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HomeMy WebLinkAboutVolume 2_FEIS Appendices_Appendix C - JLL Market Study _ UpdateAppendix C JLL Market Study & Update Market Study: Rye Brook Senior Living 900 King Street Rye Brook, New York 10573 Prepared for: George Comfort & Sons, Inc. JLL File Number: 1400-17-133746 700 E. Campbell Road, Suite 265, Richardson, TX 75081 Phone: 972 960 1222 Fax: 972 960 2922 October 25, 2017 Mr. Karl D. Mittermayr Vice President George Comfort & Sons, Inc. 200 Madison Avenue New York, New York 10016 Subject: Rye Brook Senior Living 900 King Street Rye Brook, New York 10573 Pursuant to your request, we have completed a Market Study for the above referenced property. Accompanying this letter is a self-contained report that includes a detailed identification of the property, factual data concerning the property and its surroundings, comparable market data, appropriate analyses, and conclusions and recommendations. Please note that JLL is not part of the development team, owner of the site, nor affiliated with any member of the development team engaged in the project. The scope of the assignment consists of an overview of the project, the delineation and analysis of the primary market area (PMA), an analysis of supply conditions, pipeline research, and demand estimates. Summary of Conclusions Based upon our analysis, we conclude there to be sufficient demand to support the development of the subject as proposed with 160 independent living units, 12 independent living duplexes (24 cottages), and 85 assisted living beds (including a 30-bed memory care component). Development should proceed as planned. We appreciate this opportunity to provide our advisory services to George Comfort & Sons, Inc.. JLL Valuation and Advisory Services, LLC Jon Cruse Senior Vice President Telephone: 214-396-5463 Email: jon.cruse@am.jll.com Brian L. Chandler, MAI, CRE, FRICS Executive Vice President Telephone: 214-396-5423 Email: brian.chandler@am.jll.com Table of Contents 2 Rye Brook Senior Living Table of Contents Page No. Letter of Transmittal 1 Table of Contents 2 Summary of Salient Facts and Conclusions 3 Regional Economic Analysis 5 Market Area Description and Analysis 12 Site Description and Analysis 26 Improvement Description and Analysis 36 Legal Constraints Analysis 39 Seniors Housing Market Analysis 41 Supply and Demand Analysis 57 Summary of Salient Facts and Conclusions 3 Rye Brook Senior Living Summary of Salient Facts and Conclusions George Comfort & Sons, Inc. has commissioned this study to assess the market-based opportunity for a proposed seniors housing community to be located in the village of Rye Brook, Westchester County, New York. The subject, which will be known as Rye Brook Senior Living, will be situated on a 17.8-acre site at 900 King Street. The site currently consists of an existing two and three-story office building. Plans are to demolish the building and construct a senior housing community with a total of 160 independent living units and 85 assisted living beds (including a 30-bed memory care component). Note that plans are also for the development of 12 free-standing independent living duplexes (24 cottages) along the western side of the main building. Rendering of Rye Brook Senior Living Pertinent Dates Dates pertinent to this assignment are as follows: Item Date Report Date October 25, 2017 Effective Date October 11, 2017 Pertinent Dates Inspection Sean M. Reilly MAI has previously conducted an inspection of the development site and neighborhood. Although Jon Cruse and Brian L. Chandler, MAI, CRE, FRICS have not personally inspected the development site, both are experienced in the market familiar with the competitive landscape. Summary of Salient Facts and Conclusions 4 Rye Brook Senior Living Conclusions and Recommendations Pertinent conclusions and recommendations are as follows: Market Area Description and Analysis Considering population density, commuting patterns (drive times), physical and psychological barriers, and the concentration of competing facilities’ located throughout the area, we have concluded the appropriate primary market area (PMA) to be the area constrained by the following zip codes: 10504, 06831, 06830, 105773, 10580, 10528, 10543, 10804, 10709, 10583, 10605, 10606, 10601, 10607, 10523, 10603, 10604, and 10577. In this market, we believe that the majority of demand will come from the PMA. No measurable draw from a secondary market area is forecast. The PMA, which is supported by 10 and 15-minute drive times, encompasses all and/or parts of Rye Brook, Port Chester, Harrison, Purchase, Armonk, Scarsdale, Rye, Valhalla, Elmsford, Eastchester, Mamaroneck, and White Plains in New York, as well as Greenwich, Connecticut. The primary land use in the area is single-family residential and the area is approximately 85% developed. The PMA is expected to experience slightly below average population growth. The slow growth rate is attributable to the nearly fully built out nature of the area. It has above average income levels. The area is considered to be in a stage of growth. Between 2017 and 2021, the market area is forecast to experience growth in demand for seniors housing, but at a below average rate relative to the nation as a whole. Housing values in the PMA are above average. Supply and Demand Analysis The PMA is a growing market with high barriers to entry. Our analysis shows that the assisted living (including memory care) and independent living segments to be under-supplied at this time. This is supported by the higher occupancies reported throughout each segment (95% for assisted living (including memory care), 92% specific to memory care, and 93% for independent living). Several known pipeline projects are forecast to come online within the next 24 to 36 months. These projects combine for a total of 399 independent living units (including the subject’s 184 independent living units) and 346 assisted living/memory care beds (including the subject’s 85 assisted living beds, of which 30 of which are to be dedicated memory care). • There are currently 621 competitive assisted living beds within the PMA. With a demand figure for 1,687 beds in 2019 and a pipeline supply of 346 beds (including the subject’s 85 assisted living beds – which includes a 30-bed memory care component), there is forecast to be excess demand for an additional 720 beds. • Specific to memory care, with a total supply figure of only 166 competitive beds, a pipeline supply of 110 beds (including the subject’s 30-bed memory care component), and an estimated demand figure for 590 beds in 2019, there is forecast to be excess unmet demand for an additional 319 beds. • Lastly, there are 548 competitive independent living units within the PMA at this time. With an anticipated demand figure for 2,364 units in 2019 and a pipeline supply of 399 units (including the subject’s 160 independent living units), there is indicated to be excess demand for an additional 1,417 units. Considering the strong growth forecast in seniors housing over the next few years, market conditions are anticipated to continually improve and strengthen. Development of the subject as proposed with 160 independent living units, 12 independent living duplexes (24 cottages), and 85 assisted living beds (including a 30-bed memory care component). Development should proceed as planned. Regional Economic Analysis 5 Rye Brook Senior Living Regional Economic Analysis The subject is located in the New York-Newark-Jersey City, NY-NJ-PA Metropolitan Statistical Area, hereinafter called the New York MSA, as defined by the U.S. Office of Management and Budget. The New York MSA is 8,294 square miles in size, and is the first most populous metropolitan area in the nation. Population The New York MSA has an estimated 2017 population of 20,249,968, which represents an average annual 0.5% increase over the 2010 census amount of 19,567,410. New York MSA added an average of 97,508 residents per year over the 2010 - 2017 period, and its annual growth rate is less than that of the United States. Looking forward, the New York MSA’s population is projected to increase at a 0.7% annual rate from 2017 - 2022, equivalent to the addition of an average of 133,448 residents per year. The New York MSA growth rate is expected to lag that of the United States, which is projected to be 0.8%. Population Trends Population 2010 Census 2017 Est.2022 Est.2010 - 2017 2017 - 2022 New York MSA 19,567,410 20,249,968 20,917,210 0.5%0.7% United States 308,745,538 323,580,626 337,326,118 0.7%0.8% Source: Esri 2017. Compiled by JLL Valuation & Advisory Services, LLC. Compound Ann. % Chng New York-Newark-Jersey City MSA Regional Economic Analysis 6 Rye Brook Senior Living Employment The current estimate of total employment in the New York MSA is 9,337,200 jobs. Since 2006, employment grew by 616,900 jobs, equivalent to a 7.1% gain over the entire period. There were gains in employment in seven of the past ten years despite the national economic downturn and slow recovery. The New York MSA's rate of change in employment outperformed the United States, which experienced an increase in employment of 4.0% or 5,412,000 over this period. A comparison of unemployment rates is another way of gauging an area’s economic health, where a higher unemployment rate is a negative indicator. Over the past decade, the New York MSA unemployment rate of 6.9% has been lower than the United States rate of 7.0%. In the latter half of the decade the trend has continued, with the New York MSA performing similarly to the United States. Recent data shows that the New York MSA unemployment rate is 4.8%, in comparison to a 4.5% rate for the United States, a negative sign for the New York MSA economy, although it should be noted the New York MSA and the United States have sustained a similar pace of job growth over the past two years. Employment Trends Year New York MSA Change United States Change New York MSA United States 2006 8,720,300 136,453,000 4.5%4.6% 2007 8,836,500 1.3%137,999,000 1.1%4.4%4.6% 2008 8,861,600 0.3%137,242,000 -0.5%5.3%5.8% 2009 8,571,000 -3.3%131,313,000 -4.3%8.6%9.3% 2010 8,563,100 -0.1%130,361,000 -0.7%8.9%9.6% 2011 8,675,900 1.3%131,932,000 1.2%8.6%9.0% 2012 8,808,200 1.5%134,175,000 1.7%8.7%8.1% 2013 8,958,500 1.7%136,381,000 1.6%7.9%7.4% 2014 9,142,300 2.1%138,958,000 1.9%6.4%6.2% 2015 9,337,200 2.1%141,865,000 2.1%5.3%5.3% Overall Change 2006-2015 616,900 7.1%5,412,000 4.0% Avg Unemp. Rate 2006-2015 6.9%7.0% Unemployment Rate August 2017 4.8%4.5% Unemployment Rate (Ann. Avg.)Total Employment (Annual Average) Source: Bureau of Labor Statistics. County employment is from the Quarterly Census of Employment & Wages (QCEW), all other areas use the Current Employment Survey (CES). Unemployment rates use the Current Population Survey (CPS). Data is not seasonally adjusted. Regional Economic Analysis 7 Rye Brook Senior Living Employment Sectors The composition of the New York MSA job market is illustrated in the chart below, paired with that of the United States. Total employment for the two areas is stratified by eleven major employment sectors, ranked from largest to smallest based on the percentage of New York MSA jobs in each sector. The New York MSA has a greater percentage employment than the United States in the following categories: 1. Education, Health Services - which accounts for 26.2% of New York MSA payroll employment compared to 23.6% for the United States as a whole. This sector includes employment in public and private schools, colleges, hospitals, and social service agencies. 2. Financial Activities - which accounts for 9.0% of New York MSA payroll employment compared to 6.5% for the United States as a whole. Banking, insurance, and investment firms are included in this sector, as are real estate owners, managers, and brokers 3. Professional, Business Services - which accounts for 8.9% of New York MSA payroll employment compared to 6.8% for the United States as a whole. This sector includes legal, accounting, and engineering firms, as well as management of holding companies. 4. Information - which accounts for 3.0% of New York MSA payroll employment compared to 1.9% for the United States as a whole. Publishing, broadcasting, data processing, telecommunications, and software publishing are included in this sector. Employment Sectors - 2017 Source: Esri 2017. Compiled by JLL Valuation & Advisory Services, LLC. 2.0% 1.9% 4.7% 6.2% 10.2% 6.8% 6.5% 9.2% 9.9% 19.0% 23.6% 0.2% 3.0% 3.9% 5.5% 5.8% 8.9% 9.0% 9.2% 9.4% 18.9% 26.2% 0%5%10%15%20%25%30% Natural Resources, Mining Information Government Construction Manufacturing Professional, Business Services Financial Activities Other Services Leisure, Hospitality Trade, Transportation, Utilities Education, Health Services New York MSA United States Regional Economic Analysis 8 Rye Brook Senior Living The New York MSA is underrepresented in the following categories: 1. Leisure, Hospitality - which accounts for 9.4% of New York MSA payroll employment compared to 9.9% for the United States as a whole. This sector includes employment in hotels, restaurants, recreation facilities, and arts and cultural institutions. 2. Manufacturing - which accounts for 5.8% of New York MSA payroll employment compared to 10.2% for the United States as a whole. This sector includes all establishments engaged in the manufacturing of durable and nondurable goods. 3. Construction - which accounts for 5.5% of New York MSA payroll employment compared to 6.2% for the United States as a whole. This sector includes construction of buildings, roads, and utility systems. 4. Government - which accounts for 3.9% of New York MSA payroll employment compared to 4.7% for the United States as a whole. This sector includes public administration at the federal, state, and county level, as well as other government positions. Major Employers The table below contains major employers in the New York MSA. Major Employers - New York MSA Name Number of Employees 1 City of New York 148,898 2 New York City Department of Education 119,410 3 Metropolitan Transportation Authority 66,804 4 United States Government 50,700 5 New York City Health and Hospital Corps 36,244 6 JP Morgan Chase & Co 27,157 7 State of New York 25,441 8 Citigroup Inc. 24,809 9 Northshore-LIJ Health System 20,775 10 Mount Sinai Medical Center 18,999 Source: http://www.businessinsider.com/new-york-citys-biggest-employers-2012-4 Date: 04/10/12 Regional Economic Analysis 9 Rye Brook Senior Living Gross Domestic Product Based on Gross Domestic Product (GDP), the New York MSA is the first largest metropolitan area economy in the nation. Economic growth, as measured by annual changes in GDP, has been somewhat lower in the New York MSA than the United States overall during the past nine years. The New York MSA has expanded at a 1.0% average annual rate while the United States has grown at a 1.0% rate. As the national economy improves, the New York MSA continues to underperform the United States. GDP for the New York MSA rose by 1.7% in 2015 while the United States' grew by 2.4%. The New York MSA has a per capita GDP of $69,971, which is 40.0% greater than the United States' GDP of $49,844. This means that the New York MSA industries and employers are adding relatively much more value to the economy than their peers in the United States. Gross Domestic Product is a measure of economic activity based on the total value of goods and services produced in a specific geographic area. The figures in the table above represent inflation adjusted “real” GDP stated in 2009 dollars. Gross Domestic Product [$mil][$mil] Year New York MSA Change United States Change 2006 $1,293,281 $14,593,536 2007 $1,311,379 1.4%$14,798,367 1.4% 2008 $1,273,542 -2.9%$14,718,301 -0.5% 2009 $1,277,702 0.3%$14,320,114 -2.7% 2010 $1,324,206 3.6%$14,628,165 2.2% 2011 $1,327,364 0.2%$14,833,679 1.4% 2012 $1,365,847 2.9%$15,126,279 2.0% 2013 $1,368,563 0.2%$15,317,174 1.3% 2014 $1,388,513 1.5%$15,653,000 2.2% 2015 $1,412,183 1.7%$16,023,115 2.4% Compound % Chg (2006-2015)1.0%1.0% GDP Per Capita 2015 $69,971 $49,844 Source: Bureau of Economic Analysis. The release of state and local GDP data has a longer lag time than national data. The data represents inflation-adjusted "real" GDP stated in 2009 dollars. Regional Economic Analysis 10 Rye Brook Senior Living Household Income The New York MSA has a much higher level of household income than the United States. Median household income for the New York MSA is $67,326, which is 24.3% higher than the United States. The following chart shows the distribution of households across nine income levels. The New York MSA has a smaller concentration of households in the lower income levels than the United States. Specifically, 28% of the New York MSA households are below the $35,000 level in household income as compared to 33% of United States households. A greater concentration of households exists in the higher income levels, as 46% of the New York MSA households are at the $75,000 or greater levels in household income versus 36% of United States households. Median Household Income - 2017 Median New York MSA $67,326 United States $54,149 Comparison of New York MSA to United States 24.3% Source: Esri 2017. Compiled by JLL Valuation & Advisory Services, LLC. Household Income Distribution - 2017 Source: Esri 2017. Compiled by JLL Valuation & Advisory Services, LLC. 11.7% 8.2% 8.0% 10.6% 15.2% 11.7% 16.1% 8.2% 10.4% 12.5% 10.1% 10.1% 13.3% 17.7% 12.3% 13.4% 5.3% 5.4% 0%2%4%6%8%10%12%14%16%18%20% Less than $15,000 $15,000-$24,999 $25,000-$34,999 $35,000-$49,999 $50,000-$74,999 $75,000-$99,999 $100,000-$149,999 $150,000-$199,999 $200,000 or greater New York MSA United States Regional Economic Analysis 11 Rye Brook Senior Living Education and Age Residents of the New York MSA have a higher level of educational attainment than those in the United States. An estimated 38% of the New York MSA residents are college graduates with four-year degrees or higher, while United States residents have an estimated 30% with at least a four-year degree. People in the New York MSA are similar in age to their peers in the United States. The median age of both the New York MSA and the United States is 38 years. Conclusion The New York MSA's economy will benefit from a growing population base, and higher income and education levels. The New York MSA saw an increase in the number of jobs in the past 10 years and has maintained a lower unemployment than the United States during the past decade. Furthermore, the New York MSA is well-positioned from being the first most populous metropolitan area in the country and having a higher level of GDP per capita than the United States overall. We project that the New York MSA’s economy will improve and employment will grow, strengthening the demand for real estate overall. Education & Age - 2017 Source: Esri 2017. Compiled by JLL Valuation & Advisory Services, LLC. 30% 38% 0%20%40%60%80% United States New York MSA Percent College Graduates 38 38 10 15 20 25 30 35 40 45 50 55 60 United States New York MSA Median Age Market Area Description and Analysis 12 Rye Brook Senior Living Market Area Description and Analysis Delineation of Primary Market Area The Primary Market Area (PMA) for any form of rental real estate property is defined as the area from which a majority of the project’s tenants will be drawn. According to various industry sources, the PMA of a seniors housing care facility is determined by the density of the population, the proximity of competing properties, and the ease of transit in the surrounding area. The PMA for urban facilities is generally from 5 to 10 miles, for suburban facilities 5 to 20 miles, and for small town and rural facilities 20 to 30 miles1 as indicated in the following data. Distances that Residents Relocated from Distance Assisted Living Assisted & Independent Living CCRC Less than 5 miles 40.00% 43.50% 52.20% 5 to 10 miles 20.40% 20.00% 16.40% 11 to 25 miles 20.00% 15.30% 13.40% 25 to 50 miles 7.30% 5.90% 6.00% More than 50 miles 12.40% 15.30% 11.90% A number of factors tend to define a market area. One important factor is density. In rural areas, it may be many miles between towns large enough to sustain services, and residents are accustomed to driving significant distances to access services. Conversely, in urban or suburban areas, a resident may have a choice of competing services within a short drive of his or her home and will normally select the more proximal service provider or the service provider more convenient to access. Physical barriers can also shape market areas. Rivers, lakes, streams, military bases, and major highways are all examples of barriers that can constrain market areas. Barriers can also be psychological. For example, it is common for persons who live on one side of a highway to seldom access services in a similar area on the opposite side of the same highway, even though access is not constrained. Likewise, persons living in a given town or county are often reluctant to access services in an adjacent town or county. The location of competing facilities is also a factor to consider. In market areas served by a greater number of competing facilities, the primary drawing area for each facility tends to be smaller since residents of the market area tend to access the service provider nearest their location. Each of these factors is considered in the delineation of the subject’s PMA. 1. Assisted Living Manual (Published by Assisted Living Federation of America) and Integrated Senior Care: Assisted Living and Long Term Care Manual (Published by Thompson Publishing Group). These radii are also supported by the criteria used by many national developers of seniors housing. Market Area Description and Analysis 13 Rye Brook Senior Living Physical Barriers Long Island South serves as a physical barrier liming the subject property’s market to the east. There are no other physical barriers significantly impacting the potential market area. Psychological Barriers The market area is not considered to be constrained by any known psychological barriers. Furthermore, although the subject property is located near the Connecticut state line, our surveys indicate Location of Competing Facilities There are several competing facilities scattered throughout the area, indicating that seniors have a variety of facilities from which to choose. This tends to limit the size of market areas, as it is not necessary for seniors or adult children decision makers to travel far from the home to find suitable seniors housing. Market Area Delineation Conclusion Considering population density, commuting patterns (drive times), physical and psychological barriers, and the concentration of competing facilities’ located throughout the area, we have concluded the appropriate primary market area (PMA) to be the area constrained by the following zip codes: 10504, 06831, 06830, 105773, 10580, 10528, 10543, 10804, 10709, 10583, 10605, 10606, 10601, 10607, 10523, 10603, 10604, and 10577. In this market, we believe that the majority of demand will come from the PMA. No measurable draw from a secondary market area is forecast. Market Area Description and Analysis 14 Rye Brook Senior Living Primary Market Area (PMA) Rye Brook Senior Living Market Area Description and Analysis 15 Rye Brook Senior Living 10 and 15-Minute Drive Times Rye Brook Senior Living Market Area Description and Analysis 16 Rye Brook Senior Living Market Area Attributes and Character The subject development is located in the village of Rye Brook. Rye Brook is located in southeastern Westchester County and shares its eastern border with Greenwich, Connecticut. The village was an unincorporated section of the town of Rye until its incorporation as a village in July 1982. The town of Rye lies north of the Long Island Sound and borders Connecticut as the gateway to New England. With convenient commuting distance from New York and the metropolitan area, Rye is a popular bedroom community with a good school district and nearby shops and services. Two retail malls are located in the area. The Galleria at White Plains is an indoor shopping mall anchored by Macy’s and Sear’s. With over 130 retailers, the mall includes retailers like H&M, Forever 21, Aldo, American Eagle and Victoria’s Secret. Less than a mile away, The Westchester provides a world-class setting. With stores such as Nordstrom, Neiman Marcus, Crate & Barrel, Tiffany, Burberry, Rebecca Taylor and both Microsoft and Apple, it is the shoppers destination for the Metropolitan New York Region. All 150 stores are just minutes from the communities of Chappaqua, Scarsdale, Bedford, Greenwich, and Rye. The area is served by several institutes of higher education. State University of New York at Purchase also known at Purchase College is a public four-year college. It offers majors from three schools: the School for Liberal Arts and Sciences, the School of the Arts, and the School of Liberal Studies & Continuing Education. The School of Liberal Studies & Continuing Education offers noncredit personal enrichment courses that are open to the general public and allow participants to explore personal interests. New York Medical College NYMC offers advanced degrees through its three schools: the School of Medicine, the Graduate School of Basic Medical Sciences, and the School of Health Sciences and Practice. Total enrollment is 1,660 students in addition to 800 residents and clinical fellows. NYMC employs 1,350 full-time faculty members and 1,450 part-time and voluntary faculty. Westchester County Airport is a county-owned airport in Westchester County three miles northeast of the central business district of White Plains, in the towns of Harrison, North Castle and Rye. It serves suburban Westchester County, New York and Fairfield County, Connecticut (the New York-Connecticut state border coincides with the airport's eastern limits). It also serves the New York metropolitan area, as it is about 33 miles north of Midtown Manhattan. The Westchester County Airport is currently served by five commercial airlines. Due to its proximity to New York City, many Fortune 500 companies are headquartered in Westchester County including MasterCard, PepsiCo, IBM, ITT, Jarden, and Universal American. In April 2017, county officials unveiled plans for an 80-acre, 3 million square-foot biotechnology hub to be built with $1.2 billion in private investment on vacant land adjacent to Westchester Medical Center in Valhalla. Called the Westchester BioScience and Technology Center, the new development is expected to create 12,000 new jobs. Market Area Description and Analysis 17 Rye Brook Senior Living Composition The predominant land use in the market area is single-family residential. The estimated land use composition is shown in the following table: 10%Schools, Churches, Public Buildings, Rec. Areas Multi-Family 15% Estimated Land Use Composition Property Type % Used For Type Single-Family Residential 40% 10% 5% 100% Retail & Personal Service Office Industrial Vacant Land 15% Total 5% Social Forces An analysis of the PMA demographics relative to the U.S. will yield insight into the nature of the PMA. All of the data in this section is obtained from The Nielsen Company. Population Growth Population growth figures are shown below: Area 2000 2010 Annual % Change 2000-2010 2017 Annual % Change 2010-2017 2022 Annual % Change 2017-2022 PMA 281,750 293,415 0.41%305,835 0.59%313,594 0.50% United States 281,421,906 308,745,538 0.93%327,514,334 0.85%341,323,594 0.83% Source: Esri Population Growth Between 2010 and 2017, PMA population growth was less than the national average. The forecasted growth for the PMA is at a rate less than the nation as a whole. Market Area Description and Analysis 18 Rye Brook Senior Living Household Growth Household growth figures are shown below: Area 2000 2010 Annual % Change 2000-2010 2017 Annual % Change 2010-2017 2022 Annual % Change 2017-2022 PMA 103,667 106,037 0.23%109,563 0.47%112,109 0.46% United States 105,480,101 116,716,292 1.02%123,158,887 0.77%128,069,416 0.79% Household Growth Source: Esri Between 2010 and 2017, PMA household growth was less than the national average. The forecasted growth for the PMA is at a rate less than the nation as a whole. Income Levels Pertinent income data are shown below. United States $111,200 $56,124 Source: Esri $173,694 $80,675 PMA Area 2017 Median Household Income Income Levels 2017 Average HH Income Current PMA income levels are higher than the national average. Housing Market The Nielsen Company reports the housing market statistics shown below: Source: Esri $766,202 United States 55.6%$207,344 PMA 61.0% 2017 Owner Occupied Housing Percent Housing Market Statistics Area 2017 Median Housing Value According to Esri, the median home value is $157,837. However, this figure is considered to be understated as there are a number of new developments located throughout the area with prices ranging from $300,000 to in excess of $500,000. The U.S. housing market continues to improve from the financial crisis in 2008. The next chart indicates the annual returns of the National, the 10-City Composite, and the 20-City Composite home price indices updated through March 2017. As of March 2017, the S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 5.8% annual increase in March 2017 versus a 5.2% increase in March 2016. The 10-City Composite is up 5.2% compared to March 2016. The 20-City Composite’s year-over-year gain was 5.9%. The National Index is up 38.4% from the post- bubble low in December 2011. Market Area Description and Analysis 19 Rye Brook Senior Living According to the Zillow’s April 2017 Market Report, U.S. home values increased 7.3% over the past year with a median home value of approximately $198,000. However, the report indicates that there were 7.7 percent fewer homes on the market in April than a year earlier, which marks the 27th straight month of annual inventory declines. In the short term, home values are expected to grow 2.6% over the next year through April 2018. According to Trulia, the median sales price for this area is $948,750. • This represents a year-over- year increase of 20%. • Average price per square foot is $343, and the median rent per month is $4,337. The housing market in the PMA is considered to be healthier than average. Market Area Description and Analysis 20 Rye Brook Senior Living Environmental Forces The area has a gently rolling topography. Vegetation is heavy and includes native trees, shrubs and grasses. A variety of soil types are present in the area, and most are conducive to development with proper engineering. Public Services Street Improvements The market area benefits from the following road infrastructure: Interstate Highways North-South: I-684, I-87, and I-95 East-West: I-287 Other Highways North-South: US-1, R-15, R-22, R-9A, R-125, R-100 East-West: R-119, R-100C Major City Streets North-South: Lake Avenue, White Plains Road, Pleasant Ridge Road, Mamaroneck Avenue, Ridge Street, and Riversville Road East-West: Anderson Hill Road, Polly Park Road, Westchester Avenue, Lower Cross Road, Ridgeway, and Ardsley Road Overall, accessibility is rated as good. Police/Fire Protection Police and fire protection is provided by the village Rye Brook and the Port Chester Fire Department. Schools The area is within the Port Chester-Rye Union Free School District and the Blind Brook School District. The area is served by several institutes of higher education. Westchester Community College enrolls nearly 14,000 students and offers three associate degrees; art, science, and applied science. In addition, the campus offers 20 certificate programs and a range of non-credit courses for continuing education of all ages. State University of New York at Purchase also known at Purchase College is a public four-year college. It offers majors from three schools: the School for Liberal Arts and Sciences, the School of the Arts, and the School of Liberal Studies & Continuing Education. The School of Liberal Studies & Continuing Education offers noncredit personal enrichment courses that are open to the general public and allow participants to explore personal interests. New York Medical College NYMC offers advanced degrees through its three schools: the School of Medicine, the Graduate School of Basic Medical Sciences, and the School of Health Sciences and Practice. Total enrollment is 1,660 students in addition to 800 residents and clinical fellows. NYMC employs 1,350 full-time faculty members and 1,450 part-time and voluntary faculty. Market Area Description and Analysis 21 Rye Brook Senior Living Shopping The area is adequately served by a number of retailers and restaurants. Two retail malls are located in the area. The Galleria at White Plains is an indoor shopping mall anchored by Macy’s and Sear’s. With over 130 retailers, the mall includes retailers like H&M, Forever 21, Aldo, American Eagle and Victoria’s Secret. Less than a mile away, The Westchester provides a world- class setting. With stores such as Nordstrom, Neiman Marcus, Crate & Barrel, Tiffany, Burberry, Rebecca Taylor and both Microsoft and Apple, it is the shoppers destination for the Metropolitan New York Region. All 150 stores are just minutes from the communities of Chappaqua, Scarsdale, Bedford, Greenwich, and Rye. Medical The full service hospital nearest the subject is Greenwich Hospital. This facility is located approximately 2.4 miles east of the subject. It is a 206-bed regional hospital serving Fairfield County, Connecticut and Westchester County, New York. It opened in 1903 and has become a progressive medical center and teaching institution with an internal medical residency offering a wide range of medical, surgical, diagnostic and wellness programs – these include specialty services in areas such as cancer, cardiology, cardiopulmonary, pediatrics, orthopedics, diabetes, sleep center, and gynecology among others. In addition, St. Vincent’s Hospital Westchester offers inpatient and outpatient mental health and addiction treatment services and is located approximately 3.6 miles southwest of the subject. Also, White Plains Hospital is approximately 5 miles west of the subject. It provides services to Westchester County including, but not limited to, oncology, orthopedic, cardiology, emergency care, radiology, wound care, among others. A map highlighting the locations of the noted neighborhood amenities is shown on the following page. Market Area Description and Analysis 22 Rye Brook Senior Living Neighborhood Amenities Rye Brook Senior Living White Plains Hospital Westchester County Airport Westchester Mall Greenwich Hospital Galleria at White Plains Purchase College New York Medical College Westchester Community College Market Area Description and Analysis 23 Rye Brook Senior Living Seniors Housing Market Demographics Demographics relevant to the seniors housing market are as follows: PMA USA 305,835 327,514,334 313,594 341,323,594 0.50%0.83% 65,489 84,939,888 85,166 83,911,001 5.39%-0.24% 21.41%25.93% 54,212 51,112,814 61,213 60,125,156 2.46%3.30% 17.73%15.61% 25,341 21,089,231 28,181 24,983,884 2.15%3.45% 8.29%6.44% 9,015 6,547,891 9,225 6,857,035 0.46%0.93% 2.95%2.00% $111,200 $56,124 $139,009 $63,001 $102,911 $50,681 $59,652 $32,417 85 Plus Population 2017 Population 85+ Forecasted 2022 Population 85+ Forecasted Annual Growth, 2017-2022 2017 Age 85+ Pop. as % of Total Pop. Source: Esri Income Levels Median Income Level Age 65 to 74 Median Income Level Age 75+ Median Household Income, All Ages Median Income Level Age 55 to 64 Market Area Characteristics Item Total Population 2017 Population Forecasted Annual Growth, 2017-2022 Forecasted 2022 Population Adult Child (45-64) Population 75 Plus Population 65 Plus Population 2017 Age 75+ Pop. as % of Total Pop. Forecasted Annual Growth, 2017-2022 2017 Population 75+ Forecasted 2022 Population 75+ Forecasted Annual Growth, 2017-2022 2017 Population 65+ Forecasted 2022 Population 65+ 2017 Population 45-64 2017 Age 65+ Pop. as % of Total Pop. Forecasted 2022 Population 45-64 Forecasted Annual Growth, 2017-2022 2017 Age 45-64 Pop. as % of Total Pop. Market Area Description and Analysis 24 Rye Brook Senior Living -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% Total 45-64 65+75+85+Forecast Annual Growth Cohort Comparison of Growth Rate Forecasts PMA USA 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 45-64 65+75+85+% of Total PopulationCohort Comparison of Population Composition PMA USA Overall population growth is forecast to be less than average in the PMA. Growth of persons in the “adult child” age bracket (45 to 64) is forecast to be greater than average, while the percent of total population that is within the 45 to 64 age group is less than average. The percent of total population that is 65+ is greater than average. Forecasted growth for the 65+ cohort is less than average. The percent of total population that is 75+ is greater than average. Forecasted growth for the 75+ cohort is less than average. Lastly, the 85+ population is forecast to grow at a pace less than the national average, while representing a greater than average percent of the total population base of the PMA. Senior income levels are above average. Market Area Description and Analysis 25 Rye Brook Senior Living Conclusion Considering population density, commuting patterns (drive times), physical and psychological barriers, and the concentration of competing facilities’ located throughout the area, we have concluded the appropriate primary market area (PMA) to be the area constrained by the following zip codes: 10504, 06831, 06830, 105773, 10580, 10528, 10543, 10804, 10709, 10583, 10605, 10606, 10601, 10607, 10523, 10603, 10604, and 10577. In this market, we believe that the majority of demand will come from the PMA. No measurable draw from a secondary market area is forecast. The PMA, which is supported by 10 and 15-minute drive times, encompasses all and/or parts of Rye Brook, Port Chester, Harrison, Purchase, Armonk, Scarsdale, Rye, Valhalla, Elmsford, Eastchester, Mamaroneck, and White Plains in New York, as well as Greenwich, Connecticut. The primary land use in the area is single-family residential and the area is approximately 85% developed. The PMA is expected to experience slightly below average population growth. The slow growth rate is attributable to the nearly fully built out nature of the area. It has above average income levels. The area is considered to be in a stage of growth. Between 2017 and 2021, the market area is forecast to experience growth in demand for seniors housing, but at a below average rate relative to the nation as a whole. Housing values in the PMA are above average. Site Description and Analysis 26 Rye Brook Senior Living Site Description and Analysis The development site, which consists of 17.8 acres, is located at 900 King Street in the village of Rye Brook, Westchester County, New York. Currently, a vacant two and three-story office building sits on the site. The office building with a gross building area of 201,467 square feet was built in 1981 and renovated in 2005. As proposed, the office building will be demolished and a senior housing community with 160 independent living units and 85 assisted living (including memory care) units will be constructed. In addition, the developer will construct 12 free- standing independent living duplexes (24 cottages) west of the building. Note, the photographs are from the previous inspection date of June 16, 2016. An inspection of the site was not part of the scope of work of this assignment. Photographs of the Site Front View from Arbor Drive Street View on Arbor Drive Looking Northeast Street View on Arbor Drive Looking Southwest Intersection of Arbor Drive and King Street Looking Northwest into King Street Site Description and Analysis 27 Rye Brook Senior Living Intersection of Arbor Drive and King Street Looking Southeast into King Street Side View Entrance of Access to Offices Open Area within Building Lounge Area Typical Administrative Office Site Description and Analysis 28 Rye Brook Senior Living Vacant Conference Room Coffee Bar Open Area Commercial Kitchen Dining Room Conference Room Meeting Room Site Description and Analysis 29 Rye Brook Senior Living Reception Area Vacant Conference Room Vacant Open Office Space Conference Room Vacant Open Office Space Atrium Area Site Description and Analysis 30 Rye Brook Senior Living Vacant Open Area Typical Vacant Office Unit Typical Staff Break Room Typical Office Space Lobby/Reception Area Typical Occupied Office Unit Site Description and Analysis 31 Rye Brook Senior Living Typical Common Area Restroom Covered Parking Site Description and Analysis 32 Rye Brook Senior Living Site Plan Site Description and Analysis 33 Rye Brook Senior Living Site Details Specific site details are as follows: Street Address:900 King Street Additional Frontage To:None Site Orientation: Interior Site Nearest Cross-Street:Arbor Drive and King Street Primary Access Via: Arbor Drive, a lightly traveled roadway with one lane extending in each direction. Arbor Drive is not median divided. There is a traffic light that facilitates access to the site. Secondary Access Via:None Accessibility Rating:Average Visibility Rating:Average Site Size:17.767 acres Shape:Irregular Topography:Mostly level Vegetation Heavy Excess Land Area:None Zone:Zone X Panel Number:36119C0291F, effective September 28, 2007 Flood Insurance:No Electricity:Public to site Natural Gas:Public to site Water:Public to site Sewage Treatment:Public to site Telephone:Public to site Phase 1 ESA:Not provided Known Hazards:None observed or known Earthquake Zone:Not within earthquake zone Utility Availability - Environmental - Location - Accessibility and Visibility - Physical Characteristics - Flood Zone Information - Site Description and Analysis 34 Rye Brook Senior Living Aerial Photograph (Source: Bing) North:Police and fire departments and single-family residential East:Hutchinson River Parkway, then school and vacant land South:Arbor Drive, then school and multi-family West:Arbor Drive, then park Nuisances or Hazards:None known Access Easements:None known Encroachments:None known Utility Easements:Typical for improved properties to allow for the installation and maintenance of utility lines Other Restrictions:None known Adjacent Properties - Easements and Other Legal Constraints - Subject Site Site Description and Analysis 35 Rye Brook Senior Living Conclusion The subject development sites will be located at 900 King Street in the village of Rye Brook, Westchester County, New York. More specifically, the site consists of 17.8 acres with a vacant two and three-story building sits. As proposed, the building will be demolished and a senior housing community with 160 independent living units and 85 assisted living (including a 30-bed memory care) units will be constructed. In addition, the developer will construct 12 free-standing independent living duplexes (24 cottages) west of the building. The shape of the site is irregular, and the topography is mostly level. Overall, the site is considered to have good functional utility. It is physically suited for a wide range of uses and is well suited for the proposed use as a seniors housing community. Improvement Description and Analysis 36 Rye Brook Senior Living Improvement Description and Analysis Introduction Preliminary plans are for the subject, Rye Brook Senior Living, are to consist primarily of independent living, but also including a complementary assisted living/memory care component. The estimated unit count is 160 independent living units, 12 independent living duplexes (24 cottages), and 85 assisted living (including a 30-bed memory care component. The scope of this engagement includes recommendations specific to unit/bed mix and floor plan sizes. The following definitions of the Seniors Housing Classifications were jointly developed by the American Seniors Housing Association (ASHA) and the National Investment Center (NIC). Active Adult Community: For-sale single-family homes, townhomes, cluster homes, and condominiums with no specialized services, restricted to adults at least 55 years of age or older. Rental housing is not included in this category. Residents generally lead an independent lifestyle; the facilities are not equipped to provide increased care as the individual ages. It may include amenities such as clubhouse, golf course and recreational spaces. Outdoor maintenance is normally included in the monthly homeowner’s association or condominium fee. Senior Apartment Community: Multifamily residential rental properties restricted to adults at least 55 years of age or older. These properties do not have central kitchen facilities and generally do not provide meals to residents but may offer community rooms, social activities, and other amenities. Independent Living Facility (ILF): Age-restricted multifamily rental properties with central dining facilities. ILFs provide residents, as part of their monthly fee, access to meals and other services such as housekeeping, linen service, transportation, and social and recreational activities. Such properties do not provide, in a majority of the units, assistance with activities of daily living (ADLs) such as supervision of medication, bathing, dressing, or toileting. There are no licensed skilled nursing beds in the facility. Assisted Living Facility (ALF): State regulated rental properties that provide the same services as independent living communities listed above. ALFs also provide, in a majority of the units, supportive care from trained employees to residents who are unable to live independently and require assistance with ADLs, including management of medications, bathing, dressing, toileting, ambulating, and eating. These properties may have some skilled nursing beds, but the majority of units are licensed for assisted living. Many of these properties include wings or floors dedicated to residents in need of memory care. A property that specializes in the care of residents with memory care issues should be considered an assisted living facility. Independent and Assisted Living Facility (IALF): Single communities offering both independent and assisted living services within the same building or on the same campus. Continuing Care Retirement Communities (CCRCs): Age-restricted properties that include a combination of independent living, assisted living and skilled nursing services (or independent living and skilled nursing) available to residents all on one campus. Resident payment plans vary and include entrance fee, condo/co-op and rental programs. The majority of the units are not licensed skilled nursing beds. Improvement Description and Analysis 37 Rye Brook Senior Living Preliminary Unit Mix The preliminary unit mix for the proposed subject is shown in the table. 350,000 211,750 Plus Common Areas 38.9%136,250 Totals Total Gross Building Area 60.5%239 -249 500 30 Independent Living 2,000Two Bedroom Cottage 900 250 450Memory Care Memory CareSemi-Private Private Two Bedroom 20Studio Assisted Living Assisted Living One Bedroom Two Bedroom Three Bedroom Studio One Bedroom Independent Living Assisted Living 1 1 1 1 80 30 101,500 10 5 500 2 350 24 10 24 1 5 2 20 1 15,0004.3% 15 1 15 30 10 4,5001.3% 5,250 15,0004.3% 1.5% 20 Recommended Unit Mix and Building Areas Care Type Independent Living Number of Beds Number of Beds Per Unit 1 850 1,150 Percent of Total GBA 68,000 9.9% 19.4% 2.9% 34,500 Unit Type Number of Units 20 80 30 Square Feet Total Square Feet Independent Living Independent Living 10,000 0.7% 2.6% 13.7% 9,000 48,000 2,500 Building Area According to the State of Seniors Housing 2017, median common area percentages for congregate care communities are as follows. Considering the anticipated mix consisting primarily of independent living and a complementary assisted living/memory care component, we conclude a median common area percentage of between 30% and 35% to be appropriate for the subject development. Median Common Area Percentages % of Total 32.0% Independent /Assisted Living 32.9% Independent Living Weighted Average 37.4% Assisted Living 45.4% Assisted Living with Alzheimer's Care 46.8% Independent/Assisted Living/Alzheimer's Care CCRCs 24.1% Source: State of Seniors Housing 2017 Improvement Description and Analysis 38 Rye Brook Senior Living Functional Utility The subject’s functional utility as recommended is as follows: Median Number of Units/Beds (114 units for IL ; 167 units for IALF; 149 units for IALF/ALZ; 64 units for AL; 90 units for AL/ALZ; and 296 units for CCRC) Median Common Area Percentage (32.0% for IL; 32.9% for IALF; 37.4% for IALF/ALZ; 45.4% for AL; 46.8% for AL/ALZ; and 24.1% for CCRC) Unit Layout Good Common Area Layout Good Overall Functional Utility Good Medians from State of Seniors Housing 2017 Average Functional Utility Larger than Typical Overall, the project will be inline with other recently constructed communities throughout the country and in turn will have good functional utility. Conclusion Preliminary plans are for the subject, Rye Brook Senior Living, to consist primarily with independent living, but also including a complementary assisted living/memory care component. Based on the prevailing market trends as well as current supply and demand conditions, the proposed mix consisting of 160 independent living units, 24 independent living cottages, and 86 assisted living beds (including a memory care component) is deemed reasonable. We have estimated 30 memory care beds. A competitive amenities package is recommended for the subject development in order to competitively position it with the existing inventory as well as anticipated pipeline additions. Legal Constraints Analysis 39 Rye Brook Senior Living Legal Constraints Analysis Zoning According to the Building Department for the Village of Rye Brook, the subject site is currently zoned PUD, Planned Unit Development (914-939-0668). The subject is currently zoned as Planned Unit Development, which is permitted on a minimum of 30 contiguous acres. The PUD will allow a senior living facilities, excluding nursing homes, townhouses apartments and limited commercial, retail and institutional uses, plus related accessory uses. Senior living facilities, excluding nursing homes, providing for a range of living accommodations, personal care services and support facilities for people who are 62 years of age or older or for couples, one of whom is at least 62 years of age. No senior living facility shall exceed 35 feet in height calculated by utilizing the weighted average of the building height measured from finished grade adjacent to the exterior walls of the building and provided that such building is at least 200 feet from a state road. The maximum density for senior living facilities shall be calculated as per the requirements of § 250-7E(2)(d)[1]. Some accessory uses shall be permitted in a senior living facility. Parking requirement for senior living facilities shall be a minimum of 0.75 per unit. Note that the Village of Rye Brook has a code for senior citizen housing development with a special permit to be approved by the Board of Trustees to encourage the development of additional housing options for senior citizens. Deed Restrictions We have assumed that the subject is not affected by any adverse deed restrictions. However, this is a legal matter, and an attorney should be consulted for verification of this assumption. Legal Constraints Analysis 40 Rye Brook Senior Living Licensing Requirements Assisted living is subject to some level of regulation in every state in the nation. The following summarizes the regulations in the state of New York. New York's Department of Health licenses three types of adult care facilities that offer different levels of supervision and personal care to five or more adults who have functional and/or cognitive impairments: adult homes (lowest level of care),103 enriched housing programs, and assisted living residences (ALRs) (highest level of care).104 Licensed adult homes and enriched housing programs have similar provisions except that enriched housing programs require private resident units and do not have to offer more than one meal per day. Both settings form the foundation of the state's Assisted Living Residence Program. When residents reach a level of frailty that can no longer be addressed through the care and services of an enriched housing program or an adult home, an operator may apply for certification to provide a higher level of care as an ALR;105 operators may also be certified as special needs assisted living to provide dementia care, or as enhanced assisted living to support aging in place. Adult homes and enriched housing programs may be licensed by the Department of Health to participate in the assisted living program (ALP) for Medicaid clients, which has additional requirements for admission and retention, staffing, and resident services. Adult Foster Care. The Department of Social Services, Office of Children and Family Services, licenses another type of adult care facility called family-type homes for adults that provide long-term residential care, room, board, housekeeping, supervision and/or personal care to four or fewer adults unrelated to the operator. The Division of Adult Protective Services monitors these homes. Regulatory provisions for family-type homes for adults are not included in this profile but a link to the provisions can found at the end. This profile includes summaries of selected regulatory provisions for adult homes, enriched housing programs, and ALRs. The complete regulations are online at the links provided at the end. The subject will have an ALR license. Potential Changes in the Regulatory Environment We are aware of no pending changes in the regulatory environment in the state of New York that would negatively impact the subject. Conclusion The subject is zoned as Planned Unit Development, we are assuming that the proposed use will be allowed and/or the site will be rezoned. Furthermore, the subject will need to be licensed by the state of New York as an assisted living residence. We are aware of no pending changes in the regulatory environment in the state of New York that would negatively impact the subject. Seniors Housing Market Analysis 41 Rye Brook Senior Living Seniors Housing Market Analysis Aging Trends There is no denying that the demographic trends impacting the seniors housing sector are positive. As of the 2010 Census, there were 40.3 million elderly Americans (those aged 65 and older), making up nearly 13% of the total population. The elderly population is expected to almost double by the year 2030 to 72 million, to make up 19% of the total population. The 2010 Census also indicated that there were 5.5 million Americans aged 85 and older, almost 2% of the total population. This population is expected to almost double by 2030 and become 2.3% of the total population. In 2050, as many as one in five Americans could be elderly. Much of the forecast growth will occur between 2010 and 2030, due to the Baby Boomer generation entering their elderly years. This is most apparent when comparing growth rates. Between 2010 and 2030, the overall U.S. population is forecast to grow at an annual pace of 0.9% per year. Remarkably, growth in all three seniors sectors is much stronger: 3.0% per year for the 65+ population, 2.9% per year for the 75+ population, and 2.1% per year for the 85+ population. These strong rates of growth will lead to growing demand for seniors housing. Forecast Population Growth 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 2010 2015 2020 2025 2030 2035 2040 2045 2050 Year Population (Thousands) 85+ 75 to 84 65 to 74 45 to 64 20 to 44 Under 20 Seniors Housing Market Analysis 42 Rye Brook Senior Living Other Factors Leading to Increased Demand In addition to demographic trends, the following factors are leading to increasing demand for seniors housing and long-term care: • Need for assistance with ADLs. According to census figures, about 6.5 million seniors need assistance with ADLs. As the number of seniors continues to increase, that number is expected to double by 2020. • More elderly living alone. Women continue to outlive men, and the likelihood that either men or women will live alone increases with age. Societal factors, such as rising divorce rates and the growing numbers of people choosing not to marry, also contribute to this trend. • Changes in the role of women. Women have traditionally been the primary caregivers of older people. However, the number of women in the work force grew from 20.5% in 1915 to more than 58% in 2010. With this change, fewer women are serving as caregivers, creating the need for the elderly to seek assistance outside the home. Elderly Population - Percent of Total 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2010 2015 2020 2025 2030 2035 2040 2045 2050 Year 65+ 75+ 85+ Seniors Housing Market Analysis 43 Rye Brook Senior Living National Senior Housing Supply Trends Senior apartments and independent living supply is typically expressed in terms of units, while assisted and nursing supply is expressed in terms of beds. NIC MAP estimated there were 12,544 seniors housing properties consisting of 1,778,018 units/beds in the primary and secondary markets of the U.S. as of the 2nd quarter 2017, as shown below. 1,371 4,278 671 6,224 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Majority Independent Living Majority Assisted Living Majority Memory Care Majority Nursing CarePropertiesSeniors Housing Supply 401,459 368,297 114,710 893,552 - 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 Majority Independent Living Majority Assisted Living Majority Memory Care Majority Nursing CareUnits/BedsSeniors Housing Supply Seniors Housing Market Analysis 44 Rye Brook Senior Living New Development According to NIC Map Construction Monitor for the 2nd quarter of 2017, national construction start activity (not including senior apartments) was as follows. There were 534 seniors housing properties under construction as of the 2nd quarter of 2017. The majority of the construction was within new properties, with construction in these properties totaling 45,381 units spread across 377 properties. In addition, there were also 157 existing properties undergoing expansions, totaling 9,093 units. 24,000 18,000 18,000 15,000 21,000 14,603 14,942 19,765 23,469 33,743 30,539 45,713 43,408 54,474 - 10,000 20,000 30,000 40,000 50,000 60,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017UnitsConstruction Start Activity Seniors Housing Market Analysis 45 Rye Brook Senior Living National Demand Trends As noted previously, demographic trends will lead to growing demand for seniors housing over the coming years. Most industry analysts agree that the level of assisted and independent living units that are supportable is not yet known. As the public becomes more educated as to seniors housing options, an increasing percentage of seniors may elect to occupy some form of seniors housing. To date the most comprehensive estimate of demand for seniors housing was published in The Case for Investing in Seniors Housing and Long Term Care Properties with Updated Projections. The study, conducted by NIC in partnership with Price Waterhouse, LLP, produced the following base case estimates of effective demand for seniors housing. Revised Base Case Demand (Including Public Pay Demand for Assisted and Nursing) - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 2000 2010 2020 2030 Year Independent Living Assisted Living Skilled Nursing Seniors Housing Market Analysis 46 Rye Brook Senior Living Property Size Seniors Housing Seniors housing refers to independent living and assisted living communities. Independent living communities are typically larger than assisted living or nursing care facilities with a median of 125 units. Many operators believe that a minimum size of about 80 units is required to operate profitably, but many communities are substantially larger. Assisted living communities are typically smaller than independent living communities with a median of 61 units for assisted living and 92 units for assisted/memory care. Many operators believe that a minimum size of about 60 units is required to operate profitably, but there are some smaller models that have proven to be successful. Source: The State of Seniors Housing 2016 ASHA Seniors Housing Market Analysis 47 Rye Brook Senior Living Building Composition Seniors Housing Independent living communities normally have a higher ratio of rentable area to total area than assisted living or nursing care facilities. This is partially due to the larger size of living units, and partially due to lower common area requirements for uses such as therapy and common area bathing facilities. Assisted living communities normally have a lower ratio of rentable area to total area than independent living facilities. This is partially due to the smaller size of living units; however, assisted living facilities usually have a larger common area, in proportion to the total area of the building, than independent living facilities. Source: The State of Seniors Housing 2016, ASHA Seniors Housing Market Analysis 48 Rye Brook Senior Living Community Age Seniors Housing The majority of independent living communities now in existence were developed since 2000. Another large share of the total was developed in the 1980s. This is in contrast to nursing care, which has experienced relatively constant development for a number of decades, and assisted living, most of which was developed in the 1990s. Source: The State of Seniors Housing 2016, ASHA Seniors Housing Market Analysis 49 Rye Brook Senior Living Occupancy The table on the following page shows the occupancy performance by region compared to a year ago from the National Investment Center for Seniors Housing & Care (NIC). 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 Independent Living1 89.6%88.6%90.7%90.2%3.0%3.1%2.5%4.1%2.4%2.9% East North Central 89.1%88.2%90.3%90.0%2.8%3.8%2.8%3.5%2.2%2.5% Mid-Atlantic 91.2%90.2%91.8%91.2%3.1%3.3%1.8%3.4%1.6%2.2% Mountain 87.1%86.1%88.1%88.7%3.3%2.6%3.1%5.6%2.2%4.4% Northeast 90.8%90.6%91.7%91.5%3.5%2.5%1.4%2.5%1.3%2.3% Pacific 91.4%90.4%92.0%91.1%3.3%4.2%1.0%2.5%1.6%1.4% Southeast 88.8%87.6%90.2%89.5%2.8%2.5%3.8%5.5%4.0%4.2% Southwest 86.3%84.0%88.1%87.3%2.3%2.2%4.3%8.1%4.3%5.2% West North Central 89.9%88.7%91.5%90.8%2.6%3.1%4.4%4.9%3.3%3.4% Assisted Living1 91.1%90.6%91.5%91.4%3.3%3.2%1.4%2.5%1.4%1.9% East North Central 90.5%90.7%91.0%91.1%3.0%4.5%1.0%1.0%0.9%1.3% Mid-Atlantic 93.0%92.8%93.5%93.2%3.2%3.4%1.6%2.4%2.0%2.2% Mountain 88.1%88.7%88.5%89.6%3.9%2.8%1.2%2.0%0.5%2.7% Northeast 92.2%92.3%92.4%92.5%4.1%2.3%0.5%1.7%0.2%1.8% Pacific 92.4%91.6%92.6%91.8%3.4%3.7%0.6%1.4%1.2%0.4% Southeast 90.7%89.8%91.1%91.1%3.1%3.1%2.1%3.2%3.0%2.2% Southwest 88.9%85.4%89.3%88.5%2.7%1.6%1.9%8.2%2.6%4.0% West North Central 91.2%91.3%92.0%91.8%2.4%3.5%3.8%2.0%2.0%2.1% Nursing Care1 87.8%86.2%89.8%88.7%2.7%3.0%4.1%6.2%3.6%4.2% East North Central 87.1%84.8%89.4%88.4%2.5%2.6%5.8%7.2%4.2%4.3% Mid-Atlantic 88.5%86.3%89.3%88.2%3.1%3.1%2.2%5.0%1.0%2.3% Mountain 85.6%82.5%87.5%87.4%2.1%2.3%6.0%10.8%4.9%6.8% Northeast 89.3%88.7%91.0%90.2%2.7%2.6%2.4%3.5%2.6%2.8% Pacific 90.4%89.3%91.4%90.5%3.2%4.7%1.4%3.7%2.0%2.4% Southeast 86.4%85.1%89.1%87.4%2.4%1.8%6.0%8.4%5.2%6.8% Southwest 82.5%81.9%86.2%85.4%1.6%3.3%7.9%7.9%6.9%7.1% West North Central 88.2%85.1%90.7%89.3%2.8%2.4%5.4%9.1%5.3%5.2% CCRCs1 86.9%86.3%87.1%86.4%2.7%2.7%-0.1%0.0%-0.8%-0.7% East North Central 83.9%83.5%84.4%83.6%2.5%2.8%0.4%-0.2%-0.5%-0.7% Mid-Atlantic 89.4%88.6%89.5%88.6%2.7%3.1%-0.8%0.6%-0.9%-0.4% Mountain 81.1%81.6%82.1%82.2%2.7%2.8%1.2%1.6%-1.1%2.2% Northeast 91.1%90.6%91.1%90.6%2.9%2.2%-0.2%-0.3%-1.1%-0.8% Pacific 90.0%89.3%90.0%89.3%2.9%3.6%-0.1%-0.1%-1.0%-0.8% Southeast 89.2%88.4%89.3%88.5%2.3%2.5%-0.2%0.0%-0.2%-0.9% Southwest 76.9%76.4%77.1%76.7%2.5%2.3%-0.5%0.2%-0.5%-0.4% West North Central 82.7%81.5%83.0%81.5%2.9%3.1%0.0%-0.5%-1.2%-2.0% 1. Represents aggregate property type data for all markets. Performance by Region Current Quarter vs. One Year Ago Occupancy (%) Stabilized Occupancy (%) Annual Rent Growth (%) Annual Inventory Growth (%) Annual Absorption (%) Seniors Housing Market Analysis 50 Rye Brook Senior Living The preceding table represents aggregate property type data collected from the NICMAP 99 markets (primary and secondary market aggregate), as shown below: East North Central: Includes Akron, OH; Chicago, IL; Cincinnati, OH; Cleveland, OH; Columbus, OH; Dayton, OH; Detroit, MI; Grand Rapids, MI; Indianapolis, IN; Madison, WI; Milwaukee, WI; Toledo, OH; and Youngstown, OH. Mid-Atlantic: Includes Baltimore, MD; Charleston, SC; Charlotte, NC; Columbia, SC; Greensboro, NC; Greenville, SC; Louisville, KY; Raleigh, NC; Richmond, VA; Virginia Beach, VA; and Washington, DC. Mountain: Includes Albuquerque, NM; Boise, ID; Colorado Springs, CO; Denver, CO; Las Vegas, NV; Ogden, UT; Phoenix, AZ; Salt Lake City, UT; and Tucson, AZ. Northeast: Includes Albany, NY; Allentown, PA; Boston, MA; Bridgeport, CT; Buffalo, NY; Harrisburg, PA; Hartford, CT; Lancaster, PA; New Haven, CT; New York, NY; Philadelphia, PA; Pittsburgh, PA; Portland, ME; Providence, RI; Rochester, NY; Scranton, PA; Springfield, MA; Syracuse, NY; and Worcester, MA. Pacific: Includes Bakersfield, CA; Fresno, CA; Los Angeles, CA; Modesto, CA; Portland, OR; Riverside, CA; Sacramento, CA; San Diego, CA; San Francisco, CA; San Jose, CA; Seattle, WA; Stockton, CA; and Ventura, CA. Southeast: Includes Atlanta, GA; Augusta, GA; Birmingham, AL; Chattanooga, TN; Daytona Beach, FL; Fort Myers, FL; Jackson, MS; Jacksonville, FL; Knoxville, TN; Lakeland, FL; Melbourne, FL; Memphis, TN; Miami, FL; Nashville, TN; Orlando, FL; Sarasota, FL; and Tampa, FL. Southwest: Includes Austin, TX; Baton Rouge, LA; Dallas, TX; El Paso, TX; Houston, TX; Little Rock, AR; McAllen, TX; New Orleans, LA; Oklahoma City, OK; San Antonio, TX; and Tulsa, OK. West North Central: Includes Des Moines, IA; Kansas City, MO; Minneapolis, MN; Omaha, NE; St. Louis, MO; and Wichita, KS. Seniors Housing Market Analysis 51 Rye Brook Senior Living Resident Turnover Seniors Housing Turnover in independent living is lower than for nursing care or assisted living properties probably because fewer moves are health necessitated. Turnover data reported in the State of Seniors Housing 2016 is as follows. Source: The State of Seniors Housing 2016 ASHA Seniors Housing Market Analysis 52 Rye Brook Senior Living Rental Rates Seniors Housing For rental communities, rents have continued to increase. Annual revenue per unit statistics is shown next. Source: The State of Seniors Housing 2016, ASHA Seniors Housing Market Analysis 53 Rye Brook Senior Living Payment Types Independent Living The vast majority of independent living units utilize a rental form of payment. However, 1.7% of the communities surveyed for the 2016 State of Seniors Housing have an entrance fee structure. For the purposes of the survey, this sector includes only properties having an entrance fee in excess of $20,000. This type of payment plan, common for non-profit communities, calls for the payment of an up-front entrance or endowment fee, followed by monthly maintenance fees payments. Often, the entrance fee is fully or partially refundable. Source: The State of Seniors Housing 2016, ASHA Seniors Housing Market Analysis 54 Rye Brook Senior Living Assisted Living The vast majority of assisted living units utilize a rental form of payment. Of the assisted living facilities surveyed for State of Seniors Housing 2016, 99.7% were rental. Many rental communities do charge community or assessment fees, however, which are generally less than $20,000 and non-refundable. Assisted living is still a largely private-pay industry. According to the 2009 Overview of Assisted Living, which is the most recent publication available, funding for assisted living comes from the following sources: Only a small percent of assisted living residents pay for their care through a managed care program or with long term care insurance. However, the popularity of long term care insurance is growing, as it is now given the same preferential tax treatment as expenditures on other types of health insurance. The new tax advantages, in conjunction with a growing awareness of the need for individuals to plan for long term care expenses, have led to an increased interest and growing market for long term care insurance. Seniors Housing Market Analysis 55 Rye Brook Senior Living Expenses and Profit Margins Independent Living Survey responses from The State of Seniors Housing 2016 revealed the following for independent living facilities: Assisted Living Survey responses from The State of Seniors Housing 2016 revealed the following for assisted living facilities: Seniors Housing Market Analysis 56 Rye Brook Senior Living Sales Price Trends Seniors Housing The following chart displays the average and median price per unit for both independent living and assisted living over the last 5 years. The average and median price per independent living unit was $228,200 and $202,100 in 2016, while the average and median price per assisted living unit was $193,650 and $156,250 in 2016. Source: The Senior Care Acquisition Report Twenty-Second Edition 2017, Irving Levin Associates, Inc. Conclusion Senior housing operators are optimistic, projecting to see occupancy and rental rate growth in 2017. Assisted living is considered needs based, and many consumers find the ability to pay for assisted living even in hard times. Looking forward, with the economy and housing market recovering, demand for assisted living will increase across the nation. New construction is increasing, especially in markets with lower barriers to entry. There is some risk of near term overbuilding, which will likely impact older assets in need of updating. Over the longer term, however, strong increases in demand will occur, leading to continued demand for assisted living assets. With the national economy and the housing market now in recovery, the independent living market is experiencing increases in occupancy and rental rates. New construction is increasing, especially in destination markets, as potential residents are finding it easier to sell current homes. Therefore, there is some risk of near term overbuilding which will most likely impact older assets in need of updating. However, we anticipate that occupancy and rental rate increases will continue for several years. Also, the independent living sector was the first sector to benefit from the baby boom generation, which started turning 65 in 2011. 2012 2013 2014 2015 2016 Assisted Living Average $164,000 $150,600 $188,700 $189,200 $193,650 Independent Living Average $138,800 $191,950 $246,800 $192,900 $228,200 Assisted Living Median $152,200 $150,300 $173,200 $169,000 $156,250 Independent Living Median $138,400 $199,300 $275,900 $208,900 $202,100 $- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 Average and Median Price per Unit: Seniors Housing Supply and Demand Analysis 57 Rye Brook Senior Living Supply and Demand Analysis Introduction In this section, we will analyze supply and demand conditions. Metro Market Supply and Demand Conditions The NIC Map Database provides the following data for the New York MSA, which includes the counties shown in the following map. It is noted that primary markets represent the average of the 31 largest core-based statistical areas (CBSAs) within the United States. New York MSA Supply and Demand Analysis 58 Rye Brook Senior Living An overview of the New York seniors housing market is shown in the following table, comparing the MSA data to comparable data for the largest CBSAs in the NIC survey. Trends in the independent living market over time are shown in the following table. Supply and Demand Analysis 59 Rye Brook Senior Living Trends in the assisted living market over time are shown in the following table. The NIC survey divides the market into submarkets by constituent county, as shown in the table(s) below. For stabilized properties that are mostly independent living in the New York area, the average occupancy rate is 92.2%. In comparison, the average occupancy for primarily assisted living communities is 92.5%. The subject development will be located in Westchester County. According to the NIC survey, the county-wide average occupancies for independent living and assisted living facilities are 90.4% and 91.6%. In comparison, the independent living and assisted living figures for nearby Fairfield County (to the immediate east in Connecticut) are 87.3% and 90.4%, respectively. Supply and Demand Analysis 60 Rye Brook Senior Living Delineation of the Market Area The subject’s PMA is concluded to be the area within eighteen zip codes surrounding the proposed development site. The PMA, which is supported by 10 and 15-minute drive times, encompasses all and/or parts of Rye Brook, Port Chester, Harrison, Purchase, Armonk, Scarsdale, Rye, Valhalla, Elmsford, Eastchester, Mamaroneck, and White Plains in New York, as well as Greenwich, Connecticut. Target Market The subject’s target market group consists of the age qualified population that has adequate income to live in elderly housing and adult children who are caregivers for an elderly relative. Therefore, the subject’s primary target market is seniors aged 65+ with household income of $35,000+, as well as adult children who might relocate such a person to the market. Assisted Living Supply Analysis We will now focus upon the assisted living segment of the market. Bed licenses are granted based upon double occupancy in many rooms. In practice, a lesser number of rooms are typically occupied by more than one person. For this reason, we will analyze operating beds as opposed to licensed beds. For purposes of this report, a facility’s operating beds are considered the optimal number of persons that the facility is designed to accommodate at one time. This figure is generally equal to or greater than the number of units and equal to or less than the number of licensed beds. Our analysis also disregards small board and care facilities in and around the market area, although we know such facilities to be present. Board and care facilities generally have less than 25 licensed beds, are operated by “mom and pop” type operators, and offer accommodations and services of lesser quality. For consistency, such facilities are also excluded from the penetration rates utilized in the demand analysis. Existing Supply of Assisted Living The following table is a list of the assisted living facilities (including memory care) within the PMA shown in the table. All of the communities are considered to be 100% competitive within the defined PMA boundaries. NC/MC: Nursing center with specialized memory care beds CCRC: Continuing care retirement community NC/ALF/MC: Nursing center with assisted living & memory care wing IALF: Independent and assisted living facility NC/MC/ILF: Nursing center with independent living & memory care wing IALF/MC: Independent and assisted living facility with memory care wing NC/IL: Nursing center with independent living ILF/MC: Independent living facility with memory care wing Type Key ALF/MC: Free-standing assisted living facility with memory care wing NC: Nursing center ALF D/MC: Free-standing assisted living facility, 100% memory care wing NC/ALF: Nursing center with assisted living ILF: Independent living facility Total Number of Existing Competitive Beds 621 90 Business Park Drive, Armonk, NY The Bristal at Armonk ALF/MC 134 6.0 100%134 9 Saxon Woods Rd, Scarsdale, NY 100 Maple Avenue, White Plains, NY The Ambassador ALF/MC 115 5.7 100%115 The Kensington White Plains ALF/MC 87 4.8 100%87 78 103 Theall Rd, Rye, NY 305 North Street, White Plains, NY The Osborn CCRC 78 4.5 100% 1 Bolling Place, Greenwich, CT The Bristal Assisted Living at White Plains IALF/MC 90 3.7 100%90 1155 King Street, Greenwich, CT Merry Go Round - The Mews ALF 86 2.6 100%86 The Greens at Greenwich ALF D/MC 31 2.0 100%31 Number of Competitive Beds Existing Supply of Assisted Living Property Name Type Number of Assisted Living Beds Miles From Subject Percent Beds Considered Competitive Supply and Demand Analysis 61 Rye Brook Senior Living Occupancy of Competitive Supply The occupancy and waiting list status of the competitive supply of assisted living are as follows: The Bristal at Armonk 93%No90 Business Park Drive, Armonk, NY The Ambassador 91%No9 Saxon Woods Rd, Scarsdale, NY The Kensington White Plains 100%Yes100 Maple Avenue, White Plains, NY The Bristal Assisted Living at White Plains 91%Yes305 North Street, White Plains, NY The Osborn 98%No103 Theall Rd, Rye, NY The Greens at Greenwich 87%No1155 King Street, Greenwich, CT Merry Go Round - The Mews 97%No1 Bolling Place, Greenwich, CT Occupancy of Competitive Assisted Living Property Name Current Occupancy %Waiting List Status Based upon the reported occupancy levels, the weighted average occupancy for competitive beds is as follows: WEIGHTED AVERAGE OCCUPANCY 95%- TOTALS 590 -558 The Bristal at Armonk 134 93%124 90 Business Park Drive, Armonk, NY The Kensington White Plains 87 100%87 100 Maple Avenue, White Plains, NY The Ambassador 115 91%105 9 Saxon Woods Rd, Scarsdale, NY The Osborn 78 98%76 103 Theall Rd, Rye, NY Merry Go Round - The Mews 86 97%83 1 Bolling Place, Greenwich, CT The Bristal Assisted Living at White Plains 90 91%82 305 North Street, White Plains, NY Weighted Average Occupancy of Competitive Assisted Living Property Name Number of Competitive Current Occupancy %Number of Occupied The Greens at Greenwich 31 87%27 1155 King Street, Greenwich, CT The existing inventory indicates occupancies ranging from 87% to 100%, with an overall weighted average occupancy of the PMA is 95%. Supply and Demand Analysis 62 Rye Brook Senior Living Memory Care Supply Analysis We will now focus upon the memory care segment of the assisted living market. Alzheimer’s disease is a progressive, degenerative disease that attacks the brain and results in impaired memory, thinking, and behavior. It was first described by Dr. Alois Alzheimer in 1906 and has since been diagnosed in millions of people. The exact causes have yet to be discovered. Memory care is an umbrella term used to describe the loss of cognitive or intellectual function. Many conditions can cause memory care issues. Issues related to depression, drug interaction, thyroid, and other problems may be reversible if detected early. Several other diseases also cause memory care issues, such as Parkinson’s, Creutzfeldt-Jakob, Huntington’s, and Multi-Infarct or vascular disease, caused by multiple strokes in the brain. The following statistics from the National Alzheimer’s Association’s 2017 Alzheimer’s Disease Facts and Figures report delineate the strong need for facilities that care for persons with memory care issues: • Alzheimer’s is a progressive, degenerative disease of the brain and the most common form of memory care disease. • An estimated 5.5 million Americans of all ages have Alzheimer’s dementia in 2017. This figure includes 5.3 million people aged 65 and older and 200,000 individuals under age 65 who have younger-onset memory care issues. • One in ten people aged 65 and older (10%) has Alzheimer’s dementia. • Of those with Alzheimer’s, an estimated 4% are under age 65, 16% are 65 to 74, 44% are 75 to 84, and 38% are 85 and older. It is noted that percentages do not total 100% due to rounding. • More women than men have memory care issues. Almost two-thirds of all Americans living with Alzheimer’s are women. Of the 5.3 million people over age 65 with Alzheimer’s in the United States, 3.3 million are women and 2.0 million are men. Based on estimates from ADAMS, 16% of women aged 71 and older have memory care issues compared with 11% of men. • The number of Americans surviving into their 80s and 90s and beyond is expected to grow dramatically due to advances in medicine and medical technology, as well as social and environmental conditions. Additionally, a very large segment of the American population – the baby boom generation – is reaching retirement age. • By 2030, the segment of the U.S. population aged 65 years and older is expected to double, and the estimated 74 million older Americans will make up approximately 20% of the total population (up from 14% in 2012). As the number of older Americans grows rapidly, so too will the numbers of new and existing cases of memory care issues. • In 2000, there were an estimated 411,000 new (incident) cases of Alzheimer’s disease. For 2010, that number was estimated to be 454,000 (a 10% increase); by 2030, it is projected to be 615,000 (35% increase from 2010); and by 2050, 959,000 (110% increase from 2010). • By 2025, the number of people aged 65 and older with Alzheimer’s disease is estimated to be over 7.1 million. This is a 35% increase from the 5.3 million aged 65 and older currently affected in 2017. • By 2050, the number of people aged 65 and older with Alzheimer’s disease may nearly triple, from 5.3 million to a projected 13.8 million, barring the development of medical breakthroughs to prevent or more effectively treat the disease. In the past, most persons with memory care issues have been cared for in the home by informal caregivers (friends or relatives) or through home health care agencies or other providers. With the continuing increase in two- income households and the recognition that caring for a person with memory care issues Supply and Demand Analysis 63 Rye Brook Senior Living can be physically and mentally taxing, many informal caregivers are seeking options outside the home. This led to growth in the number of facilities providing specialized care for persons with memory care issues. Facilities providing specialized care for persons with memory care issues generally follow one of two models: the nursing care model or the assisted living model. Generally, the nursing care model can be characterized as being for patients who have relatively extensive health care needs in addition to requiring care for memory care issues. The nursing care model is a type of care subject to greater regulation than assisted living care. Staffing requirements for nursing care are typically greater, and the associated costs for care are higher. As many persons with memory care issues are otherwise healthy, the assisted living model is the leading model for the care of persons with memory care issues. Existing Supply of Memory Care The existing supply of memory care within the PMA is as follows. Total Number of Existing Competitive Beds 166 Type Key ALF/MC: Free-standing assisted living facility with memory care wing NC: Nursing center ALF D/MC: Free-standing assisted living facility, 100% memory care wing NC/ALF: Nursing center with assisted living ILF: Independent living facility NC/ALF/MC: Nursing center with assisted living & memory care wing IALF: Independent and assisted living facility NC/MC/ILF: Nursing center with independent living & memory care wing IALF/MC: Independent and assisted living facility with memory care wing Existing Supply of Memory Care Property Name Type Number of Memory Care Beds Miles From Subject Percent Beds Considered Competitive Number of Competitive Beds NC/IL: Nursing center with independent living ILF/MC: Independent living facility with memory care wing NC/MC: Nursing center with specialized memory care beds CCRC: Continuing care retirement community 90 Business Park Drive, Armonk, NY The Bristal at Armonk ALF/MC 36 6.0 100%36 20 9 Saxon Woods Rd, Scarsdale, NY 100 Maple Avenue, White Plains, NY The Ambassador ALF/MC 20 5.7 100% The Kensington White Plains ALF/MC 34 4.8 100%34 103 Theall Rd, Rye, NY 32 305 North Street, White Plains, NY The Osborn CCRC 13 4.5 100%13 1155 King Street, Greenwich, CT The Bristal Assisted Living at White Plains ALF/MC 32 3.5 100% The Greens at Greenwich ALF D/MC 31 2.0 100%31 Supply and Demand Analysis 64 Rye Brook Senior Living Occupancy of Competitive Supply The occupancy and waiting list status of the competitive supply of memory care is as follows: 9 Saxon Woods Rd, Scarsdale, NY No90%The Ambassador 100 Maple Avenue, White Plains, NY Yes100%The Kensington White Plains The Bristal at Armonk 89%No90 Business Park Drive, Armonk, NY The Bristal Assisted Living at White Plains 88%No305 North Street, White Plains, NY The Osborn 100%Yes103 Theall Rd, Rye, NY Property Name The Greens at Greenwich 87%No1155 King Street, Greenwich, CT Occupancy of Competitive Memory Care Current Occupancy %Waiting List Status Based upon the reported occupancy levels, the weighted average occupancy for competitive beds is as follows: TOTALS 166 -152 WEIGHTED AVERAGE OCCUPANCY 92%- The Bristal at Armonk 36 89%32 90 Business Park Drive, Armonk, NY The Kensington White Plains 34 100%34 100 Maple Avenue, White Plains, NY The Ambassador 20 90%18 9 Saxon Woods Rd, Scarsdale, NY The Osborn 13 100%13 103 Theall Rd, Rye, NY The Greens at Greenwich 31 87%27 1155 King Street, Greenwich, CT The Bristal Assisted Living at White Plains 32 88%28 305 North Street, White Plains, NY Property Name Weighted Average Occupancy of Competitive Memory Care Number of Competitive Current Occupancy %Number of Occupied The existing inventory indicates occupancies ranging from 87% to 100%, with an overall weighted average occupancy of the PMA is 92%. Supply and Demand Analysis 65 Rye Brook Senior Living Independent Living Supply Analysis We will now focus upon the independent living segment of the market. In this analysis, the focus is upon living units, which can accommodate one to two persons. Existing Supply of Independent Living The following table is a list of independent living facilities serving the market area. NC/ALF: Nursing center with assisted living ILF: Independent living facility NC/ALF/MC: Nursing center with assisted living & memory care wing IALF: Independent and assisted living facility NC/MC/ILF: Nursing center with independent living & memory care wing IALF/MC: Independent and assisted living facility with memory care wing NC/IL: Nursing center with independent living ILF/MC: Independent living facility with memory care wing NC/MC: Nursing center with specialized memory care beds CCRC: Continuing care retirement community Total Number of Existing Competitive Units 548 Type Key ALF/MC: Free-standing assisted living facility with memory care wing NC: Nursing center ALF D/MC: Free-standing assisted living facility, 100% memory care wing 55 Grasslands Rd, Valhalla, NY The Knolls CCRC 120 6.1 100%120 103 Theall Rd, Rye, NY 305 North Street, White Plains, NY The Osborn CCRC 204 4.5 100%204 The Bristal Assisted Living at White Plains IALF/MC 58 3.7 100%58 Type Number of Independent Living Units Miles From Subject Percent Units Considered Competitive Number of Competitive Units Existing Supply of Independent Living Property Name Atria Rye Brook ILF 166 0.9 100%166 1200 King Street, Rye Brook, NY Supply and Demand Analysis 66 Rye Brook Senior Living Occupancy of Competitive Supply The occupancy and waiting list status of the competitive supply of independent living is as follows: Occupancy of Competitive Independent Living Current Occupancy %Waiting List Status The Knolls 92%No55 Grasslands Rd, Valhalla, NY The Bristal Assisted Living at White Plains 91%No305 North Street, White Plains, NY The Osborn 94%No103 Theall Rd, Rye, NY Property Name Atria Rye Brook 93%No1200 King Street, Rye Brook, NY Based upon the reported occupancy levels, the weighted average occupancy for competitive units is as follows: TOTALS 548 -509 WEIGHTED AVERAGE OCCUPANCY 93%- The Knolls 120 92%110 55 Grasslands Rd, Valhalla, NY The Osborn 204 94%192 103 Theall Rd, Rye, NY Atria Rye Brook 166 93%154 1200 King Street, Rye Brook, NY The Bristal Assisted Living at White Plains 58 91%53 305 North Street, White Plains, NY Property Name Weighted Average Occupancy of Competitive Independent Living Number of Competitive Current Occupancy %Number of Occupied The existing inventory of independent living indicates occupancies ranging from 91% to 94%, with an overall average of 93%. Supply and Demand Analysis 67 Rye Brook Senior Living Pipeline Supply Our research revealed there to be several pipeline projects under construction or proposed within or overlapping with the concluded PMA boundaries at this time. Independent Living in Rye – is a 135 unit luxury senior retirement community under construction at 120 Old Post Road in Rye. It is located 4.3 miles northeast of the subject. Completion is scheduled in late 2018. Rye Brook Senior Living (subject) - is an existing office building located at 900 King Street in Rye Brook, New York. After demolition, the subject will have 160 independent living units, 12 independent living duplexes (24 cottages), and 85 assisted living beds (including a memory care component). We have estimated 35 beds for memory care. We have included it in our 2019 forecast. Brightview Senior Living of Harrison – is a proposed independent and assisted living community to be located on 600 Lake Street in West Harrison, New York. This four-story community will have a total of 160 units. The exact unit mix has not been determined; however, for the purpose of our analysis we will designate 80 units to each care type. In addition, we estimated 20 of the 80 assisted beds for memory care. Note, a significant legal battle ensued as town residents sued the town board, planning board, and Brightview arguing the site was unfit for senior living. In February 2017, a judge upheld the town board and planning board’s zoning amendment to allow for senior housing. We have included it in our 2019 forecast. Assisted Living Facility in Greenburgh – is a proposed assisted living community to be located on 715 Dobbs Ferry Road in White Plains, New York. This facility is planned to consist of 101 units including a 30 unit memory care component on 6.89 acres site. The Greenburgh Town Board approved the sale of the site to Capital Seniors Housing LLC. It is unknown at this moment if the community will have memory care. We have included 101 assisted living units in our 2019 forecast. The Solana Assisted Living - is a proposed assisted living community to be located on 448 Underhill Road in Scarsdale, New York. Shelbourne Assisted Living is planning to build a total of 80 units. We have estimated 25 for memory care. The facility is currently undergoing the entitlement process in the Town of Greenburgh. We have included this project in our 2019 forecast. Note that there is a proposed assisted living facility to be located near North Lawrence Avenue and North High Street in Elmsford (Greenburgh), New York. This community will have 113 assisted living beds. According to the planning department of Greenburgh, there has not been progress in the planning process since early 2015; hence, we have not included it in our forecast. Also, the Hilton Westchester submitted plans to convert to an upscale 125 assisted living units, including 25 memory care units, but no progress has been made since 2014. We have not included it in our forecast. Residence at Summer Street in Stamford is currently under construction in downtown Stamford at 30 Oak Street. It is to consist of 79 units for either independent living or assisted living plus a 25 unit memory care unit. Construction is expected to be complete in summer 2018. It is located 5.8 miles northeast of the subject. Although outside the subject’s PMA, it is worth noting due to proximity. In our supply forecast, we will only include those facilities likely to be complete within the coming 24 months. These facilities are set forth in the following tables. Supply and Demand Analysis 68 Rye Brook Senior Living Relevant Supply Likely to be Complete Within 24 Months 346 448 Underhill Road, Scarsdale 600 Lake Street, West Harrison The Solana Assisted Living Proposed 80 8.0 100%80 Rye Brook Senior Living Brightview Sr Living of Harrison Proposed 80 3.5 100%80 Assisted Living Facility - Greenburgh Proposed 101 7.5 100%101 715 Dobbs Ferry Rd, White Plains Proposed 85 0.0 100%85 900 King Street, Rye Brook Supply of Assisted Living Under Construction or Proposed Property Name Current Status Number of Assisted Living Beds Miles From Subject Percent Beds Considered Competitive Number of Competitive Beds 715 Dobbs Ferry Rd, White Plains The Solana Assisted Living Proposed 25 8.0 100%25 Relevant Supply Likely to be Complete Within 24 Months 105 448 Underhill Road, Scarsdale 20 600 Lake Street, West Harrison Assisted Living Facility - Greenburgh Proposed 30 7.5 100%30 900 King Street, Rye Brook Brightview Sr Living of Harrison Proposed 20 3.5 100% Rye Brook Senior Living Proposed 30 0.0 100%30 Supply of Memory Care Under Construction or Proposed Property Name Current Status Number of Memory Care Beds Miles From Subject Percent Beds Considered Competitive Number of Competitive Beds Relevant Supply Likely to be Complete Within 24 Months 264 Brightview Sr Living of Harrison Proposed 80 3.5 100%80 600 Lake Street, West Harrison Relevant Supply Likely to be Complete Within 12 Months 135 Rye Brook Senior Living Proposed 184 0.0 100%184 900 King Street, Rye Brook Supply of Independent Living Under Construction or Proposed Property Name Current Status Number of Independent Living Units Miles From Subject Percent Units Considered Competitive Number of Competitive Units Rye Independent Living Under Construction 135 4.3 100%135 120 Old Post Road, Rye, NY Barriers to Entry The subject is in a market with relatively high barriers to entry. These include: • High cost of land • Limited availability of vacant sites • Difficulty in obtaining zoning approval These barriers to entry will tend to limit future development. Supply and Demand Analysis 69 Rye Brook Senior Living Rye Brook Senior Living Supply and Demand Analysis 70 Rye Brook Senior Living Seniors Housing Demand Analysis We will now analyze demand for seniors housing. Our analysis will show demand estimates for the current year, each year for the following four, and 10 years from the current year. The demand estimates will be based upon the quantity of four potential target groups who are likely users of seniors housing. Analysis of these four target groups will provide four separate indications of demand for seniors housing. We will then consider each one of them to derive our demand conclusions, much as the three approaches to value in an appraisal are reconciled into a single value estimate. The target groups are as follows: Target Group 1 Although the vast majority of persons entering seniors housing are age 80 and over, some persons between the ages of 65 and 80 elect to live in seniors housing. Therefore, the broadest potential target group for seniors housing is persons age 65 and over. The number of persons age 65+ is often considered in bed need methodologies which are adopted by various state licensing agencies. Target Group 2 The next potential target group typically examined in evaluating demand for seniors housing is the number of households headed by an individual age 75 and over. The vast majority of seniors housing residents fall into the 75+ range. Target Group 3 The next target group consists of the age qualified population that has adequate income to live in seniors housing. Many operators consider $35,000 to be the minimum qualifying income. Although research has shown that many seniors with lesser income levels can afford to reside in seniors housing due to having income from other sources or assets to spend down, $35,000 is widely considered a benchmark for the private pay market. Due to the location of the subject, this target group consists of the number of households with a household income of $35,000+ headed by an individual age 75+. Therefore, this target group has been utilized in this analysis. Target Group 4 This group consists of a group referred to in the industry as adult children. Children and/or other relatives of seniors generally play a significant role in the placement of a senior in a seniors housing facility. Market areas where there are large concentrations of persons in the 45 to 64 age group can often support a significantly larger supply of seniors housing than would be indicated through analysis of seniors already residing in the area. This is because in-migration of seniors into markets with large adult child populations is common, as the elderly are often relocated to a facility near the home of their adult children or other relative. Many operators of seniors housing have recognized the importance of the adult child market. Thus, this target group is the number of persons in the age 45 to 64 age bracket. Income and ADL Qualification Some in the industry apply additional qualifications to further refine the potential target market before applying a penetration rate. These further qualifications might include quantification of seniors likely to require assistance with ADLs and quantification of seniors by living arrangements, restricting the market to those living alone under the assumption that few seniors living with spouses will choose seniors housing. However, there are no reliable local sources to accurately estimate these factors in a given market area, typically leading to the use of national statistics. These further qualifications tend to complicate the application and derivation of penetration rates, and Supply and Demand Analysis 71 Rye Brook Senior Living are a futile exercise since the same national data is typically applied to each market area. For this reason, we will not attempt to further qualify the potential market. Discussion of Achievable Penetration Rates There are no industry standard definitions for penetration or capture rates. For purposes of this analysis, a penetration rate is considered to be the number of beds or units of a specific type that should be demanded at market equilibrium within a given market area, divided by the quantity of persons or households of a specific type in the same market area. For example, if 100 beds of assisted living should be demanded, and there are 1,000 persons age 65+ that reside in the PMA, the indicated penetration rate is 10%. In order to determine appropriate penetration rates, we consulted national demand estimates provided in The Case for Investing in Seniors Housing and Long Term Care Properties with Updated Projections. We have also relied upon actual penetration rates being realized based upon data from NIC Map. The penetration rates are based upon demand for public and private pay. The inclusion of public pay demand significantly impacts the nursing facility sector and has a lesser but still notable impact upon the other two sectors. It is important to note that in states where Medicaid waivers and/or other public pay alternatives are not available, these penetration rates may not be realized. These demand estimates, derived from the most complete and authoritative study of national demand in existence, will be used as the basis for estimating demand in the subject’s market area. We have been evaluating seniors housing facilities since the mid-1980s. Over the years, we have worked with many of the most prolific developers of seniors housing in the nation including Sunrise Senior Living, Holiday Retirement, Senior Resource Group, Brookdale Senior Living, and Capital Senior Living. Most of the successful developers and operators of private pay seniors housing target the adult child population (persons age 45 to 64). In our tours of literally hundreds of facilities nationally, we always ask the source of residents and how often the decision is made by an adult child caregiver. In most instances, the adult child caregiver is noted as being the primary decision maker, and in many markets, more than 50% of the residents are brought in from outside the PMA by adult child caregivers that live in the PMA. Thus, in our analysis, the adult child market (Target Group 4) is given considerable weight. We have also field tested the penetration rates, used herein, in the preparation of more than 3,000 market studies and appraisals of seniors housing assets prepared over the past 10+ years. We have found these penetration rates to be excellent predictors of actual market conditions. In other words, when our demand analysis indicated there to be an undersupply, we typically found high market occupancy levels indicating unmet demand. Alternatively, when our demand model showed an oversupply, we have typically seen low market occupancy levels. Supply and Demand Analysis 72 Rye Brook Senior Living Demand Estimates The following table shows the estimated number of persons or households in each target group for a number of time periods, and the indicated demand for each period based upon the penetration rates previously discussed. 2017 2018 2019 2020 2021 2022 2027 A. PMA Persons Age 65+54,212 55,612 57,012 58,413 59,813 61,213 69,118 B. Achievable Penetration Rate 2.0%2.0%2.0%2.0%2.0%2.0%2.0% C. Indicated Market Area Demand (A X B)1,094 1,122 1,151 1,179 1,207 1,235 1,395 2017 2018 2019 2020 2021 2022 2027 A. PMA HHs Age 75+16,064 16,335 16,607 16,878 17,150 17,421 18,893 B. Achievable Penetration Rate 6.6%6.6%6.6%6.6%6.6%6.6%6.6% C. Indicated Market Area Demand (A X B)1,065 1,083 1,101 1,119 1,137 1,155 1,252 2017 2018 2019 2020 2021 2022 2027 A. PMA HHs Age 75+ W/Inc. $35,000+11,314 11,544 11,773 12,003 12,232 12,462 13,726 B. Achievable Penetration Rate 21.6%21.6%21.6%21.6%21.6%21.6%21.6% C. Indicated Market Area Demand (A X B)2,439 2,488 2,538 2,587 2,637 2,686 2,959 2017 2018 2019 2020 2021 2022 2027 A. PMA Persons Age 45-64 65,489 69,424 73,360 77,295 81,231 85,166 110,755 B. Achievable Penetration Rate 1.1%1.1%1.1%1.1%1.1%1.1%1.1% C. Indicated Market Area Demand (A X B)746 791 836 881 926 971 1,262 2017 2018 2019 2020 2021 2022 2027 Indicated Demand 1,593 1,640 1,687 1,734 1,781 1,828 2,111 Adjustment for Local Market Conditions 0%0%0%0%0%0%0% Concluded Demand 1,593 1,640 1,687 1,734 1,781 1,828 2,111 Item Year Demand Conclusions Item Year Target Group 4 - Persons Age 45-64 (Adult Children) Demand For Assisted Living Item Year Item Target Group 3 - Households Age 75+ With Income $35,000+ Year Target Group 2 - Households Age 75+ Target Group 1 - Persons Age 65+ Year Item The demand indication for each target group is independent of the other three demand indications. In this case, our final demand conclusions is weighted 50% to Target Group 3 - age and income qualified seniors, and 50% to Target Group 4 - adult children. These two indications of demand are the best indicators of demand for private pay seniors housing. Supply and Demand Analysis 73 Rye Brook Senior Living 2018 2019 2020 2021 2022 2027 A. PMA Persons Age 65+55,612 57,012 58,413 59,813 61,213 69,118 B. Achievable Penetration Rate 2.8%2.8%2.8%2.8%2.8%2.8% C. Indicated Market Area Demand (A X B)1,573 1,612 1,652 1,691 1,731 1,954 2018 2019 2020 2021 2022 2027 A. PMA HHs Age 75+16,335 16,607 16,878 17,150 17,421 18,893 B. Achievable Penetration Rate 9.3%9.3%9.3%9.3%9.3%9.3% C. Indicated Market Area Demand (A X B)1,517 1,542 1,567 1,593 1,618 1,754 2018 2019 2020 2021 2022 2027 A. PMA HHs Age 75+ W/Inc. $35,000+11,544 11,773 12,003 12,232 12,462 13,726 B. Achievable Penetration Rate 30.2%30.2%30.2%30.2%30.2%30.2% C. Indicated Market Area Demand (A X B)3,486 3,556 3,625 3,694 3,764 4,146 2018 2019 2020 2021 2022 2027 A. PMA Persons Age 45-64 69,424 73,360 77,295 81,231 85,166 110,755 B. Achievable Penetration Rate 1.6%1.6%1.6%1.6%1.6%1.6% C. Indicated Market Area Demand (A X B)1,109 1,172 1,234 1,297 1,360 1,769 2018 2019 2020 2021 2022 2027 Indicated Demand 2,298 2,364 2,430 2,496 2,562 2,957 Adjustment for Local Market Conditions 0%0%0%0%0%0% Concluded Demand 2,298 2,364 2,430 2,496 2,562 2,957 Year Year Target Group 1 - Persons Age 65+ Item Demand For Independent Living Item Year Target Group 2 - Households Age 75+ Item Target Group 3 - Households Age 75+ With Income $35,000+ Demand Conclusions Target Group 4 - Persons Age 45-64 (Adult Children) Item Year Item Year The demand indication for each target group is independent of the other three demand indications. In this case, our final demand conclusions is weighted 50% to Target Group 3 - age and income qualified seniors, and 50% to Target Group 4 - adult children. These two indications of demand are the best indicators of demand for private pay seniors housing. Supply and Demand Analysis 74 Rye Brook Senior Living Comparison of Supply and Demand The following table summarizes our conclusions of supply and demand for assisted living (including memory care). 2017 2018 2019 2020 2021 2022 2027 A. Indicated Demand 1,593 1,640 1,687 1,734 1,781 1,828 2,111 B. Less Existing Supply 621 621 621 967 967 967 967 C. Existing Unmet Demand or Oversupply 972 1,019 1,066 767 814 861 1,144 D. Additions/Subtractions to Supply 0 0 346 0 N.A.N.A.N.A. E. Unmet Demand After Additions 972 1,019 720 767 814 861 1,144 Comparison of Supply and Demand For Assisted Living Item Year Our analysis shows that the PMA has an undersupply of assisted living (including memory care) in the current year. This is supported by the strong overall weighted average assisted living/memory care occupancy of 95%. Several known pipeline projects are forecast to come online within the next 24 to 36 months. These projects combine for a total of 346 assisted living/memory care beds (including the subject’s 85 assisted living beds – which include a 30-bed memory care component). As noted previously, demand for memory care is a subset of overall assisted living demand. Memory care facilities are normally licensed the same as standard assisted living facilities. Furthermore, it is relatively easy for facilities to begin or cease providing specialized memory care since the physical plant requirements are not significantly different and the license is not different. We have previously determined demand for all assisted living, including memory care. As of the 2nd quarter of 2017, NIC MAP reported that there were 388,489 assisted living units and 120,209 memory care units in the top 140 metro markets. Thus, the combined assisted living supply count inclusive of memory care was 508,698 units. The memory care assisted living supply figure in turn equated to 23.63% of the total assisted living supply. The average occupancy was 87.6% for assisted living and 84.4% for memory care, indicating that demand between the two segments is near a balanced level. However, we believe this provides just a starting point, and, in fact, understates potential demand for memory care for several reasons. Firstly, memory care units are much more likely to be semi-private than traditional assisted living, and the statistics noted above are based upon units, not beds. Therefore, the quantity of memory care units above has a much higher level of double occupancy, thus the demand on a bed, rather than unit basis, would be much higher as a percent of total demand. Furthermore, many residents of traditional assisted living have mild to moderate memory care issues and would be better suited for residency in a memory care facility, but the supply of memory care units is lacking in many markets. According to the Alzheimer’s Association, there are approximately 480,000 people age 65 or older that developed Alzheimer’s disease in the United States in 2017. Also, the Alzheimer’s Association provided the following data regarding projected change by state for those residents with Alzheimer’s disease. Supply and Demand Analysis 75 Rye Brook Senior Living Supply and Demand Analysis 76 Rye Brook Senior Living As shown in the figures above, between 2017 and 2025, every state and region across the county is expected to experience double-digit percentage increases in the numbers of people with Alzheimer’s due to increases in the proportion of the population 65 and older. Major operators of memory care facilities such as Brookdale, Capital Senior Living, and Benchmark believe that demand for memory care is as high as 38% of total assisted living demand. Based upon this, we will estimate demand for memory care at 35% of total assisted living demand. Supply and Demand Analysis 77 Rye Brook Senior Living The following table summarizes our conclusions of supply and demand for memory care. 2017 2018 2019 2020 2021 2022 2027 A. Indicated Demand 557 574 590 607 623 640 739 B. Less Existing Supply 166 166 166 271 271 271 271 C. Existing Unmet Demand or Oversupply 391 408 424 336 352 369 468 D. Additions/Subtractions to Supply 0 0 105 0 N.A.N.A.N.A. E. Unmet Demand After Additions 391 408 319 336 352 369 468 Comparison of Supply and Demand For Memory Care Item Year Our analysis shows that the PMA has an under-supply of memory care in the current year. This is supported by the 92% level for the memory care subset. Several known pipeline projects are forecast to come online within the next 24 to 36 months. These projects combine for a total of 110 memory care beds (including the subject’s 35-bed memory care component). The following table summarizes our conclusions of supply and demand for independent living: 2017 2018 2019 2020 2021 2022 2027 A. Indicated Demand 2,231 2,298 2,364 2,430 2,496 2,562 2,957 B. Less Existing Supply 548 548 683 947 947 947 947 C. Existing Unmet Demand or Oversupply 1,683 1,750 1,681 1,483 1,549 1,615 2,010 D. Additions/Subtractions to Supply 0 135 264 0 N.A.N.A.N.A. E. Unmet Demand After Additions 1,683 1,615 1,417 1,483 1,549 1,615 2,010 Item Year Comparison of Supply and Demand For Independent Living Our analysis shows that the PMA has an under-supply of independent living in the current year. This is supported by the strong overall weighted average independent living occupancy of 97%. There is one known project under construction that will add 135 competitive units in 2018. The subject’s 184 units plus one additional project with 80 units are forecast to come online in 2019. These two projects combine for a total of 264 independent living units. Supply and Demand Analysis 78 Rye Brook Senior Living Supply and Demand Conclusion The PMA is a growing market with high barriers to entry. Our analysis shows that the assisted living (including memory care) and independent living segments to be under-supplied at this time. This is supported by the higher occupancies reported throughout each segment (95% for assisted living (including memory care), 92% specific to memory care, and 93% for independent living). Several known pipeline projects are forecast to come online within the next 24 to 36 months. These projects combine for a total of 399 independent living units (including the subject’s 184 independent living units) and 346 assisted living/memory care beds (including the subject’s 85 assisted living beds, of which 30 of which are to be dedicated memory care). • There are currently 621 competitive assisted living beds within the PMA. With a demand figure for 1,687 beds in 2019 and a pipeline supply of 346 beds (including the subject’s 85 assisted living beds – which includes a 30-bed memory care component), there is forecast to be excess demand for an additional 720 beds. • Specific to memory care, with a total supply figure of only 166 competitive beds, a pipeline supply of 110 beds (including the subject’s 30-bed memory care component), and an estimated demand figure for 590 beds in 2019, there is forecast to be excess unmet demand for an additional 319 beds. • Lastly, there are 548 competitive independent living units within the PMA at this time. With an anticipated demand figure for 2,364 units in 2019 and a pipeline supply of 399 units (including the subject’s 160 independent living units), there is indicated to be excess demand for an additional 1,417 units. Considering the strong growth forecast in seniors housing over the next few years, market conditions are anticipated to continually improve and strengthen. Development of the subject as proposed with 160 independent living units, 12 independent living duplexes (24 cottages), and 85 assisted living beds (including a 30-bed memory care component). Development should proceed as planned. JLL Valuation & Advisory Services, LLC Market Study Specialty Practice October 9, 2020 Mr. Karl D. Mittermayr George Comfort & Sons, Inc. 200 Madison Ave New York, NY 10016 Phone: 212-542-2104 Email: kmittermayr@gcomfort.com Subject: Proposed Seniors Housing Community in Rye Brook, New York -Independent Living -Assisted Living -Memory Care As you are aware, we previously conducted a Market Study for this project in 2016 and later updated it in 2017. The scope of this engagement is specific to revisiting and updating the demand estimates for each product/care segment (independent living, assisted living, and memory care). Our findings and conclusions will be reported and presented in this brief letter report format. Project Overview Plans are for the development of a seniors housing community in Rye Brook, New York. More specifically, the 17.77+/- acre site is located at 900 King Street. The site is currently improved with a 215,000+/- square foot office building and a 595- space parking lot. All structures and improvements will be completely demolished and removed prior to the development of the proposed subject. A product/care mix consisting of 156 independent living units (including 20 townhome-style units), 60 assisted living beds, and 25 memory care beds. Page 2 Proposed Seniors Housing Community - Rye Brook, NY Primary Market Area Considering population density, commuting patterns, physical and psychological barriers, and the concentration of competing communities located throughout the area, we conclude the appropriate primary market area (PMA) to be the area constrained by the following zip codes: -10504 -06831 -06830 -10573 -10580 -10528 -10543 -10804 -10709 -10583 -10605 -10606 -10601 -10607 -10523 -10603 -10604 -10577 Page 3 Proposed Seniors Housing Community - Rye Brook, NY Demand Estimates The following is our process for determining demand for the property’s Primary Market Area (PMA). The following criterion is to determine the appropriate targeted demographic by product/care type. Competitive Market Area Delineate and establish primary market area boundaries and evaluate demographics. Age Qualification Determine appropriate age ranges to establish demand. Source: Esri Need Qualification If applicable, quantify the number of seniors in need of assistance with ADLs and IADLs. Source: US Census and Alzheimer's Association Downsizers In the case of 55+ and/or independent living, quantify the number of seniors desiring to downsize. Source: The Independent Living Report and Esri Income Qualification Apply screens to filter out persons or households with income levels deemed to be too high or too low. Source: Esri Demand Estimates Apply appropriate penetration rates to the age, need, and income-qualified persons or households to determine demand. Active Adult 55+ Age Qualified (55+) 65+ Income Qualified Downsizers Preferring Retirement Communities Influence of Adult Children Independent Living Age Qualified (62+) 75+ Income Qualified Downsizers Preferring Retirement Communities Influence of Adult Children Assisted Living Age Qualified (62+) 75+ Income Qualified Need Qualified ADLs & IADLs Influence of Adult Children Memory Care Age Qualified (62+) 75+ Income Qualified Need Qualified ADLs & IADLs Specialized Memory Care Needs Influence of Adult Children Nursing Care Age Qualified (Any) 65+ Payor Source Need Qualified Skilled & Rehab Page 4 Proposed Seniors Housing Community - Rye Brook, NY Target Demographic Seniors housing communities typically have a minimum age requirement of 62, while the majority of residents are in excess of 75+ based on national research. For purposes of estimating demand in the PMA, we will use a qualifying minimum age of 75 for independent living, assisted living, and memory care. Note that specific to active adult 55+ apartments, a minimum age of 65 is typically used. Age and Income Qualification A number of operators consider $35,000 to be the appropriate minimum income benchmark, while others set the benchmark at $50,000 due to higher associated costs. For illustration, this chart highlights the overall income distribution reported within a recent ASHA publication. As a starting point, we will utilize a minimum income-qualifying figure of $35,000+ for assisted living and $35,000+ for independent living. However, we recognize that the total cost of residing in a facility will likely require supplemental income from other sources (children and/or other relatives) or assets to spend down, e.g., home equity. Considering the median home value within the subject’s PMA, an available equity assumption of 50%+/-, and NIC’s latest median length of stay figures, we estimate the actual potential spending power of the targeted households 75+ to be significantly higher, in turn more than offsetting any minimum income related shortfalls. Page 5 Proposed Seniors Housing Community - Rye Brook, NY Need Qualification | Assisted Living and Memory Care The U.S. Census Bureau reports that 15.4% of seniors age 75 to 79 require assistance with the activities of daily living (ADLs) and/or instrumental activities of daily living (IADLs). For seniors 80+, that dependency increases to 30.2%. Applying these assumptions to the localized PMA demographic pool (weighting of the population age 75 to 79 in comparison to the population 80+) results in current and five-year forecast figures of 24.5% and 24.2%. Cohort % Requiring Independent Size =>Assistance vs Seniors Current Year Population 75 to 79 9,757 =>15.4%vs 84.6% Population 80+15,706 =>30.2%vs 69.8% Current Year | Targeted Pool 25,463 =>24.5%vs 75.5% Five-Year Forecast Population 75 to 79 11,675 =>15.4%vs 84.6% Population 80+17,040 =>30.2%vs 69.8% Five-Year Forecast | Targeted Pool 28,715 =>24.2%vs 74.8% Source: US Census % Requiring Assistance with ADLs and IADLs Item Regarding seniors requiring memory care services, an additional adjustment is necessary. According to the Alzheimer’s Association, 17% of seniors age 75 to 84 require this specialized assistance. And specific to the population 85+, the figure is even larger at 32%. When applied to the localized demographics (weighting of the population 75 to 84 in comparison to the population 85+) results in current and five-year forecast figures of 22.2% and 24.4%. The five-year forecast is adjusted according to the state-by-state growth projections released by the Alzheimer’s Association which are displayed later in this report. The five-year growth figure indicated for the state of New York is 12.2%. Cohort % Requiring Size =>Assistance Current Year Population 75 to 84 16,655 =>17.0% Population 85+8,808 =>32.0% Current Year | Targeted Pool 25,463 =>22.2% Five-Year Forecast Population 75 to 84 19,680 =>19.1% Population 85+9,035 =>35.9% Five-Year Forecast | Targeted Pool 28,715 =>24.4% Source: Alzheimer's Association % Requiring Specialized Memory Care Assistance Item Page 6 Proposed Seniors Housing Community - Rye Brook, NY Downsizers by Choice | Active Adult 55+ and Independent Living When estimating demand for active adult 55+ and independent living product types, the prevailing home ownership percentage for the competitive market area should be considered, as well as the propensity of these downsizers to choose independent living. According to the American Seniors Housing Association’s The Independent Living Report, 59% of the downsizing seniors surveyed preferred moving into an independent living community instead of a smaller single-family residence, duplex, condominium, or conventional apartment building. And of the residents at the communities surveyed, 90% downsized from owner-occupied single-family homes. ASHA’s report detailed the reasons, motivations, hesitations, and influences impacting new residents’ decisions to move and reflect data from over 900 move-ins to independent living communities in the 100 largest cities in the United States. Because of this strong correlation, we will adjust our targeted independent senior demographic pool downward by the area’s prevailing home ownership percentage – as well as apply an adjustment for the seniors’ preferences towards independent living upon downsizing. Influence of Adult Children Children and/or other relatives of seniors generally play a significant role in the placement of a senior in a seniors housing facility. Market areas where there are large concentrations of persons in the 45 to 64 age group can often support a significantly larger supply of seniors housing than would be indicated through analysis of seniors already residing in the area. This is because in- migration of seniors into markets with large adult child populations is common, as the elderly are often relocated to a facility near the home of their adult children or other relative. JLL’s experience with surveying and touring seniors housing communities nationally indicates that the decision for a senior to move into a community is primarily made by their adult child. Additionally, in many markets, more than 50% of the residents are brought in from outside of a given submarket by adult children that live inside the submarket. The ratio of adult children in comparison to households 75+ within the PMA is 1.3. This is significantly lower than the metro-wide figure of 3.2. This is an indication that the PMA is currently an aging in place market that in turn is not expected to experience a significant level of in-migration since there are a limited number of adult children that will influence their parents residing elsewhere to move into the area. For the current year, assuming a ratio of adult children to households 75+ in line with the metro, the adjusted pool is estimated at 10,290. Looking five years forward, the ratio is expected to be 1.1 for the PMA in comparison to 2.6 for the metro. Assuming a ratio in line with the metro results in an adjusted forecasted pool of 11,757. Item Current Year Five-Year Forecast Change Adult Children (ages 45 to 64)20,911 19,160 -1,751 Households 75+16,257 17,853 1,596 Ratio of Adult Children to HHs 75+ 1.3 1.1 -0.21 Metro Comparison 3.2 2.6 -0.56 Targeted Households 75+6,570 7,310 740 Times Average Household Size 1.6 1.6 0.04 Adjusted Population 75+ Pool 10,290 11,757 1,467 Ratio of Adult Children to HHs 75+ Page 7 Proposed Seniors Housing Community - Rye Brook, NY Demand Reconciliation These two demographic groups, age and income qualified households 75+ and adult children, will be utilized in the derivation of demand for independent living, assisted living, and memory care. Note that the two demographic groups will provide two separate indications of demand. We will then consider each one to derive our demand conclusion. In-Place Households 75+ Influence of Adult Children Page 8 Proposed Seniors Housing Community - Rye Brook, NY Demand Estimates by Product/Care Type The estimated number of persons or households for each of the targeted demographic groups for a number of time periods, and the indicated demand for each period based upon the applicable market penetration rates are shown in the following table(s). Independent Living Demand for independent living is calculated in the table. Demand Estimate for Independent Living Item 2020 2021 2022 2023 2024 2025 2030 Total Population 75+25,463 26,113 26,634 27,050 27,383 28,715 32,382 % Not Requiring Assistance | Independent Seniors 75.8% 75.8% 75.8% 75.9% 75.9% 76.0% 76.2% Divided by Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Pool of Households 75+ Not Requiring Assistance 12,315 12,570 12,772 12,933 13,060 13,565 14,943 % of Homeowners 62.9% 62.7% 62.6% 62.5% 62.4% 62.1% 61.3% % of Preferring Independent Living 59.0% 59.0% 59.0% 59.0% 59.0% 59.0% 59.0% Targeted Households 75+ | Independent Living 4,569 4,651 4,717 4,768 4,809 4,969 5,403 % of Income Qualified Households 55.7% 55.7% 55.7% 55.7% 55.7% 55.7% 55.7% Demand Estimate | In-Place Households 75+2,544 2,590 2,626 2,655 2,678 2,767 3,009 Total Households 45-64 | Adult Children 20,911 20,561 20,211 19,860 19,510 19,160 17,556 Ratio of Adult Children to Households 75+1.3 1.2 1.2 1.2 1.1 1.1 0.9 Application of Metro Ratio / Benchmark 3.2 3.1 2.9 2.8 2.7 2.6 2.2 Potential Net In-Migration/Out-Migration Pool of Households 75+ 6,570 6,725 6,877 7,025 7,169 7,310 8,133 Times Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Adjusted Population 75+ Pool 10,290 10,590 10,876 11,148 11,407 11,757 13,432 % Not Requiring Assistance with ADLs and IADLs 75.8% 75.8% 75.8% 75.9% 75.9% 76.0% 76.2% Divided by Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Pool of Households 75+ Not Requiring Assistance 4,977 5,098 5,215 5,330 5,441 5,554 6,198 % of Homeowners 62.9% 62.7% 62.6% 62.5% 62.4% 62.1% 61.3% % of Downsizers Preferring Independent Living 59.0% 59.0% 59.0% 59.0% 59.0% 59.0% 59.0% Targeted Households 75+ | Independent Living 1,846 1,886 1,926 1,965 2,003 2,034 2,241 % Income Qualified 55.7% 55.7% 55.7% 55.7% 55.7% 55.7% 55.7% Demand Estimate | Influence of Nearby Adult Children 1,028 1,050 1,072 1,094 1,115 1,133 1,248 Weight given to household indication 50% 50% 50% 50% 50% 50% 50% Weight given to adult child influence 50% 50% 50% 50% 50% 50% 50% Demand Conclusion | Independent Living 1,786 1,820 1,849 1,875 1,897 1,950 2,128 Year The two indicated demand estimates are independent of the other. In this case, our conclusion is weighted 50% to the demand indication based on in-place households 75+ and 50% to the demand indication based on the potential influence of nearby adult children (i.e., in- migration/out-migration). Page 9 Proposed Seniors Housing Community - Rye Brook, NY Assisted Living Demand for assisted living is calculated in the table. Demand Estimate for Assisted Living 2020 2021 2022 2023 2024 2025 2030 Total Population 75+25,463 26,113 26,634 27,050 27,383 28,715 32,382 % Requiring Assistance with ADLs and IADLs 24.5% 24.5% 24.4% 24.4% 24.3% 24.2% 23.8% Divided by Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Pool of Households 75+ Requiring Assisted Living or Memory Care 3,988 4,056 4,110 4,152 4,186 4,317 4,674 Minus % with Memory Care Needs -22.2% -22.6% -23.0% -23.3% -23.5% -24.4% -26.8% Targeted Households 75+ | Assisted Living 3,103 3,138 3,166 3,187 3,203 3,265 3,423 % Income Qualified 69.7% 70.2% 70.5% 70.8% 71.0% 71.8% 74.0% Demand Estimate | In-Place Households 75+2,164 2,202 2,232 2,255 2,274 2,346 2,533 Total Households 45-64 | Adult Children 20,911 20,561 20,211 19,860 19,510 19,160 17,556 Ratio of Adult Children to Households 75+1.3 1.2 1.2 1.2 1.1 1.1 0.9 Application of Metro Ratio / Benchmark 3.2 3.1 2.9 2.8 2.7 2.6 2.2 Potential Net In-Migration/Out-Migration Pool of Households 75+ 6,570 6,725 6,877 7,025 7,169 7,310 8,133 Times Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Adjusted Population 75+ Pool 10,290 10,590 10,876 11,148 11,407 11,757 13,432 % Requiring Assistance with ADLs and IADLs 24.5% 24.5% 24.4% 24.4% 24.3% 24.2% 23.8% Divided by Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Pool of Households 75+ Requiring Assistance 1,612 1,645 1,678 1,711 1,744 1,768 1,939 Minus % with Memory Care Needs -22.2% -22.6% -23.0% -23.3% -23.5% -24.4% -26.8% Targeted Households 75+ | Assisted Living 1,254 1,273 1,293 1,313 1,334 1,337 1,420 % Income Qualified 69.7% 70.2% 70.5% 70.8% 71.0% 71.8% 74.0% Demand Estimate | Influence of Nearby Adult Children 874 893 911 929 947 960 1,051 Weight given to household indication 50% 50% 50% 50% 50% 50% 50% Weight given to adult child influence 50% 50% 50% 50% 50% 50% 50% Demand Conclusion | Assisted Living 1,519 1,547 1,571 1,592 1,610 1,653 1,792 Item Year The two indicated demand estimates are independent of the other. In this case, our conclusion is weighted 50% to the demand indication based on in-place households 75+ and 50% to the demand indication based on the potential influence of nearby adult children (i.e., in- migration/out-migration). Page 10 Proposed Seniors Housing Community - Rye Brook, NY Memory Care Demand for memory care is calculated in the table. Demand Estimate for Memory Care 2020 2021 2022 2023 2024 2025 2030 Total Population 75+25,463 26,113 26,634 27,050 27,383 28,715 32,382 % Requiring Assistance with ADLs and IADLs 24.5% 24.5% 24.4% 24.4% 24.3% 24.2% 23.8% Divided by Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Pool Households 75+ Requiring Assisted Living or Memory Care 3,988 4,056 4,110 4,152 4,186 4,317 4,674 % with Memory Care Needs 22.2% 22.6% 23.0% 23.3% 23.5% 24.4% 26.8% Targeted Households 75+ | Memory Care 885 918 944 966 983 1,052 1,251 % Income Qualified 69.7% 70.2% 70.5% 70.8% 71.0% 71.8% 74.0% Demand Estimate | In-Place Households 75+617 644 666 683 698 756 926 Total Households 45-64 | Adult Children 20,911 20,561 20,211 19,860 19,510 19,160 17,556 Ratio of Adult Children to Households 75+1.3 1.2 1.2 1.2 1.1 1.1 0.9 Application of Metro Ratio / Benchmark 3.2 3.1 2.9 2.8 2.7 2.6 2.2 Potential Net In-Migration/Out-Migration Pool of Households 75+ 6,570 6,725 6,877 7,025 7,169 7,310 8,133 Times Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Adjusted Population 75+ Pool 10,290 10,590 10,876 11,148 11,407 11,757 13,432 % Requiring Assistance with ADLs and IADLs 24.5% 24.5% 24.4% 24.4% 24.3% 24.2% 23.8% Divided by Average Household Size 1.6 1.6 1.6 1.6 1.6 1.6 1.7 Pool of Households 75+ Requiring Assistance 1,612 1,645 1,678 1,711 1,744 1,768 1,939 % with Memory Care Needs 22.2% 22.6% 23.0% 23.3% 23.5% 24.4% 26.8% Targeted Households 75+ | Assisted Living 358 372 386 398 409 431 519 % Income Qualified 69.7% 70.2% 70.5% 70.8% 71.0% 71.8% 74.0% Demand Estimate | Influence of Nearby Adult Children 249 261 272 282 291 309 384 Weight given to household indication 50% 50% 50% 50% 50% 50% 50% Weight given to adult child influence 50% 50% 50% 50% 50% 50% 50% Demand Conclusion | Memory Care 433 452 469 482 494 533 655 Item Year The two indicated demand estimates are independent of the other. In this case, our conclusion is weighted 50% to the demand indication based on in-place households 75+ and 50% to the demand indication based on the potential influence of nearby adult children (i.e., in- migration/out-migration). Segment Growth Memory care facilities are normally licensed the same as standard assisted living facilities. Furthermore, it is relatively easy for facilities to begin or cease providing specialized memory care since the physical plant requirements are not significantly different and the license is not different. According to the Alzheimer’s Association, there are approximately 491,000 people age 65 or older that will develop Alzheimer’s disease in the United States in 2020. Also, the Alzheimer’s Association provided the following data regarding projected change by state for those residents with Alzheimer’s disease. Page 11 Proposed Seniors Housing Community - Rye Brook, NY Percentage Increase Percentage Increase State 2020 2025 2020-2025 State 2020 2025 2020-2025 District of Columbia 8.9 9 1.1 Montana 22 27 22.7 Alabama 96 110 14.6 Nebraska 35 40 14.3 Alaska 8.5 11 29.4 Nevada 49 64 30.6 Arizona 150 200 33.3 New Hampshire 26 32 23.1 Arkansas 58 67 15.5 New Jersey 190 210 10.5 California 690 840 21.7 New Mexico 43 53 23.3 Colorado 76 92 21.1 New York 410 460 12.2 Connecticut 80 91 13.8 North Carolina 186 210 16.7 Delaware 19 23 21.1 North Dakota 15 16 6.7 Flonda 580 720 24.1 Ohio 220 250 13.6 Georgia 150 190 26.7 Oklahoma 67 76 13.4 Hawaii 29 35 20.7 Oregon 69 84 21.7 Idaho 27 33 22.2 Pennsylvania 280 320 14.3 Illinois 230 260 13.0 Rhode Island 24 27 12.5 Indiana 110 130 18.2 South Carolina 95 120 26.3 Iowa 66 73 10.6 South Dakota 18 20 11.1 Kansas 55 62 12.7 Tennessee 120 140 16.7 Kentucky 75 86 14.7 Texas 400 490 22.5 Louisiana 92 110 19.6 Utah 34 42 23.5 Maine 29 35 20.7 Vermont 13 17 30.8 Maryland 110 130 18.2 Virginia 150 190 26.7 Massachusetts 130 150 15.4 Washington 120 140 16.7 Michigan 190 220 15.8 West Virginia 39 44 12.8 Minnesota 99 120 21.2 Wisconsin 120 130 8.3 Mississippi 57 65 14.0 Wyoming 10 13 30.0 Missouri 120 130 8.3 Created from data provided to the Alzheimer's Association by Weuve et al. Projected Number with Alzheimer's (in thousands) Projections of Total Numbers of Americans Age 65+ with Alzheimer's by State Projected Number with Alzheimer's (in thousands) Page 12 Proposed Seniors Housing Community - Rye Brook, NY As shown in the figures above, between 2020 and 2025, every state and region across the county is expected to experience increases of at least 6.7% in the numbers of people with Alzheimer’s due to increases in the proportion of the population 65 and older. Page 13 Proposed Seniors Housing Community - Rye Brook, NY Comparison of Supply and Demand Independent Living The table summarizes the key metrics and penetration rate(s) for independent living: •Our analysis shows that the PMA has an undersupply of independent living in the current year. The penetration rate based on supply is calculated to be 2.3%. While this is slightly higher than the metro-wide figure of 1.7%, it is important to note that the targeted household penetration figure for the PMA is actually 11.0%. •Atria Rye Brook, which consists of 166 independent living units, is planning to transition into a licensed assisted living facility. Since opening in 2004, the community has offered its aging in place residents personal care services via a third-party home health provider. So, transitioning fully into assisted living is an indication that the facility is likely a strategy to retain the majority of its current resident base in an effort to limit vacancy levels and turnover rates. For purposes of this analysis, these 166 units have been removed from the competitive independent living supply and instead added to the assisted living inventory. •Upon delivery of the proposed subject’s 156 independent living units in 2022, the market is forecast to continue to have excess unmet demand, with additional penetration levels ranging from 7.8% to 8.1% by the outer years of the forecast. Key Metrics and Penetration Rate(s) for Independent Living Item 2020 2021 2022 2023 2024 2025 2030 Metro Metrics | Inventory Penetration Total Households 75+ within Metro 862,199 888,415 914,632 940,848 967,065 993,281 1,144,292 Influence of Nearby Adult Children 2,744,251 2,716,119 2,687,988 2,659,856 2,631,725 2,603,593 2,470,144 Ratio of Adult Children to Households 75+3.2 3.1 2.9 2.8 2.7 2.6 2.2 Supply | Independent Living 14,742 15,096 15,458 15,829 16,209 16,598 18,688 Annual Inventory % Increase 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% Inventory Penetration % (Supply / HHs 75+)1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.6% PMA Supply Metrics | Inventory Penetration In-Place Households 75+ within PMA 16,257 16,576 16,832 17,036 17,199 17,853 19,606 Influence of Nearby Adult Children 20,911 20,561 20,211 19,860 19,510 19,160 17,556 Ratio of Adult Children to Households 75+1.3 1.2 1.2 1.2 1.1 1.1 0.9 Supply | Independent Living 548 382 382 538 538 538 538 Additions / Subtractions to Supply -166 0 156 0 0 N.A. N.A. Inventory Penetration % (Supply / HHs 75+)2.3% 2.3% 3.2% 3.2% 3.1% 3.0% 2.7% Variance PMA versus Metro 0.6% 0.6% 1.5% 1.5% 1.5% 1.3% 1.1% PMA Demand Estimate | Household Penetration Demand | Independent Living 1,786 1,820 1,849 1,875 1,897 1,950 2,128 Targeted Household Penetration % (Demand / HHs 75+)11.0% 11.0% 11.0% 11.0% 11.0% 10.9% 10.9% Supply | Independent Living (Existing plus Pipeline)382 382 538 538 538 538 538 Excess Unmet Demand | Independent Living 1,404 1,438 1,311 1,337 1,359 1,412 1,590 Unmet Targeted Penetration % (Unmet Demand / HHs 75+)8.6% 8.7% 7.8% 7.8% 7.9% 7.9% 8.1% Year Page 14 Proposed Seniors Housing Community - Rye Brook, NY Assisted Living The table summarizes the key metrics and penetration rate(s) for assisted living: •Our analysis shows that the PMA has an undersupply of assisted living in the current year. The penetration rate based on supply is calculated to be 4.3%. This is higher than the metro-wide figure of 2.5% but well below the PMA’s actual targeted household penetration figure of 9.3%. •As previously discussed, Atria Rye Brook is planning to transition into a licensed assisted living facility in an effort to retain the majority of its current resident base, which has been offered third-party home health services since opening in 2004. For purposes of this analysis, these 166 units were removed from the competitive independent living supply and instead added to the assisted living inventory. •Upon delivery of the proposed subject’s 60 assisted living beds in 2022, the market is forecast to continue to have excess unmet demand, with additional penetration levels ranging from 4.9% to 5.3% by the outer years of the forecast. Key Metrics and Penetration Rate(s) for Assisted Living Item 2020 2021 2022 2022 2024 2025 2030 Metro Metrics | Inventory Penetration Total Households 75+ within Metro 862,199 888,415 914,632 940,848 967,065 993,281 1,144,292 Influence of Nearby Adult Children 2,744,251 2,716,119 2,687,988 2,659,856 2,631,725 2,603,593 2,470,144 Ratio of Adult Children to Households 75+3.2 3.1 2.9 2.8 2.7 2.6 2.2 Supply | Assisted Living 21,867 22,108 22,351 22,597 22,845 23,096 24,395 Annual Inventory % Increase 1.1%1.1%1.1%1.1%1.1%1.1%1.1% Inventory Penetration % (Supply / HHs 75+)2.5%2.5%2.4%2.4%2.4%2.3%2.1% PMA Supply Metrics | Inventory Penetration Total Households 75+ within PMA 16,257 16,576 16,832 17,036 17,199 17,853 19,606 Influence of Nearby Adult Children 20,911 20,561 20,211 19,860 19,510 19,160 17,556 Ratio of Adult Children to Households 75+1.3 1.2 1.2 1.2 1.1 1.1 0.9 Supply | Assisted Living 526 692 692 752 752 752 752 Additions / Subtractions to Supply 166 0 60 0 0 N.A.N.A. Inventory Penetration % (Supply / HHs 75+)4.3%4.2%4.5%4.4%4.4%4.2%3.8% PMA Demand Estimate | Household Penetration Total Households 75+ within PMA 16,257 16,576 16,832 17,036 17,199 17,853 19,606 Demand | Assisted Living 1,519 1,547 1,571 1,592 1,610 1,653 1,792 Targeted Household Penetration % (Demand / HHs 75+)9.3%9.3%9.3%9.3%9.4%9.3%9.1% Supply | Assisted Living (Existing plus Pipeline)692 692 752 752 752 752 752 Excess Unmet Demand | Assisted Living 827 855 819 840 858 901 1,040 Unmet Targeted Penetration % (Unmet Demand / HHs 75+)5.1%5.2%4.9%4.9%5.0%5.0%5.3% Year Page 15 Proposed Seniors Housing Community - Rye Brook, NY Memory Care The table summarizes the key metrics and penetration rate(s) for memory care: •Our analysis shows that the PMA has an undersupply of memory care in the current year. The penetration rate based on supply is calculated to be 1.2%. While this is slightly higher than the metro-wide figure of 0.7%, it is important to note that the targeted household penetration figure for the PMA is higher at 2.7%. •Atria Rye Brook is planning to transition into a licensed assisted living facility in an effort to retain the majority of its current resident base, which has been offered third-party home health services since opening in 2004. It is unknown at this time if the facility will have a dedicated memory care wing/floor. So, for purposes of this analysis, all 166 beds will be included within the assisted living inventory. •Upon delivery of the proposed subject’s 60 memory care beds in 2022, the market is forecast to continue to have excess unmet demand, with additional penetration levels ranging from 1.5% to 2.2% by the outer years of the forecast. Key Metrics and Penetration Rate(s) for Memory Care Item 2020 2021 2022 2022 2024 2025 2030 Metro Metrics | Inventory Penetration Total Households 75+ within Metro 862,199 888,415 914,632 940,848 967,065 993,281 1,144,292 Influence of Nearby Adult Children 2,744,251 2,716,119 2,687,988 2,659,856 2,631,725 2,603,593 2,470,144 Ratio of Adult Children to Households 75+3.2 3.1 2.9 2.8 2.7 2.6 2.2 Supply | Memory Care 5,644 6,033 6,450 6,895 7,371 7,879 10,999 Annual Inventory % Increase 6.9%6.9%6.9%6.9%6.9%6.9%6.9% Inventory Penetration % (Supply / HHs 75+)0.7%0.7%0.7%0.7%0.8%0.8%1.0% PMA Supply Metrics | Inventory Penetration Total Households 75+ within PMA 16,257 16,583 16,841 17,046 17,209 17,853 19,606 Influence of Nearby Adult Children 20,911 20,561 20,211 19,860 19,510 19,160 17,556 Ratio of Adult Children to Households 75+1.3 1.2 1.2 1.2 1.1 1.1 0.9 Supply | Memory Care 196 196 196 221 221 221 221 Additions / Subtractions to Supply 0 0 25 0 0 N.A.N.A. Inventory Penetration % (Supply / HHs 75+)1.2%1.2%1.3%1.3%1.3%1.2%1.1% PMA Demand Estimate | Household Penetration Demand | Memory Care 433 452 469 482 494 533 655 Targeted Household Penetration % (Demand / HHs 75+)2.7%2.7%2.8%2.8%2.9%3.0%3.3% Supply | Memory Care (Existing plus Pipeline)196 196 221 221 221 221 221 Excess Unmet Demand | Memory Care 237 256 248 261 273 312 434 Unmet Targeted Penetration % (Unmet Demand / HHs 75+)1.5%1.5%1.5%1.5%1.6%1.7%2.2% Year Page 16 Proposed Seniors Housing Community - Rye Brook, NY Conclusion / Recommendation Our analysis indicates the market to have sufficient unmet demand to support additional independent living, assisted living, and memory care at this time. Other than the proposed subject, the most notable pipeline/inventory activity is with an existing community known as Atria Rye Brook. The community consists of 166 independent living units and is planning to transition into a licensed assisted living facility. However, since opening in 2004, the community has offered its aging in place residents personal care services via a third-party home health provider. So, transitioning fully into assisted living is an indication that the facility is likely a strategy to retain the majority of its current resident base in an effort to limit vacancy levels and turnover rates. In comparison, the proposed subject, which will offer a full-continuum of care with independent living, assisted living, and memory care, will be competitively positioned in the market as it will appeal to independent seniors desiring to move into a community where they can age in place over the years as well as those in need of immediate assistance with the activities of daily living. With this structure, the independent living component will serve as a natural feeder into its complementary assisted living and memory care components. In our experience, communities offering a full continuum of care typically outperform stand-alone assisted living facilities. •There are 548 competitive independent living units within the PMA at this time. With an anticipated demand figure for 1,849 units in 2022, the transition of Atria’s 166 units over to assisted living, and the proposed subject’s 156 units, there is indicated to be excess unmet demand for an additional 1,311 units. •In regards to assisted living, there are currently 526 competitive beds within the PMA. With a demand figure for 1,571 beds in 2022, the addition of Atria’s converted 166 assisted living beds, and the proposed subject’s 60 assisted living beds, there is indicated to be excess unmet demand for an additional 819 beds. •Lastly, specific to memory care, with a total supply figure of 196 competitive beds, an estimated demand figure for 469 beds in 2022, and the proposed subject’s 25 memory care beds, there is indicated to be excess unmet demand for an additional there is forecast to be excess unmet demand for an additional 248 beds. Page 17 Proposed Seniors Housing Community - Rye Brook, NY Considering the strong growth forecast in seniors housing over the next few years, market conditions are anticipated to continually improve and strengthen. Development of the subject as proposed with 156 independent living units (including 20 townhome-style units), 60 assisted living beds, and 25 memory care beds should proceed as planned. We appreciate this opportunity to provide our advisory services to George Comfort & Sons, Inc. JLL Valuation and Advisory Services, LLC Jon Cruse, CRE, FRICS Brian L. Chandler, MAI, CRE, FRICS Executive Vice President Managing Director Telephone: 214-396-5463 Telephone: 214-396-5423 Email: jon.cruse@am.jll.com Email: brian.chandler@am.jll.com