIOR LIVING FINANCINGS Top Lead Managing Underwriters Senior Living Finance Issues 2016 Ziegler
$2,866.4
Piper Jaffray & Co.
656.0
Herbert J. Sims & Co.
466.8
RBC Capital Markets
279.2
Cain Brothers
249.8
BB&T Capital Markets
178.7
Dougherty & Company
176.3
Stifel Nicolaus & Co.
171.6
Northland Securities
123.4
Oppenheimer & Co.
$3,000
$2,800
$2,600
$2,400
$2,200
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
94.0
Millions
Based on full credit given to senior manager of lead-managed underwriting principal volume for senior living transactions completed nationally. Rankings and amounts through Thomson Financial Securities Data, as of 12/31/16
8
AGENDA TOPIC 1
• YOUR KEY STAKEHOLDERS: CONSUMERS & STAFF TOPIC 2
• NFP SENIOR LIVING GROWTH & EVOLUTION TOPIC 3
• DISRUPTORS IMPACTING SENIOR LIVING TOPIC 4 • SENIOR LIVING CAPITAL MARKETS QUESTIONS & ANSWERS
9
RE-BRANDING TO INFLUENCE PERCEPTIONS • fka ABHOW & be.group (CA) • fka PRCN (WA) • fka Ohio Presbyterian Retirement Services (OH) • fka Virginia Baptist Homes (VA) • fka Hunt Communities (NH) • fka United Methodist Memorial Home (IN) • fka Lutheran Social Services of Michigan (MI) • fka The United Methodist Homes (NJ) Source: Ziegler Investment Banking
10
STAFFING: A COMPLEX ISSUE • Many factors contributing to challenges: – An aging population; retirements – Increase in minimum wages – Department of labor overtime ruling – Pressure on immigration rules – Growth of the for-profit sector
Will need to recruit 1.2 million direct care staff by 2025
• Many providers are working together, partnering with schools and universities • Efforts to better understand work preferences, traits of the Millennials • Not just your workforce…workforce of your partners (e.g. impact on construction costs) Source: Ziegler Investment Banking; and Argentum
11
WORKFORCE: A STRATEGIC IMPERATIVE Has your organization had to…
Work w/ temp agencies to fill direct care staff vacancies
53.0%
Limit admissions b/c of staffing shortages
15.6%
0%
10%
20%
30%
40%
50%
60%
Limit admissions b/c of staffing shortages Work w/ temp agencies to fill direct care staff vacancies Source: Ziegler CFO Hotline, June 2016
12
TOPIC 2: NOT-FOR-PROFIT SENIOR LIVING GROWTH & EVOLUTION
TODAY’S RETIREMENT OPTIONS A LOOK AT SENIORS HOUSING SUPPLY Life Plan Communities Adult Day Programs
• 1,961 communities
% NFP 80%
600,000 units 51%
• 4,800 programs 289,400 participants/day
Hospice
• 4,000 agencies
Nursing Homes
• 15,600 homes
26%
1.34 mill discharged/yr.
Freestanding Memory Care
• 1,100 communities
Assisted Living/ Residential Care
• 30,200 communities
1,663,000 units
24%
53,000 units
22%
1million residents
17% 15%
Home Health
• 12,400 agencies
4.9 mill discharged/yr.
IL Housing
• 1,100 properties
184,000 units
Sources: Ziegler National CCRC Listing & Profile, LeadingAge, NIC MAP® Data and Analysis Service, The National Center for Health Statistics, Centers for Medicare and Medicaid Services
3% 14
RESIDENTIAL & NON-RESIDENTIAL OPTIONS FOR SENIORS AGE
75+ 65+
70+
Long-term Care
Preventative
Geriatric Assessment
Senior Health & Wellness Center
Wellness Program *Community Based Services
Hospital
Life Plan Community
AACs
Senior Center Services
90+
85+
Continuing Care at Home
Independent Living Case Management
Assisted Living
Adult Day Services
Memory Support Assisted Living
Respite Care
PACE Programs
Memory Support Skilled Nursing
Subacute Rehab
Skilled Nursing Home Health Care
Transitional Medicare Hospice
Acute
*Transportation; Information/Referral; Counseling; Meals-on-Wheels; Integrated Day Care; Homemaker/Chore/Housekeeping; and Emergency Response System 15 Adapted from Greystone Communities’ Continuum of Care Chart, 2006
15
2016 LEADINGAGE ZIEGLER 150 • Represents the Largest 150 Not-for-Profit Sr Living Multi-site Providers • Range from 18,527 market-rate units (National Senior Campuses) to 588 units (St. John’s Lutheran Ministries)
Accessible via Ziegler & LeadingAge websites Source: 2016 LeadingAge Ziegler 150
• Represents a total of 1,253 market-rate communities 16
2016 LZ 150 ANALYSIS OF THE DATA: SYSTEM HEADQUARTERS HEADQUARTERS’ LOCATIONS BY SIZE (TOTAL UNITS)
25 Top Top 100 50 10 Top 150
3,250+ Units (Top 10)
1,350+ Units (Top 50) 780+ Units (Top 100)
1,970+ Units (Top 25)
588+ Units (Top 150)
Source: 2016 LeadingAge Ziegler 150 Publication (data as of 12/31/15)
17
2016 LEADINGAGE ZIEGLER 150 THE NATION'S LARGEST NOT-FOR-PROFIT MULTI-SITE SENIOR LIVING ORGANIZATIONS 2015 Rank
2016 Rank
MASSACHUSETTS PROVIDERS Units (as of 12/31/15)
Communities (as of 12/31/15)
System Name
State
Total
ILU
ALU NCB Total LPC
IL
AL
NH
38
36 Hebrew SeniorLife
MA
1,764
659
159
946
4
2
1
0
1
50
NR Covenant Health
MA
1,476
0
364
1,112
12
0
0
4
8
142 133 The Loomis Communities
MA
634
426
74
134
4
3
1
0
0
149 135 Deaconess Abundant Life Communities
MA
598
377
138
83
5
3
1
1
0
15
15
0
0
0
15
13
2
0
0
25
4
3
9
9
1
1 National Senior Campuses
MD
18,527
15,873 1,370 1,284
11
8 The Kendal Corporation
PA
3,726
2,522
24
21 Volunteers of America
VA
2,404
531
System
666
723 1,150
Communities in Massachusetts
National Senior Campuses
Brooksby Village, Linden Ponds
The Kendal Corporation
Lathrop Community
Volunteers of America
Concord Park, Nashoba Park
Source: 2016 LeadingAge Ziegler 150 Publication (data as of 12/31/15)
538
18
INTENSE FOCUS ON GROWTH • While not at pre-recession levels, NFP growth is increasing from recent years – Expansions to existing campuses – Growth through affiliations and acquisitions – New location development (LPCs, IL/AL, AL/MC) • Growth through development of satellite campuses
• Providers continue to grow and diversify HCBS platforms • Significant organizational resources are being devoted to changes in healthcare, post-acute and payment reform
Source: Ziegler Investment Banking
19
2016 LZ 150 GROWTH: GROWTH OF LARGEST 100 SYSTEMS, COMBINED UNIT MIX FROM 1980 (EXCLUDES EVANGELICAL LUTHERAN GOOD SAMARITAN SOCIETY) 60,000 ILU
ALU
NCB
All Units
Partial histories used if complete data was unavailable
55,000 50,000
All other organizations pre-1980 National Senior Campuses
45,000 40,000
Units
35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1980
1985
1990
1995
2000
2005
2010
2015
Year Source: 2016 LeadingAge Ziegler 100 Publication (data as of 12/31/15)
20
A PARADIGM SHIFT IN THE NFP SECTOR
THE PAST Pulled Toward Growth
THE FUTURE
Growth Driven Internally
21
NFP SENIOR LIVING GROWTH & EVOLUTION IN 2017
Expansions/Repositioning
Most activit
Sponsorship Transitions HCBS Offerings Satellite Campuses
New Community locations
Least activity 22
GROWTH PLANS OVER THE NEXT TWO YEARS Percentage of LZ 150 who plan to grow through… 76.5%
Expansion or repositioning of existing community
71.5%
36.0%
New community locations (affiliations or development)
0.0% 2016 Source: 2015 & 2016 LeadingAge Ziegler 150 Publications
38.0%
20.0% 40.0% 60.0% 80.0% 100.0% 2015 23
COMMITMENT TO AFFORDABLE HOUSING FOR SENIORS 140000 120000
125,277
Total Units
100000 80000 60000
68,086
40000
• Among the LeadingAge Ziegler 150, 43% have affordable housing communities for seniors
20000 0 Affordable Housing Market Rate Units Units Source: 2016 LeadingAge Ziegler 150 Publication (data as of 12/31/15)
24
2016 LEADINGAGE ZIEGLER 150
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 34 70 99
2016 LZ 150 Rank
Rank
LARGEST PROVIDERS OF MARKET-RATE AND AFFORDABLE UNITS
System Name
2 1 34 8 24 3 4 5 NR NR 6 16 NR 7 15 13 9 19 14 10 38 50 NR
The Evangelical Lutheran Good Samaritan Society National Senior Campuses National Church Residences Retirement Housing Foundation Volunteers of America ACTS Retirement Services, Inc. Presbyterian Homes and Services Benedictine Health Mercy Housing Inc. Christian Church Homes of Northern California Covenant Retirement Communities Westminster Communities of Florida Senior Housing Assistance Group Ascension Senior Living Cornerstone Affiliates Presbyterian Senior Living Lifespace Communities, Inc. Pacific Retirement Services Lutheran Senior Services Trinity Senior Living Communities Hebrew SeniorLife Covenant Health Jewish Community Housing for the Elderly
Units (as of 12/31/15)
Source: 2016 LeadingAge Ziegler 150 Publication (data as of 12/31/15)
State
Total
ILU
ALU
SD MD OH CA VA PA MN MN CO CA IL FL WA MO CA PA IA OR MO MI MA MA MA
19,144 18,527 18,140 15,814 12,436 7,933 7,349 5,270 5,268 5,052 5,015 4,843 4,797 4,748 4,572 4,503 4,052 3,901 3,785 3,745 2,529 1,476 1,117
5,013 15,873 779 2,636 531 5,591 3,503 625 0 0 3,146 2,027 0 925 1,984 1,808 3,069 2,116 1,614 1,184 659 0 0
2,286 1,370 539 868 723 901 2,127 1,484 0 0 885 476 0 833 646 499 154 333 709 633 159 364 0
NCB
AFF
10,523 1,322 1,284 0 542 16,280 595 11,715 1,150 10,032 1,441 0 1,426 293 3,161 0 0 5,268 0 5,052 984 0 751 1,589 0 4,797 2,990 0 688 1,254 1,127 1,069 829 0 407 1,045 1,003 459 1,928 0 946 765 1,112 0 0 1,117 25
UNIT GROWTH NOT JUST FROM BUILDING NEW UNITS, BUT ALSO FROM SYSTEM GROWTH
Sponsorship Transitions
Affiliations Acquisitions Dispositions
• Currently the primary mode of growth for residential settings among not-forprofit senior living providers – Systems coming together – Two smaller organizations joining to form larger – Single-sites joining a system
26
DRIVERS FOR NFP SENIOR LIVING CONSOLIDATION
2016-2017 Complexities of Healthcare
Leadership Turnover Competition Ability to Attract Talent/Wrkforce Mgmt.
Technology Demands Reinvestment Requirements Hospital Consolidation Pressure
Financial Pressure Diversify Service Lines
Growth Capital Needs Source: Ziegler Investment Banking
27
NOT-FOR-PROFIT CHANGE OF OWNER/SPONSOR AFFILIATIONS, DISPOSITIONS, ACQUISITIONS, CLOSURES
Total by # of Transactions & # of Communities 100 91 80
80
63
60 40 20
36
36 15
29 12
0 2010
2011
24 22 2012 Transactions
Note: Includes market-rate communities; excludes government subsidized Source: Ziegler Investment Banking 12/31/16
52
55
60
2014
2015
2016
34 2013
Market-Rate Communities 28
SPONSORSHIP TRANSITIONS BY CATEGORY 2010-2016 BY NO. OF COMMUNITIES 100% 90% 80%
11.8% 2.9%
70% 60%
6.6%
4.5% 4.5%
8.8% 27.8%
10.5%
13.8% 2.5%
15.4% 3.3%
46.7% 55.9%
39.6%
68.2%
50%
63.2%
67.5%
61.1%
40% 30% 20% 10%
46.7% 29.4%
41.7% 22.7%
0% 2010
2011
NFP to NFP Source: Ziegler Investment Banking, 12/31/16
2012 NFP to FP
11.1% 2013
17.5%
16.3%
2014
2015
Closure of NFP
FP to NFP
2016
NOT-FOR-PROFIT CHANGE OF OWNER/SPONSOR AFFILIATIONS, DISPOSITIONS, ACQUISITIONS, CLOSURES
NFP to NFP Sponsorship Transitions Only
40
36
35 30 25 20 15
18 12 7
10 5
11 5
4
7
7
5
4
2010
2011
2012
2013
0
Transactions Note: Includes market-rate communities; excludes government subsidized Source: Ziegler Investment Banking 12/31/16
11 2014
14
2015
19
2016
Market-Rate Communities 30
SELECT RECENT NFP TO NFP SPONSORSHIP TRANSITIONS: 2015-2016
Source: Ziegler Investment Banking
31
MASSACHUSETTS ACTIVITY • Since 2009, there have been nine sponsorship transitions among not-for-profit providers in Massachusetts NFP Change of Owner/Sponsor: Massachusetts FP to NFP, 1 Closure, 2 NFP to FP, 2
NFP to NFP, 4
Source: Ziegler Investment Banking
32
MANAGEMENT & FOR-PROFIT SUBSIDIARIES • Roughly 36% of the LZ 150 manage another community – The path to affiliation for some
• Some providers have developed consulting, development or management subsidiaries
33
NFP SUCCESS BEYOND RESIDENTIAL SETTINGS
Source: 2016 LeadingAge Ziegler 150
70% of the LZ150 with HCBS are below $10 million annually in HCBS revenue
34
TOPIC 3: DISRUPTORS IMPACTING NOT-FOR-PROFIT SENIOR LIVING
INCREASING COMPLEXITY IN POST-ACUTE Sophistication • Do you have the scale needed to compete in the local healthcare marketplace? • What expertise do you have regarding the ACA and payment reform (bundles, etc.)? • Are you technologically advanced with data analytics, outcome-based reporting, etc.? Partnerships • Are you able to compete and be a player in the new models of care emerging as a result of the ACA? • Are you engaged in any joint ventures, post-acute networks or bundled-payment agreements? 36
SKILLED NURSING & POST-ACUTE: THREAT OR OPPORTUNITY? • Some providers have concerns: • Reimbursement pressures • Growth of bundles & managed care • Rising labor costs • Declining occupancy • Patients being sent directly home • Some providers see opportunity: • New investment groups are forming • Rise of the hospitality-focused post-acute market • Overwhelming demographic tide that will eventually need services at some point in the future • Growth in regional operators 37
ZIEGLER CFO HOTLINE: POST-ACUTE ACTIVITIES Is your organization experiencing any of the following regarding your healthcare setting? (% Yes Responses) Patients with a higher level of acuity than in years' past
86.5%
Decreased length of stays in skilled care
84.6%
Narrowing of networks from area hospitals, physician groups
51.9%
Increase in consumers w/ treatment plans that skip skilled care altogether
44.2% 0%
Source: Ziegler CFO Hotline, August 2016
20%
40%
60%
80%
100% 38
SKILLED CARE & POST-ACUTE MARKET Skilled Nursing Operators Single-site operators, 41%
Operators w/ 29 properties, 26%
Operators w/ 10 or more properties, 33% Source: National Investment Centers for Seniors Housing & Care
39
CONTINUED FOR-PROFIT GROWTH • For-profits continue to grow nationally with new location development – Largely Independent Living, Assisted Living, Memory Care – Some hospitality-based post acute (e.g Mainstreet)
• For-profits are growing in residential services as well as home & community-based services • Not-for-profits, however, consistently outperform forprofits with regard to occupancy
40
FOR-PROFITS DOMINATE THE BROADER SECTOR AND ARE RAPIDLY GROWING
ForProfit
NFP
Govt. Data Sources: Ziegler National CCRC Listing & Profile, LeadingAge, NIC MAP® Data and Analysis Service, The National Center for Health Statistics, Centers for Medicare and Medicaid Services
72%
25.5%
2.5% 41
SENIOR LIVING FP SECTOR: BENCHMARK SENIOR LIVING • Benchmark Senior Living, Wellesley, MA – 50 Communities in 7 states • CT, MA, ME, NH, PA, RI, VT • 28 in Massachusetts
– 4,587+ Total units • Independent Living: 5% • Assisted Living: 61% • Memory Care: 34% http://www.benchmarkseniorliving.com
Source: ALFA 2015 Largest Senior Living Providers
42
FOR-PROFIT DEVELOPMENT REMAINS STRONG Senior Housing Construction by Profit Status; MAP31 4Q05 – 4Q16 Number of Properties With Construction
350 300
For-Profit
250 200 150 100 50
Not-For-Profit
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 43 Source: NIC MAP® Data & Analysis Service, as of 12/31/16
© National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org
43
FOR-PROFIT GROWTH NOT JUST AL/MEMORY CARE INDEPENDENT LIVING COMING ON STRONG Construction vs. Inventory; MAP31 Seniors Housing | 4Q05 – 4Q16 12% Assisted Living* 10% 8% Independent Living* * Excludes not-for-profits and CCRCs
6% 4%
Not-for-Profits
2% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
44 Source: NIC MAP® Data & Analysis Service, as of 12/31/16
© National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org
44
MASSACHUSETTS HEADLINES: FOR PROFIT GROWTH February 22, 2017
45
NATIONAL OCCUPANCY IS GENERALLY HIGH Seniors Housing Occupancy by Profit Status; MAP31 4Q05 – 4Q16 95%
93% Not-For-Profit
91%
For-Profit
89%
87%
85%
83% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: NIC MAP® Data & Analysis Service, as of 12/31/16
© National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org
46
LIFE PLAN COMMUNITIES EVEN BIGGER ADVANTAGE LPC Occupancy by Profit Status; MAP31 4Q05 – 4Q16 95% 93% Not-For-Profit 91%
5.44%
89% 87%
For-Profit 85% 83% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: NIC MAP® Data & Analysis Service, as of 12/31/16
© National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org
47
PRESSURES IMPACTING SKILLED NURSING OCCUPANCY
Source: National Investment Center for the Seniors Housing & Care Industry | Skilled Nursing Data Report; data through June 2016
48
TECHNOLOGY: PRESSURE TO KEEP UP
Data Analytics
Care coordination Consumerdriven Operational Efficiencies
Source: Ziegler Investment Banking
ZIEGLER LINK•AGE FUND Aging in Place
Coordination of Care
Chronic Disease Management
Reduction of Hospitalizations and Readmissions
Prevention and Wellness Strategies
Government Funded Programs / Public Health Related Matters
Representative Business Models Healthcare Services • • • • •
Behavioral Change Management Capitated Physician Models Concierge Medicine Homecare 2.0 Hospice and Palliative Care
Healthcare IT • • • • •
Clinical Decision Support Medication Management Population Analytics Remote Monitoring Telehealth
Other • Institutional Pharmacy • Medicare Advantage / Dual Eligible Plans • Post-acute Care Diagnostics and Therapeutics
ZLF Fund
Source: Ziegler Link.age Longevity Fund
(RECENTLY ACQUIRED BY AFAM)
THE POTENTIAL NOT-FOR-PROFIT FULL-SERVICE SENIOR LIVING MODEL Continuing Care at Home
Market Rate IL – hospitality focus
Home Health
Moderate Independent Living Assisted Living
Services
Age
Home Care Concierge
Memory Care
PACE
Skilled Nursing, post-acute
Hospice Skilled Nursing, Medicaid
Adult Day
Government Subsidized
Home Maintenance
Income
Maximization of partnerships in the region Source: Ziegler Investment Banking
51
TOPIC 4: THE SENIOR LIVING CAPITAL MARKETS
NOT-FOR-PROFIT SENIOR LIVING FINANCINGS Very few financings completed in the 12 months from July 2008 to July 2009 2010 & 2009 volume focused on relieving pent-up demand created during the crisis Estimated Other/Bank Credit
$8,000
$1,500
$7,000
$1,660
$2,543
$1,974
$1,435
$3,802
$2,718
$2,795
$3,665
$2,637
$1,801
$2,480
$7,394
$5,911
$4,138
$3,032
$3,160
$3,780
$2,860
$2,849
$4,982
$5,077
$3,524
$3,142
$2,293
$2,320
$2,506
$2,246
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$0
$1,490
$1,000
$1,577
$2,000
$1,377
$3,000
$1,148
$4,000
$1,066
$5,000
$475
(In Millions)
$6,000
$5,691
• •
Other Bank Credit
Par Volume
SOURCE: Thomson Financial Securities Data, as of 12/31/16, Ziegler Investment Banking, Volume & Other Bank Credit Estimates thru 12/31/16
53
BANK CREDIT A RAPIDLY GROWING PART OF MARKET Letters of credit backing tax-exempt VRDB’s predominated through 2008
Letter of Credit Backed VRDB's & Other Bank Credit Volume 1990 - 2016 $3,000 Other Bank Credit (Est.)
•
•
Financial crisis in 2009 significantly reduced LOC volume (BASEL III/regulatory issues, bank credit allocation considerations, rating downgrades, etc.) Since 2009, direct bank purchases of tax-exempt debt, taxable construction loans have replaced VRDB’s
Volume Millions
$2,500
Letter of Credit Backed
$2,000
$1,500
$1,000
$500
$-
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
•
SOURCE: Thomson Financial Securities Data, as of 12/31/16, Ziegler Investment Banking, Other Bank Credit Estimates thru 12/31/16
54
NON-PROFIT SENIOR LIVING CREDIT RATING TRENDS • Compared with one year ago, the sector experienced a net loss of one rating; there is also one less organization rated by multiple rating agencies. Rated Bond Issues Through 3/3/17
NON-PROFIT SENIOR LIVING CREDIT RATING TRENDS CUMULATIVE SENIOR LIVING RATINGS
Fitch
129
180
S&P
40
160
Moody’s
2
140
*171
120
*12 organizations have debt rated by more than one rating agency. Therefore, there are a total of 159 organizations with rated debt.
Moody's
S&P
Fitch
100 80 60 40
•
All of these agencies publish guidelines for their ratings CCAC, Fitch & S&P publish rating category medians for key ratios
20 0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
•
NOTE: Excluded from the above totals: 4 ratings based on bond insured program. SOURCE: Ziegler Investment Banking, as of 3/3/17
55
THE RATINGS ENVIRONMENT • Senior living credits predominantly in “BBB” category
• Senior living credits predominantly in “BBB” category
Ratings Distribution by Category S&P
Fitch
Ratings Category Breakdown Systems
Moody's
100%
80
90%
67
70 60
80%
50
70% 37
40
60%
30 20 10 0
Single Sites
16 0 A Category Ratings
50%
25
19
40% 2
BBB Category Ratings
5
0
BB Category Ratings
30% 20% 10% 0% A
SOURCE: Ziegler Investment Banking, as of 3/3/17
BBB
BB 56
HISTORICAL INTEREST RATES UNIQUE MARKET OPPORTUNITY 30-yr "AAA" MMD Histogram 1990 - 2017 (Frequency "Weekly") 40 35
Frequency
30
3/3/17 MMD: 3.16%
25 20 15 10
0
1.95 2.05 2.15 2.25 2.35 2.45 2.55 2.65 2.75 2.85 2.95 3.05 3.15 3.25 3.35 3.45 3.55 3.65 3.75 3.85 3.95 4.05 4.15 4.25 4.35 4.45 4.55 4.65 4.75 4.85 4.95 5.05 5.15 5.25 5.35 5.45 5.55 5.65 5.75 5.85 5.95 6.05 6.15 6.25 6.35 6.45 6.55 6.65 6.75 6.85 6.95 7.05
5
30-yr "AAA" MMD Source: Thomson Financial Municipal Market Monitor, as of 3/3/17
57
Jan-2010 Mar-2010 May-2010 Jul-2010 Sep-2010 Nov-2010 Jan-2011 Mar-2011 May-2011 Jul-2011 Sep-2011 Nov-2011 Jan-2012 Mar-2012 May-2012 Jul-2012 Sep-2012 Nov-2012 Jan-2013 Mar-2013 May-2013 Jul-2013 Sep-2013 Nov-2013 Jan-2014 Mar-2014 May-2014 Jul-2014 Sep-2014 Nov-2014 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2015 Nov-2015 Jan-2016 Mar-2016 May-2016 Jul-2016 Sep-2016 Nov-2016 Jan-2017 Mar-2017
ALL MUNICIPAL BOND FUNDS: INFLOWS/OUTFLOWS All Municipal Bond Fund Monthly In/Outflows
In/Outflows (000s) $6,000,000
$4,000,000
$2,000,000
$0
-$2,000,000
-$4,000,000
-$6,000,000
-$8,000,000
-$10,000,000
-$12,000,000
Source: LipperFMI Data Service, as of 3/1/17 58
1.00 01/02/15 01/16/15 01/30/15 02/13/15 02/27/15 03/13/15 03/27/15 04/10/15 04/24/15 05/08/15 05/22/15 06/05/15 06/19/15 07/03/15 07/17/15 07/31/15 08/14/15 08/28/15 09/11/15 09/25/15 10/09/15 10/23/15 11/06/15 11/20/15 12/04/15 12/18/15 01/01/16 01/15/16 01/29/16 02/12/16 02/26/16 03/11/16 03/25/16 04/08/16 04/22/16 05/06/16 05/20/16 06/03/16 06/17/16 07/01/16 07/15/16 07/29/16 08/12/16 08/26/16 09/09/16 09/23/16 10/07/16 10/21/16 11/04/16 11/18/16 12/02/16 12/16/16 12/30/16 01/13/17 01/27/17 02/10/17 02/24/17
HISTORICAL INTEREST RATES Senior Living Credit Spreads (2015 YTD – Weekly)
8.00
7.00 30-YR NR New Campus
6.00 30-YR NRInstitutional
5.00 30-YR NRRetail
4.00 30-YR "BBB"
3.00 30-YR "A"
2.00 MMD 30-YR "AAA"
SOURCE: Ziegler Investment Banking, as of 3/3/17 NR = Non-Rated
59
HISTORICAL INTEREST RATES (SENIOR LIVING) Treasury Yield Curve 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%
3 Month 1 Year Ago 0.26% 4 Weeks Ago 0.53% 1 Week Ago 0.49% Friday 3/3/17 0.69%
6 Month 0.48% 0.64% 0.65% 0.84%
SOURCE: Ziegler Investment Banking, as of 3/3/17
1 Year 0.65% 0.79% 0.75% 0.96%
3 Year 0.98% 1.46% 1.38% 1.59%
5 Year 1.38% 1.88% 1.80% 2.01%
7 Year 1.68% 2.21% 2.12% 2.30%
10 Year 1.88% 2.40% 2.31% 2.47%
30 Year 2.70% 3.00% 2.95% 3.07%
60
HISTORICAL INTEREST RATES (SENIOR LIVING) Variable Rate Demand Bonds vs MMD 30-Yr “AAA” vs 30-Yr NR Institutional (1990 YTD - Weekly) VRDBs 0.02% 8.00% 2.20% 0.62%
Minimum: Maximum: Average: Current:
12.00
MMD 30 YR "AAA" 1.95% 7.35% 4.82% 3.16%
30-YR NR Institutional 3.85% 10.75% 6.94% 5.41%
10.00 8.00 6.00 4.00 2.00
Variable Rate Demand Bonds SOURCE: Ziegler Investment Banking, as of 3/3/17
30 Year "AAA" MMD
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0.00
30-Yr NR-Institutional 61
QUESTIONS & ANSWERS
B.C. Ziegler and Company is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, 37219-2417. Web site: www.nasba.org. Attendees are eligible to receive credits for attendance at the 2017 LeadingAge Massachusetts & Ziegler Senior Living Symposium. No prerequisites are required for this group-live educational conference. Program level is basic. For more information regarding administrative policies such as complaint and refund, please contact our offices at 312-705-7262. Fees for this workshop are detailed on the registration form. ©2017 B.C. Ziegler and Company | Member SIPC and FINRA
ABOUT ZIEGLER •
Ziegler is a privately-held investment bank, capital markets, wealth management and alternative investments firm
•
A registered broker dealer with SIPC & FINRA
•
Ziegler provides its clients with capital raising, strategic advisory services, equity & fixed-income trading, wealth management and research
•
Founded in 1902, Ziegler specializes in the healthcare, senior living, educational and religious sectors as well as general municipal finance
DISCLAIMER Investment banking services offered through B.C. Ziegler and Company. FHA mortgage banking services are provided through Ziegler Financing Corporation which is not a registered broker/dealer. Ziegler Financing Corporation and B.C. Ziegler and Company are affiliated and referral fees may be paid by either entity for services provided. This presentation was prepared based upon information provided to Ziegler Investment Banking (ZIB) and contains certain financial information, including audited and unaudited information, certain statistical information and explanations of such information in narrative form (the “Information”). ZIB believes this information to be correct as of the date or dates contained herein. However, the financial affairs change constantly, and such changes may be material. Today’s discussion may contain forward-looking statements, which may or may not come to fruition depending on certain circumstances, including those outside the control of management. Please be advised that ZIB has not undertaken, assumed no duty and are not obligated to update the Information. In addition, please be advised that past financial results do not predict future financial performance. The material in this presentation is designed to present potential financing structures and options for discussion, however it does not represent a commitment to underwrite bonds, place debt or provide financing and thus should not be relied upon as a promise of financing or underwriting commitment. 63
