THERE ARE FIVE COMPELLING REASONS TO INVEST IN SENIOR HOUSING TODAY:

1. High Cash-on-Cash Returns with High Internal Rates of Return

Due to the varying combinations of real estate, service programming and facility
designs, the senior housing market currently provides cash-on-cash returns ranging
from 7% to 11% free and clear. Internal rates of return have ranged from 10% to
20%.
2. Demand Drivers are Positive and More Certain than Other Property Types
The significant growth in the senior population has begun as the aging baby
boomers are entering their retirement years. The demographic growth of seniors is
forecasted to affect over 25% of the population in Canada and the United States
during the next decade, evidencing strong support for the demand for senior
housing.
The demand for senior housing is not only secular, that is driven by demographics,
but it is also (with the exception of active adult communities) need-influenced or
need-driven, that is, not discretionary and required by the chronic care issues of
aging. It is hard to make the same objective case for growing demand for office,
retail and industrial properties.
Demand for senior housing is also much less impacted by "technology risk". This
very real risk will impact retail, commercial, and industrial property types to a much
greater extent over the foreseeable future, and cause the investment analysis to be
much less certain with regard to understanding and measuring demand.
3. The Business Cycle is Independent
Like all property types, senior housing has its own business cycle. Demand for
senior housing is much less affected by the rise and fall in employment and the
expansion and contraction of GDP. Today's seniors are better equipped financially to
live out their senior years with the support of retirement plans, stock portfolios,
insurance benefits and CPP programs. Seniors that move to these properties are not
employed.
While demand is moderately impacted by severe inflation and an inability to sell
residential real estate, social security payments received by seniors and the needdriven element of the product are two substantial cushions to the traditional
economic dislocations that affect yearly demand for other property types. The
business cycle for senior housing is almost exclusively dependent upon the supply
and demand of capital and for the various product types. For the seniors'
apartment, independent, CCRC, and dementia units, demand exceeds supply in
most markets nationwide.

Even in markets that have reached temporary saturation for assisted living, many of
the national operators have maintained 88% occupancy rates or better. There is
considerable evidence that the more sophisticated companies with newer properties
are taking market share from the smaller, older properties. There is a strong
argument that adding independent living properties to a multi-family portfolio will
decrease risk for a given level of return or increases return for a given level of risk,
since these assets are not highly correlated.
4. Industry Cost Structure Creates Excess Returns for Additions and Expansions
The industry's high fixed-cost structure, which can create problems where there is a
large drop in occupancy, also provides significant, value-added opportunities. Small
additions to a property can create significant increases to net operating income and
produce leveraged internal rates of return well over 30% with little additional risk to
the property. For example, an existing 100-unit independent living property that
adds a 30-unit assisted living wing has very little fixed or variable operating
expense other than incremental nurse's aide wages, utilities and food. Due to the
extremely high revenue per unit (unlike apartments), there is a significant increase
to net operating income.
In this specific example, NOI can increase by $500,000 per year on an additional
equity investment of $2,500,000 above the equity investment in the property,
producing a doubling in the value of the additional equity investment at an 11%
capitalization rate.
5. The Current Market is Inefficient which Provides Opportunities To Make AboveMarket Returns Through Sophisticated Research
Unlike the other property types which have several national information reporting
and data tracking services at both the national and local market levels, senior
housing has been slow to develop these efforts.