SENIOR HOUSING Q3 2020 MARKET INSIGHT NATIONAL SENIOR HOUSING IN THIS REPORT PRIMARY CONTACTS 03 04 06 LISA WIDMIER ARON WILL AUSTIN SACCO JOSHUA HAUSFELD Introduction Demographic Senior Executive Vice President Vice Chairman First Vice President Executive Vice President Institutional Properties Institutional Properties Institutional Properties Institutional Properties Demand Housing National Senior Housing National Senior Housing National Senior Housing National Senior Housing Capital Advisors, Inc. Debt & Structured Finance Debt & Structured Finance Debt & Structured Finance Supply Investment Banking CBRE | Capital Markets [email protected] [email protected] Member FINRA/SIPC [email protected] T +1 713 787 1952 T +1 301 215 4102 CBRE | Capital Markets T +1 713 787 1965 [email protected] T +1 858 729 9890 M +1 858 952 4743 NATIONAL SENIOR HOUSING 07 08 10 INVESTMENT PROPERTIES & DEBT Investment Capitalization Capitalization Returns Rates Rate Comparison ASHAY SHAH ADAM MINCBERG MATT KURONEN TIM ROOT Transaction/ Vice President Vice President Vice President Underwriting Manager Institutional Properties Institutional Properties Institutional Properties 11 12 13 Institutional Properties National Senior Housing National Senior Housing National Senior Housing National Senior Housing Debt & Structured Finance Debt & Structured Finance Debt & Structured Pricing Per Transaction Transaction CBRE | Capital Markets Finance Unit/Bed Activity Activity by Buyer Type ALLISON FORD BRANDON WILLIAMS MICHAEL CREGAN ALLIE SURGES Financial Analyst Production Analyst Production Analyst Client Services Institutional Properties Institutional Properties Institutional Properties Coordinator 14 15 16 National Senior Housing National Senior Housing National Senior Housing Institutional Properties CBRE | Capital Markets Debt & Structured Debt & Structured Finance National Senior Housing Finance CBRE | Capital Markets Senior Occupancy Occupancy Housing Rates & Rent Stack Up SENIOR HOUSING LAND PRACTICE Construction Growth Activity NATALIA MANNING Client Services Coordinator Institutional Properties National Senior Housing MATT MARCHALL ADAM PETERSON 17 18 19 Debt & Structured Finance Senior Vice President First Vice President [email protected] [email protected] T +1 858 404 7202 T +1 310 550 2592 REIT Top Senior COVID-19 Performance Housing Information SENIOR HOUSING Owners & and Resources VALUATION SENIOR HOUSING CORPORATE Operators ADVISORY PROPERTY TAX LEADERSHIP SERVICES CONSULTING SUPPORT RESOURCE 20 21 22 About CBRE CBRE CBRE National Valuation Property Tax JAMES GRABER MIKE WING MITCHELL KIFFE Senior Services Consulting Managing Director, Senior Director, Property Tax Senior Managing Director Housing & Healthcare Services National Senior Housing Housing Service [email protected] [email protected] Debt & Structured Finance T +1 212 715 5725 T +1 214 425 3747 IN THIS REPORT 3 Introduction CBRE National Senior Housing is an industry leader in investment sales, debt originations, and investment banking within the senior housing sector. Our team has transacted more than $15.4 billion (including deals currently under contract) across the nation since 2014 and over $25.6 billion in transaction volume since 2006. We offer a depth of expertise rarely found in the senior housing sector. Our principals, Lisa Widmier, Aron Will, Austin Sacco, and Joshua Hausfeld have 65 years of combined experience in the senior housing industry. The breadth of our experience as developers, institutional investors, appraisers, and owner/ operators has given us the ability to understand a transaction from all sides. CBRE National Senior Housing focuses exclusively on senior housing. We provide a wide variety of services, including: • Investment property sales • Structured debt • Investment banking/Capital raise • Valuation • Property Tax Services • General consulting • Asset management We provide investment opportunities to the marketplace across a broad spectrum of senior housing property types including: • Age-restricted multifamily (55+) • Active Adult • Independent living • Assisted living • Alzheimer’s/memory care • Skilled nursing and continuum of care • Continuing care retirement communities (rental and entry fee) • Post acute/Sub acute care For more information about CBRE National Senior Housing, please visit our website at www.cbre.com/ nationalseniorhousing. 3 | CBRE Q3 2020 SHMI Senior Housing Demand is Driven by 4 Demographic Demand The baby boomers (post-World War II babies) began years to approximately 20.4 years. Additionally, it is turning 65 in 2011 and by 2030, the remainder will estimated that about one out of every four 65-year- also reach age 65 and account for approximately olds will live to be 90 years old, with one of every 10 21% of the total United States population. By 2050, expected to live past 95 years of age.2 the 65-plus age group is estimated to exceed 85.6 million, a more than 50% increase over its estimated Driving this increased life expectancy, and 2020 population (56.1 million). The same figure for consequentially average population age, is the 85-plus group is even higher. By 2050, the 85-plus advancement in public health strategy and medical age group is estimated to exceed 18.5 million, a treatment. Life expectancy in the United States has 177% increase over its estimated 2020 population (6.7 increased by approximately 30 years over the past million). Additionally, by 2035 the 65-plus age group is century, primarily due to the reduction of acute illness estimated to be larger than the population under age threats. However, an unforeseen consequence of longer 18. By 2035, there will be 78.0 million people 65 years life expectancy has been the increased prevalence of and older compared to 76.7 million under the age heart disease, cancer and other chronic diseases as the of 18. The projected growth in the senior population leading causes of death. As Americans age during the will present many challenges to policy makers and next several decades, the elderly population will require programs by having a significant impact on families, a larger number of formally trained, professional businesses, healthcare providers and, most notably, on caregivers as a direct effect of these chronic diseases, the demand for senior housing.1 which often affect independence and mobility.3 One of the primary drivers in trends for the aging Moreover, the problems facing the United States aging population is mortality rates. Survivorship rates have population can be witnessed as a global phenomenon. shown consistent improvement for many decades. In Fifty countries had a higher proportion of people aged the United States in 1972, the average life expectancy 65-plus than the United States in 2010. This number of a 65-year-old was 15.2 years. By 2017, the most is expected to increase to approximately 98 countries recent available data, this metric increased by 5.2 by 2050.1 NUMBER OF PEOPLE AGE 65 & OVER AND 85 & OVER 100 88.0 98.2 82.3 80 74.1 56.4 60 40.3 40 19.0 19.7 Population (millions) Population 20 14.6 5.5 6.7 9.1 0 2010A 2020F 2030F 2040F 2050F 2060F Population 65 + Population 85 + Source: U.S. Census Bureau; 2017 National Population Projects: Summary Table 3: Projections of the Population by Sex and Age for the United States: 2017 to 2060. Released March 2018 historical data per census data. Note: “A” indicates actuals based on 2010 Census and “F” indicates forecasted population estimates released March 2018 (1) U.S. Census Bureau. (2) Social Security Administration, Retirement & Survivors Benefits: Life Expectancy Calculator, 2019. (3) Center for Disease Control and Prevention. The State of Aging and Health in America Report. 4 | CBRE Q3 2020 SHMI Senior Housing Demand is Driven by 5 Demographic Demand (CONT’D) U.S. POPULATION ESTIMATES AGE 75-PLUS 60 14.0% 50 12.0% Population % of Total 10.0% 40 8.0% 30 6.0% 20 4.0% 10 2.0% 75-Plus Population (millions) 75-Plus Population 0 0.0% Population 75+ % of Total Population Source: U.S. Census Bureau; release date: March, 2018 and U.S. Census Bureau, Statistical Abstract of the United States: 2012. Note: “A” indicates actuals based on Census data and “F” indicates forecasted population estimates released March 2018. A Multi-Trillion Dollar Industry Annual United States healthcare services expenditures totaled almost $3.5 trillion in 2017. Healthcare is one of the largest line items in Federal and State Government spending. Healthcare spending is estimated to grow at an average of 5.5% per year from 2018 through 2027. Furthermore, over the same period, healthcare spending is estimated to grow 0.8% faster than GDP per year. As a result, the healthcare portion of GDP is expected to rise from 17.9% in 2017 to 19.4% by 2027.4 NATIONAL HEALTH EXPENDITURES (BILLIONS) $7,000 $6,000 $5,345 $5,651 $5,963 $5,049 $4,767 $4,502 $5,000 $4,255 $4,031 $3,823 $3,649 $3,487 $4,000 $3,347 $3,200 $3,025 $2,875 $3,000 $2,791 $2,000 $1,000 $0 Source: Centers for Medicare & Medicaid Services, actuals published as of 2/2019. The projections incorporate estimates of GDP and spending as of May 2017. NATIONAL HEALTH EXPENDITURES PER CAPITA $20,000 $16,309 $17,102 $15,527 $14,764 $14,035 $13,344 $15,000 $12,702 $12,119 $11,576 $11,174 $10,743 $10,380 $9,996 $9,517 $9,113 $10,000 $8,909 $5,000 $0 Source: Centers for Medicare & Medicaid Services, actuals published as of 2/2019. The projections incorporate estimates of GDP and spending as of May 2017. (4) Centers for Medicare & Medicaid Services, National Health Expenditure Projections 2018 – 2027 https://www.cms.gov/research-statistics-data-and-systems/ statistics-trends-and-reports/nationalhealthexpenddata/downloads/forecastsummary.pdf. 5 | CBRE Q3 2020 SHMI 6 Senior Housing Supply Total Supply NUMBER OF COMMUNITIES BY MAJORITY TYPE Majority MC, Majority 6% AL, 32% Majority NC, Majority 8% IL, 12% CCRCs, 42% NUMBER OF UNITS BY SEGMENT TYPE Majority Majority IL, NC, 23% 47% Majority AL, 23% Majority MC, 7% Source: NIC MAP Data & Analysis Service; Q3 2020 Supply Report, All Markets.