marketing analysis for senior community

Appraisal of Brookdale Castle Hills

1207 Jackson Keller Road, San Antonio, Texas 78213

Prepared for: American Eagle Lifecare Corporation

JLL File Number: 1400-18-141077

700 E. Campbell Road, Suite 265 Richardson, TX 75081

Phone: 972 960 1222 Fax: 972 960 2922

July 10, 2018

Elan Ruggill American Eagle Lifecare Corporation 3819 Hawk Crest Road Ann Arbor, Michigan 48103

Subject: Brookdale Castle Hills 1207 Jackson Keller Road San Antonio, Texas 78213

Pursuant to your request, we have completed an appraisal of the above-referenced property. Accompanying this letter is an Appraisal Report that contains a detailed identification of the property, factual data concerning the property and its surroundings, comparable market data, and appropriate analyses. Our analyses and forecasts have resulted in the conclusion(s) below:

Appraisal Premise Date of Value Value Conclusion Market Value of the Specified Assets of the Business As Is, Fee Simple Estate

June 29, 2018 $10,700,000

Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption

June 29, 2018 $13,680,000

Prospective Market Value of the Specified Assets of the Business Upon Stabilization

December 29, 2018 $11,950,000

Value Conclusions

Our valuation is based on terms of cash and a reasonable exposure time of six months prior to the effective date of value. The estimated marketing period is also six months. The specified assets of the business exclude certain items not normally conveyed, such as cash on hand, accounts receivable, accounts payable, management company trademarks, and proprietary management systems. Please refer to the assumptions and limiting conditions section where any extraordinary assumptions and hypothetical conditions specific to this engagement are discussed.

The subject was appraised based upon the going concern premise as an on-going business operation. Our value allocation(s) follow:

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Brookdale Castle Hills

Component Real Property FF&E Intangibles and Goodwill Market Value of the Specified Assets of the Business As Is, Fee Simple Estate

Component Real Property FF&E Intangibles and Goodwill Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption

Component Real Property FF&E Intangibles and Goodwill Prospective Market Value of the Specified Assets of the Business Upon Stabilization

Value Allocation Allocated Value

$10,910,000 $2,220,000

$550,000

$13,680,000

$11,950,000

Value Allocation Allocated Value

$10,120,000 $440,000

$1,390,000

$10,700,000

Value Allocation

$830,000

Allocated Value $9,400,000

$470,000

We appreciate this opportunity to provide valuation services to American Eagle Lifecare Corporation.

JLL Valuation and Advisory Services, LLC

Andrea Roberts Senior Analyst Texas Certified General Appraiser #TX-1380731-G Telephone: 214-396-5453 Email: [email protected]

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Brookdale Castle Hills

Brian L. Chandler, MAI, CRE, FRICS Executive Vice President Texas Certified General Appraiser #TX-1324513-G Telephone: 214-396-5423 Email: [email protected]

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Brookdale Castle Hills

Certification I hereby certify that, to the best of our knowledge and belief:

■ The statements of fact contained in this report are true and correct. ■ The reported analyses, opinions, and conclusions are limited only by the reported

assumptions and limiting conditions and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.

■ I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.

■ I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.

■ Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

■ Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

■ Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

■ Andrea Roberts has made a personal inspection of the property that is the subject of this report. Brian L. Chandler, MAI, CRE, FRICS has not made a personal inspection of the property that is the subject of this report.

■ Andrea Roberts assisted in the compilation and analysis of factual data used in this report. Andrea Roberts is an employee of JLL Valuation & Advisory Services, LLC. No other persons provided significant real property appraisal assistance to the persons signing this certification.

■ I certify that, to the best of my knowledge and beliefs, the reported analyses, opinions, and conclusions were developed and this report has been prepared in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

■ I certify that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

■ USPAP 2018-19 requires the appraiser to disclose “any services regarding the subject property performed by the appraiser within the three year period immediately preceding acceptance of the assignment, as an appraiser or in any other capacity.” Pursuant to that requirement, to the best of our knowledge, we:

● Have not performed any services in connection with the subject property within the three-year period immediately preceding acceptance of this assignment, either as an appraiser or in any other capacity.

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Brookdale Castle Hills

■ As of the date of this report, Brian L. Chandler, MAI, CRE, FRICS has completed the continuing education program for Designated Members of the Appraisal Institute.

■ Various analysts employed by JLL Valuation and Advisory Services, LLC procured the comparable data used in this report.

Andrea Roberts Senior Analyst Texas Certified General Appraiser #TX-1380731-G Telephone: 214-396-5453 Email: [email protected]

Brian L. Chandler, MAI, CRE, FRICS Executive Vice President Texas Certified General Appraiser #TX-1324513-G Telephone: 214-396-5423 Email: [email protected]

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Table of Contents Page No.

Letter of Transmittal 1

Certification 4

Table of Contents 6

Addenda 7

Summary of Salient Facts and Conclusions 8

Strengths and Weaknesses 11

General Information 12

Assumptions and Limiting Conditions 22

Regional Economic Analysis 28

Market Area Description and Analysis 35

Site Description and Analysis 47

Improvement Description and Analysis 50

Legal Constraints Analysis 63

Ad Valorem Tax Analysis 73

Seniors Housing Market Analysis 77

Supply and Demand Analysis 86

Highest and Best Use Analysis 105

Income Capitalization - Direct Capitalization 107

Sales Comparison Approach 153

Land Valuation 165

FF&E Analysis 170

Absorption and Income Loss Analysis 171

Conclusion 174

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Addenda Legal Description Appendix A

Maps, Plats, Building Plans Appendix B

Comparable Profiles Appendix C

Operating Data Appendix D

Letter of Engagement Appendix E

Analyst Qualifications Appendix F

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Summary of Salient Facts and Conclusions

Andrea Roberts

TX-1380731-G

Certified General

Brian L. Chandler, MAI, CRE, FRICS

TX-1324513-G

Certified General

5.00

Certification Types:

6.76

Zoning Compliance:

Certified Appraisers: Certification Numbers:

Primary Site Size (Acres):

Legal, conforming use

All standard municipal utilities available

Shape: Mostly rectangular

Certification Types:

Site Summary -

Utilities:

Zoning: C

Excess Land Site Size (Acres):

Brookdale Castle Hills

To estimate the value of the going concern under the following scenario(s):

Property Name:

Property Identification -

Municipality: Street Address: 1207 Jackson Keller Road

San Antonio

Census Tract - 48

Bexar

Texas

78213 Zip: State: County:

State Code:

Purpose of the Appraisal:

County Code: 029 Tract/BNA Code: 1911.02

Certified Appraisers: Certification Numbers:

Assets and Property Rights Appraised -

Property Rights Appraised: Fee Simple

Certification -

All assets of the business enterprise including real property, FF&E and business value Assets Appraised:

Market Value of the Specified Assets of the Business As Is, Fee Simple Estate

Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption

Prospective Market Value of the Specified Assets of the Business Upon Stabilization

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101

71.3%

80.0%

6Months to Achieve Stabilization:

Number of Stories: 80

Number of Operating Beds: Number of Licensed Beds:

Continued use as a seniors housing facility

As Vacant: As Improved:

Highest & Best Use Summary -

160

Development of a seniors housing facility

97

Assisted Living Units:

Total Units:

Occupancy Analysis - Occupancy as of Effective Date:

Stabilized Occupancy Forecast:

Improvement Summary -

No

Seniors housing

2000

3 Number of Buildings: 1 & 2

Construction Type: Year of Construction:

89,140 Gross Building Area (SF): Class D

Property Type:

Flood Insurance Required:

Assisted Living, Memory Care Care Provided:

17 Memory Care Units:

Flood Hazard Zone -

48029C0245G, Effective September 29, 2010

Zone X Zone: Panel Number:

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Approach to Value Income Capitalization - Direct Capitalization Sales Comparison Cost

Approach to Value Income Capitalization - Direct Capitalization

Value Scenario Effective Date Value Conclusions Market Value of the Specified Assets of the Business As Is, Fee Simple Estate 6/29/2018 $10,700,000 Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption 6/29/2018 $13,680,000 Prospective Market Value of the Specified Assets of the Business Upon Stabilization 12/29/2018 $11,950,000

Component Real Property FF&E Intangibles and Goodwill Market Value of the Specified Assets of the Business As Is, Fee Simple Estate

Component Real Property FF&E Intangibles and Goodwill Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption

Component Real Property FF&E Intangibles and Goodwill Prospective Market Value of the Specified Assets of the Business Upon Stabilization

Value Allocation Allocated Value

$10,910,000 $2,220,000

$550,000

$13,680,000

$11,950,000

Value Allocation Allocated Value

$10,120,000 $440,000

$1,390,000

$10,700,000

Value Allocation

$830,000

Allocated Value $9,400,000

$470,000

As Is Value Indications

Value Conclusion

Value Indication $10,700,000

Upon Stabilization Value Indication Value Indication

$11,950,000

$10,800,000 Not Developed

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Strengths and Weaknesses Strengths of the property include:

■ Strong Market Occupancy: Occupancy is high for the rent comparables for Memory Care. ■ MC Subject vs. PMA Occupancy: The Memory Care segment indicates an average

occupancy for the rent comparables of 94.1% and all facilities in the PMA of 75.0%. The subject occupancy is currently performing above the market indications and has an occupancy of 89.0%.

■ Strong Market Demand: The PMA has an undersupply of 469 beds of assisted living and 203 beds of memory care in the current year. There are no planned additions to the competitive supply.

Weaknesses of the property include:

■ Subject Occupancy: The subject property currently has a low occupancy of 71.3%. Occupancy at the subject property has lagged that of the market. Management noted that its location and layout are the two biggest factors impacting occupancy. The majority of incoming residents cannot live on the second floor due to evacuation restrictions; therefore, the second floor units are difficult to lease-up. In addition, the subject’s location and visibility is inferior to competing properties in the market.

■ Housing Values: The subject’s PMA has a low median housing value of $168,465, which is 22.9% below the United States median housing value of $218,492.

■ Income Levels: The subject’s PMA has a low median household income of $46,482, which is well below the United States median household income of $58,100. It is additionally noted that the median income level for the senior cohorts are below the median income for each respective cohort including 65 to 74, 75 to 84, and 85+.

■ Senior Housing Growth: The senior housing age cohorts of the 65 Plus Population, 75 Plus Population and 85 Plus Population are forecast to grow at slower rates in comparison to the United States over the next five years.

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General Information

Identification of the Subject The subject is an existing seniors housing facility located at 1207 Jackson Keller Road, San Antonio, Bexar County, Texas, and it is known as Brookdale Castle Hills. A legal description for the subject is presented in the Addendum.

Front View of Subject

The subject is an assisted living and memory care facility. It has 97 units, including 17 in a secure memory care building. Current occupancy is 71.3%. The facility has 89,140 square feet in a two story structure. The facility is well located and exhibits good quality of construction. In this appraisal, we are valuing the subject as is and upon stabilization. In addition, per the client’s request, we have also valued the subject’s investment value assuming not-for-profit ownership and ad valorem tax exemption.

Purpose of the Appraisal The purpose of this appraisal is to estimate the market value of the subject under the following scenario(s):

● Market Value of the Specified Assets of the Business As Is, Fee Simple Estate ● Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption ● Prospective Market Value of the Specified Assets of the Business Upon Stabilization

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Brookdale Castle Hills

Intended User(s) and Intended Uses(s) American Eagle Lifecare Corporation is the intended user of this report. The intended use is to assist client in obtaining bond financing.

Pertinent Dates Dates pertinent to this assignment are as follows:

Item Date Report Date July 10, 2018

Market Value of the Specified Assets of the Business As Is, Fee Simple Estate June 29, 2018 Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption June 29, 2018

Prospective Market Value of the Specified Assets of the Business Upon Stabilization December 29, 2018

Pertinent Dates

Prior Services USPAP 2018-2019 requires the appraiser to disclose “any services regarding the subject property performed by the appraiser within the three year period immediately preceding acceptance of the assignment, as an appraiser or in any other capacity.” Pursuant to that requirement, to the best of our knowledge, we:

■ Have not performed any services in connection with the subject property within the three- year period immediately preceding acceptance of this assignment, either as an appraiser or in any other capacity.

Definition of Market Values For purposes of this appraisal, market value and as is market value are defined as:

Market value: The most probable price which a property should bring in a competitive and open market, under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

2. Both parties are well informed or well advised, and acting in what they consider their own best interests;

3. A reasonable time is allowed for exposure in the open market;

4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

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Brookdale Castle Hills

5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1

As Is Market Value: The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal’s effective date. 2

Assets Appraised Seniors housing and health care assets are generally considered to be business enterprises and may have value in excess of the real estate value. Such assets can be valued based upon the liquidation premise or the going concern premise. The liquidation premise would only be used if the highest and best use of the asset is to sell the component parts separately. This is not the case with the subject, so the subject is valued based upon the going concern premise. The term going concern is defined as follows:

One of the premises under which the total assets of a business (TAB) can be valued; the assumption that a company is expected to continue operating well into the future (usually indefinitely). Under the going concern premise, the value of a business is equal to the sum of the value of the tangible assets and the value of the intangible assets, which may include the value of excess profit, where asset values are derived consistent with the going concern premise. 3

When a property is valued based upon the going concern premise, the valuation may include real estate, FF&E and intangibles. These assets in total compromise the Total Assets of a Business (TAB), defined as follows:

The tangible property (real property and personal property, including inventory and furniture, fixtures and equipment) and intangible property (cash, workforce, contracts, name, patents, copyrights and other residual intangible assets, to include capitalized economic profit).4

When appraised based upon the going concern premise, the Market Value of the Total Assets of the Business (MVTAB) is defined as follows:

The market value of all of the tangible and intangible assets of a business as if sold in aggregate as a going concern.5

Definitions of the components that compromise the TAB are as follows:

1. 12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990 as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994. 2. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition). 3. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition). 4. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition). 5. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition).

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Real property: All interests, benefits, and rights inherent in the ownership of physical real estate; the bundle of rights with which the ownership of the real estate is endowed. In some states, real property is defined by statute and is synonymous with real estate. 6

Furniture, fixtures and equipment (FF&E): The movable property of a business enterprise not classified as stock or inventory or leasehold improvements; frequently found in the ownership of hotels or motels, restaurants, assisted living facilities, service stations, car washes, greenhouses and nurseries, and other service intensive properties. Furniture, fixtures and equipment frequently wears out much more rapidly that other components of those properties.7

Business enterprise value: A term applied to the concept of the value contribution of the total intangible assets of a continuing business enterprise such as marketing and management skill, an assembled workforce, working capital, trade names, franchises, patents, trademarks, contracts, leases, and operating agreements.8

However, it should be noted that some of the assets included in the definition of TAB are not commonly included in the value or sale of a seniors housing facility. Items normally excluded are: cash on hand, working capital, accounts receivable, and accounts payable. As such, our valuation focuses upon the specified assets of the business, which excludes the items noted.

In addition, we have provided an allocation of our concluded value. Note that the allocation is based upon the continuation of the business enterprise. If the business ceases operations, the values of the individual components would likely be different than the value allocated to the components based upon the continuation of the business operation.

Property Rights Appraised Definitions of the three major classes of property rights are as follows:

Fee simple estate: Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.9

Leased fee interest: A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease)10

6. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition). 7. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition). 8. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition). 9. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition). 10. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition).

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Leasehold estate: The tenant’s possessory interest created by a lease.11

Investment Value: The value of a property interest to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of market. [12]

The property rights valued in this appraisal are Fee Simple. As previously stated, we have also provided an investment value based on not-for-profit ownership and ad valorem tax exemption.

Scope of Work USPAP 2018-2019 states:

For each appraisal and appraisal review assignment, an appraiser must:

1. Identify the problem to be solved;

2. Determine and perform the scope of work necessary to develop credible assignment results; and

3. Disclose the scope of work in the report.

Pursuant to that requirement, the steps in the appraisal process are as follows:

11. The Dictionary of Real Estate Appraisal (Chicago, IL: Appraisal Institute, Sixth Edition).

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The Valuation Process

Definition of the Problem Identification Intended Purpose of Date of Identification of Extraordinary Hypothetical of client/ use of appraisal opinion characteristics assumptions conditions intended users appraisal (including of value of property

definition of (including location value) and property rights

to be valued)

Scope of Work

Data Collection and Property Description Market Area Data Subject Property Data Comparable Property Data

General characteristics Specific characteristics of Sales, listing, offerings, of region, city, and neighborhood land and improvements, personal vacancies, cost and depreciation,

property, business assets, etc. income and expenses, capitalization rates, etc.

Data Analysis Market Analysis Highest and Best Use Analysis Demand studies Site as though vacant Supply studies Ideal improvement Marketability studies Property as improved

Land Value Options

Application of the Approaches to Value Cost Sales comparison Income capitalization

Reconciliation of Value Indications and Final Opinion of Value

Report of Defined Value

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Brookdale Castle Hills

Inspection Andrea Roberts has conducted an inspection of the subject. Brian L. Chandler, MAI, CRE, FRICS has not conducted an inspection of the subject.

Data Collection Three types of data are normally gathered while completing an appraisal: general, specific, and competitive supply and demand.

General Data General data concerns the social, economic, governmental, and environmental forces that impact property values. This data is found in the area description and analysis, and the neighborhood description and analysis sections of this report. We have gathered the general data from a variety of sources and publications, which are noted in the analyses. In addition, the general data concerning the neighborhood is based upon observations made during our inspection of the neighborhood.

Specific Data The data relating to the property being appraised and comparable properties is referred to as specific data. Documents we have relied upon for specific data pertaining to the subject are listed in the general assumptions section. Additional data pertaining to the subject has been gathered from zoning maps, tax records, and other resources maintained in our library, city halls, chambers of commerce, Bexar County, and various state of Texas offices.

The specific comparable data has been gathered from market participants. The extent of the comparable market data collection process varies for each type of comparable data. Refer to discussions preceding the presentation of data in the approaches to value for descriptions of the data sources consulted and the search criteria.

Competitive Supply and Demand Data An analysis of seniors housing supply and demand conditions is included in this report.

Approaches to Value The three approaches to value are:

The Income Capitalization Approach, typically referred to as the income approach is used to value commercial and investment properties. It capitalizes an income stream into a present value. This can be accomplished using revenue multipliers or a capitalization rate applied to net operating income (NOI). The NOI is gross potential income (GPI), less vacancy, less operating expenses, but excluding debt service or depreciation charges applied by accountants. NOI is synonymous with EBITDA. Alternatively, multiple years of NOI can be valued by a discounted cash flow analysis (DCF) model.

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Brookdale Castle Hills

The Sales Comparison Approach, derives a value indication by comparing the subject being appraised to similar properties that have recently sold.

The Cost Approach, based on the principle of substitution which asserts that no prudent buyer or investor will pay more for a property than that amount for which the site could be acquired, and which improvements that have equal desirability and utility can be constructed without undue delay. It is a method of appraising property based on the depreciated reproduction or replacement cost new of improvements, plus the market value of the site.

In appraising the subject, we have applied the approaches to value as follows:

Approach to Value Developed Applicability

Income Capitalization - Direct Capitalization Yes Highly applicable

Sales Comparison Yes Applicable, but not as relevant as income approach

Cost No Applicable, but not as relevant as income approach

Approaches to Value

The cost approach was not developed. The subject was built in 2000 and the cost approach is generally only reliable for new or nearly new properties.

Report Type Standards Rule 2-2 of the Uniform Standards of Professional Appraisal Practice sets forth two different reporting options, as follows:

Appraisal Report: should summarize all pertinent data considered and summarize all analyses developed in arriving at the conclusion of value.

Restricted Report: merely states the major conclusions without discussion of the data considered and the analyses conducted.

This report is intended to comply with the requirements for an Appraisal Report.

Compliance We have developed this appraisal in compliance with:

● The requirements of the Code of Ethics and the Standards of Professional Practice of the Appraisal Institute;

● The Uniform Standards of Professional Appraisal Practice promulgated by the Appraisal Foundation; and

● FIRREA Title XI, 12 CFR Part 323 (FDIC) and 12 CFR Part 34 (RTC).

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Competency Charles A. Bissell, MAI, ASA, CRE, is Managing Director and Brian L. Chandler, MAI, CRE, FRICS, is Executive Vice President of JLL’s Valuation and Advisory Services group. Mr. Bissell and Mr. Chandler specialize in the valuation of seniors housing and health care properties. Since 2002, Mr. Bissell, Mr. Chandler and their team have completed in excess of 10,000 assignments related to seniors housing and health care properties. Assignments have been completed in all 50 states, the District of Columbia, and Canada.

Ownership, History and Management of the Subject USPAP Standards Rules 1-5(a) and (b) require an appraiser, when the value opinion to be developed is market value, and if such information is available to the appraiser in the normal course of business, to analyze (1) all agreements of sale, options, or listings of the subject property current as of the effective date of the appraisal and (2) all sales of the subject property that occurred within three years prior to the effective date of the appraisal. The subject’s current ownership, ownership history, current status, and management are discussed below.

Current Ownership The subject is currently owned by ARC Castle Hills LP. It is operated by Brookdale Senior Living, a related entity.

Ownership History There has not been a sale or other transfer of the subject in the three years preceding the date of appraisal.

Current Status The subject is currently owned and operated by affiliates of Brookdale Senior Living, which are related entities.

The subject is one of 17 properties that is under contract to sell to American Eagle Lifecare Corporation, who will purchase each facility through a separate wholly-owned LLC subsidiary with one intermediate holding company. These entities will be formed prior to execution of this agreement. The purchase price for all 17 assets is $224,500,000. In addition, the buyer plans on spending approximately $7 million in capital expenditures, resulting in total expenditures of $231,500,000.

The purchase price is not allocated by property. We have also provided a Portfolio Report that will analyze the purchase price as compared to our valuation of the properties. This report is referenced to comply with USPAP reporting requirements.

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Management The subject is currently operated by Brookdale Senior Living. Headquartered in Nashville, TN. Brookdale is the nation’s largest owner/operator of seniors housing facilities. Management at the facility and corporate level is considered prudent and capable.

After purchase of the portfolio, new ownership will change management to another seniors housing operator, Greenbriar Senior Living. The company is headed by Michael Mays who has been in senior housing since 1992. The company operates for profit and not for profit senior housing facilities in the nation and is headquartered in Birmingham, Alabama.

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Assumptions and Limiting Conditions The use of this report is subject to the following assumptions and limiting conditions:

■ All reports and work product we deliver to you (collectively called “report”) represents an opinion of value, based on historical information and forecasts of market conditions. Actual results may vary from those forecast in the report. There is no guaranty or warranty that the opinion of value reflects the actual value of the property.

■ The conclusions stated in our report apply only as of the effective date of the appraisal, and no representation is made as to the effect of subsequent events. Assessed values may change significantly and unexpectedly over short periods. We are not liable for any conclusions in the report that may be different if there are subsequent changes in value. We are not liable for loss relating to reliance upon our report more than three months after its date.

■ There may be differences between projected and actual results because events and circumstances frequently do not occur as predicted, and those differences may be material. We are not liable for any loss arising from these differences.

■ We are not obligated to predict future political, economic or social trends. We assume no responsibility for economic factors that may affect or alter the opinions in the report if the economic factors were not present as of the date of the letter of transmittal accompanying the report.

■ The report reflects an appraisal of the property free of any liens or encumbrances unless otherwise stated.

■ We assume responsible ownership and competent property management. ■ The appraisal process requires information from a wide variety of sources. We have

assumed that all information furnished by others is correct and complete, up to date and can be relied upon, but no warranty is given for its accuracy. We do not accept responsibility for erroneous information provided by others. We assume that no information that has a material effect on our appraisal has been withheld.

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■ We assume the following, unless informed to the contrary in writing: Each property has a good and marketable title. All documentation is satisfactorily drawn and that there are no encumbrances, restrictions, easements or other adverse title conditions, which would have a material effect on the value of the interest under consideration. There is no material litigation pending involving the property. All information provided by the Client, or its agents, is correct, up to date and can be relied upon. We are not responsible for considerations requiring expertise in other fields, including but not limited to: legal descriptions, interpretation of legal documents and other legal matters, geologic considerations such as soils and seismic stability, engineering, or environmental and toxic contaminants. We recommend that you engage suitable consultants to advise you on these matters.

■ We assume that all engineering studies correct. The plot plans and illustrative material in the report are included only to help the reader visualize the property.

■ We assume that there are no hidden or unapparent conditions of the property, subsoil or structures that render it more or less valuable. We are not responsible for such conditions or for obtaining the engineering studies that may be required to discover them.

■ We assume that the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the report. We have not made or requested any environmental impact studies in conjunction with the report. We reserve the right to revise or rescind any opinion of value that is based upon any subsequent environmental impact studies. If any environmental impact statement is required by law, the report assumes that such statement will be favorable and will be approved by the appropriate regulatory bodies.

■ Unless otherwise stated in the report, you should assume that we did not observe any hazardous materials on the property. We have no knowledge of the existence of such materials on or in the property; however, we are not qualified to detect such substances, and we are not providing environmental services. The presence of substances such as asbestos, urea-formaldehyde foam insulation and other potentially hazardous materials may affect the value of the property. Our report assumes that there is no such material on or in the property that would cause a loss in value. We do not assume responsibility for such conditions or for any expertise or engineering knowledge required to discover them. We encourage you to retain an expert in this field, if desired. We are not responsible for any such environmental conditions that exist or for any engineering or testing that might be required to discover whether such conditions exist. We are not experts in the field of environmental conditions, and the report is not an environmental assessment of the property.

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■ We may have reviewed available flood maps and may have noted in the report whether the property is generally located within or out of an identified Special Flood Hazard Area. However, we are not qualified to detect such areas and therefore do not guarantee such determinations. The presence of flood plain areas and/or wetlands may affect the value of the property. Any opinion of value we include in our report assumes that floodplain and/or wetlands interpretations are accurate.

■ The Americans with Disabilities Act (ADA) became effective January 26, 1992. We have not made a specific survey or analysis of the property to determine whether it is in compliance with the ADA. We claim no expertise in ADA issues, and render no opinion regarding compliance of the property with ADA regulations.

■ We assume that the property conforms to all applicable zoning and use regulations and restrictions unless we have identified, described and considered a non-conformity in the report.

■ We assume that all required licenses, certificates of occupancy, consents, and other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the opinion of value contained in the report is based.

■ We assume that the use of the land and improvements is confined within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report.

■ We have not made any investigation of the financial standing of actual or prospective tenants unless specifically noted in the report. Where properties are valued with the benefit of leasing, we assume, unless we are informed otherwise, that the tenants are capable of meeting their financial obligations under the leases, all rent and other amounts payable under the leases have been paid when due, and that there are no undisclosed breaches of the leases.

■ We did not conduct a formal survey of the property and assume no responsibility for any survey matters. The Client has supplied the spatial data, including sketches and/or surveys included in the report, and we assume that data is correct, up to date and can be relied upon.

■ Unless otherwise stated, the opinion of value included in our report excludes any additional value attributable to goodwill, or to fixtures and fittings which are only of value, in situ, to the present occupier. We have made no allowance for any plant, machinery or equipment unless they form an integral part of the building and would normally be included in a sale of the building. We do not normally carry out or commission investigations into the capacity or condition of services being provided to the property. We assume that the services, and any associated controls or software, are in working order and free from defect. We also assume that the services are of sufficient capacity to meet current and future needs.

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Brookdale Castle Hills

■ In the case of property where construction work is in progress, such as refurbishment or repairs, or where developments are in progress, we have relied upon cost information supplied to us by the Client or its appointed experts or upon industry accepted cost guides. In the case of property where construction work is in progress, or has recently been completed, we do not make allowance for any liability already incurred, but not yet discharged, in respect of completed work, or obligations in favor of contractors, subcontractors or any members of the professional or design team. We assume the satisfactory completion of construction, repairs or alterations in a workmanlike manner.

■ Any allocation in the report of value between the land and the improvements applies only under the stated program of utilization. The separate values allocated to the land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

■ The report is confidential to the party to whom it is addressed and those other intended users specified in the report for the specific purpose to which it refers. Use of the report for any other purpose or use by any party not identified as an intended user of the report without our prior written consent is prohibited, and we accept no responsibility for any use of the report in violation of the terms of this Agreement.

■ We are not required to testify or provide court-related consultation or to be in attendance in court unless we have agreed to do so in writing.

■ Neither the whole report, nor any part, nor reference thereto, may be published in any manner without our prior written approval.

■ We may rely on, and will not verify, the accuracy and sufficiency of documents, information and assumptions provided to it by the Client or others. We will not verify documents, information and assumptions derived from industry sources or that JLL or its affiliates have prepared in the regular course of business. We are not liable for any deficiency in the report arising from the inaccuracy or insufficiency of such information, documents and assumptions. However, our report will be based on our professional evaluation of all such available sources of information.

■ JLL IS NOT LIABLE TO ANY PERSON OR ENTITY FOR LOSS OF PROFITS, CONSEQUENTIAL, PUNITIVE, EXEMPLARY OR SIMILAR DAMAGES IN CONNECTION WITH THIS AGREEMENT. IN NO EVENT SHALL THE LIABILITY OF JLL AND ITS AFFILIATES IN CONNECTION WITH THIS AGREEMENT EXCEED THE FEE PAID TO JLL HEREUNDER.

■ Unless expressly advised to the contrary, we assume that appropriate insurance coverage is and will continue to be available on commercially acceptable terms.

■ We assume that no material changes in any applicable federal, state or local laws, regulations or codes (including, without limitation, the Internal Revenue Code) are anticipated.

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Brookdale Castle Hills

■ We may determine during the course of the assignment that additional Hypothetical Conditions and Extraordinary Assumptions may be required in order to complete the assignment. The report will be subject to those Hypothetical Conditions and Extraordinary Assumptions. Each person that is permitted to use the report agrees to be bound by all the Assumptions and Limiting Conditions and any Hypothetical Conditions and Extraordinary Assumptions stated in the report.

Extraordinary Assumptions USPAP defines an extraordinary assumption as “an assignment-specific assumption as of the effective date regarding uncertain information used in the analysis which, if found to be false, could alter the appraiser’s opinion of conclusions.” Our appraisal is subject to the following extraordinary assumptions:

■ The subject is valued based upon the going concern premise and is considered an on-going business enterprise. Our market value conclusion(s) include real estate, FF&E, and some intangible items. The allocation to the individual asset groups explicitly assumes the subject property will continue to operate as a going concern. Any individual allocation of value represents an opinion of the contributory value of the asset to the going concern. It is an extraordinary assumption of the appraisal that the asset allocations are part of a continuing going concern and do not represent the value of these assets separate from the going concern. The market value of the specified assets of the business is comprised of real property, personal property (FF&E), and intangible (non-realty) assets, such as business enterprise value. If any one of the assets is removed from the going concern, the remaining individual asset allocations of value may be rendered invalid. Furthermore, if the subject property discontinued operating, then the real estate allocated value, as well as the allocated value of the FF&E and business assets, may be much less than the reported value allocated to each component. The appraisal industry has not set forth a generally agreed upon methodology for the allocation of market value between real estate and non-realty items (FF&E and business assets). Differing allocation methods may result in widely varying allocations of value. Any user of the appraisal should be aware of and fully understand the above information.

■ We are also providing a value of the property assuming the subject will have not-for-profit and tax exempt status. As this is an investment value and the subject is currently a for-profit entity.

■ The subject site has improvements on the excess land, which needs to be demolished given it has no contributory value.

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Hypothetical Conditions USPAP defines a hypothetical condition as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.” Our analysis is based upon the following hypothetical conditions:

■ None

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Brookdale Castle Hills

Regional Economic Analysis The subject is located in the San Antonio-New Braunfels, TX Metropolitan Statistical Area, hereinafter called the San Antonio MSA, as defined by the U.S. Office of Management and Budget. The San Antonio MSA is 7,312 square miles in size, and ranks #24 in population out of the nation’s 382 metropolitan areas.

Population The San Antonio MSA has an estimated 2018 population of 2,453,759, which represents an average annual 1.7% increase over the 2010 census amount of 2,142,508. San Antonio MSA added an average of 38,906 residents per year over the 2010 - 2018 period, and its annual growth rate is greater than that of the United States.

Looking forward, the San Antonio MSA’s population is projected to increase at a 1.9% annual rate from 2018 - 2023, equivalent to the addition of an average of 47,247 residents per year. The San Antonio MSA growth rate is expected to exceed that of the United States, which is projected to be 0.8%.

Population Trends Population

2010 Census 2018 Est. 2023 Est. 2010 - 2018 2018 - 2023 San Antonio MSA 2,142,508 2,453,759 2,689,996 1.7% 1.9% United States 308,745,538 327,514,334 341,323,594 0.7% 0.8%

Source: Esri 2018. Compiled by JLL Valuation & Advisory Services, LLC.

Compound Ann. % Chng

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Employment The current estimate of total employment in the San Antonio MSA is 1,016,500 jobs. Since 2007, employment grew by 174,700 jobs, equivalent to a 20.8% gain over the entire period. There were gains in employment in eight of the past ten years despite the national economic downturn and slow recovery.

The San Antonio MSA's rate of change in employment significantly outperformed the United States, which experienced an increase in employment of 4.6% or 6,307,000 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 San Antonio MSA unemployment rate of 5.4% has been lower than the United States rate of 7.0%. In the latter half of the decade that trend has continued, as the San Antonio MSA has consistently overperformed the United States. Recent data shows that the San Antonio MSA unemployment rate is 3.2%, in comparison to a 3.6% rate for the United States, a positive sign for the San Antonio MSA economy and one that is further magnified by the fact that the San Antonio MSA has outperformed the United States in the rate of job growth over the past two years.

Employment Sectors The composition of the San Antonio 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 San Antonio MSA jobs in each sector.

Employment Trends

Year San Antonio MSA Change United States Change San Antonio MSA United States 2007 841,800 137,999,000 4.0% 4.6% 2008 860,400 2.2% 137,242,000 -0.5% 4.6% 5.8% 2009 844,500 -1.8% 131,313,000 -4.3% 6.7% 9.3% 2010 851,700 0.9% 130,361,000 -0.7% 7.2% 9.6% 2011 867,900 1.9% 131,932,000 1.2% 7.1% 9.0% 2012 890,300 2.6% 134,175,000 1.7% 6.3% 8.1% 2013 918,500 3.2% 136,381,000 1.6% 5.7% 7.4% 2014 949,500 3.4% 138,958,000 1.9% 4.6% 6.2% 2015 980,700 3.3% 141,865,000 2.1% 3.8% 5.3% 2016 1,016,500 3.7% 144,306,000 1.7% 3.7% 5.0%

Overall Change 2007-2016 174,700 20.8% 6,307,000 4.6% Avg Unemp. Rate 2007-2016 5.4% 7.0% Unemployment Rate - May 2018 3.2% 3.6%

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.

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The San Antonio MSA has a greater percentage employment than the United States in the following categories:

■ Trade, Transportation, Utilities - which accounts for 19.0% of San Antonio MSA payroll employment compared to 18.7% for the United States as a whole. This sector includes jobs in retail trade, wholesale trade, trucking, warehousing, and electric/gas/water utilities.

■ Leisure, Hospitality - which accounts for 11.2% of San Antonio MSA payroll employment compared to 10.0% for the United States as a whole. This sector includes employment in hotels, restaurants, recreation facilities, and arts and cultural institutions.

■ Other Services - which accounts for 9.9% of San Antonio MSA payroll employment compared to 9.3% for the United States as a whole. This sector includes establishments that do not fall within other defined categories, such as private households, churches, and laundry and dry cleaning establishments.

■ Financial Activities - which accounts for 8.7% of San Antonio MSA payroll employment compared to 6.7% 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.

Employment Sectors - 2018

Source: Esri 2018. Compiled by JLL Valuation & Advisory Services, LLC.

1.9%

1.8%

4.5%

10.1%

7.2%

6.4%

6.7%

9.3%

10.0%

18.7%

23.5%

1.4%

1.6%

5.2%

5.6%

6.6%

8.0%

8.7%

9.9%

11.2%

19.0%

23.0%

0% 5% 10% 15% 20% 25%

Natural Resources, Mining

Information

Government

Manufacturing

Professional, Business Services

Construction

Financial Activities

Other Services

Leisure, Hospitality

Trade, Transportation, Utilities

Education, Health Services

San Antonio MSA United States

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The San Antonio MSA is underrepresented in the following categories:

■ Education, Health Services - which accounts for 23.0% of San Antonio MSA payroll employment compared to 23.5% for the United States as a whole. This sector includes employment in public and private schools, colleges, hospitals, and social service agencies.

■ Professional, Business Services - which accounts for 6.6% of San Antonio MSA payroll employment compared to 7.2% for the United States as a whole. This sector includes legal, accounting, and engineering firms, as well as management of holding companies.

■ Manufacturing - which accounts for 5.6% of San Antonio MSA payroll employment compared to 10.1% for the United States as a whole. This sector includes all establishments engaged in the manufacturing of durable and nondurable goods.

■ Information - which accounts for 1.6% of San Antonio MSA payroll employment compared to 1.8% for the United States as a whole. Publishing, broadcasting, data processing, telecommunications, and software publishing are included in this sector.

Major Employers The table below contains major employers in the San Antonio MSA.

Name Number of Employees

1 H-E-B 20,000 2 USAA 17,000 3 Methodist Healthcare System 8,118 4 Baptist Health System 6,498 5 JP Morgan Chase 5,200 6 Wells Fargo 5,153 7 AT&T 4,200 8 Bill Miller BBQ 3,540 9 Christus Santa Rosa Health Care 3,360

10 Rackspace 3,300 11 CPS Energy 3,022 12 Toyota Motor Manufacturing 2,900 13 Clear Channel Communications 2,800 14 Boeing 2,800 15 Southwest Research Institute 2,700 16 Frost Bank 2,100 17 Accenture 1,800 18 Valero Energy 1,653 19 Harland Clarke 1,500 20 KCI 1,400

Major Employers - San Antonio MSA

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Gross Domestic Product Based on Gross Domestic Product (GDP), the San Antonio MSA ranks #34 out of all metropolitan area economies in the nation.

Economic growth, as measured by annual changes in GDP, has been somewhat higher in the San Antonio MSA than the United States overall during the past nine years. The San Antonio MSA has expanded at a 3.4% average annual rate while the United States has grown at a 1.1% rate. As the national economy improves, the San Antonio MSA continues to outperform the United States. GDP for the San Antonio MSA rose by 3.1% in 2016 while the United States's grew by 1.5%.

The San Antonio MSA has a per capita GDP of $45,006, which is 11.0% less than the United States's GDP of $50,708. This means that the San Antonio MSA industries and employers are adding relatively much less 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 San Antonio MSA Change United States Change 2007 $80,838 $14,798,367 2008 $82,381 1.9% $14,718,301 -0.5% 2009 $79,363 -3.7% $14,320,114 -2.7% 2010 $80,912 2.0% $14,628,165 2.2% 2011 $83,814 3.6% $14,833,679 1.4% 2012 $88,033 5.0% $15,126,281 2.0% 2013 $93,734 6.5% $15,348,034 1.5% 2014 $100,487 7.2% $15,717,536 2.4% 2015 $106,032 5.5% $16,148,378 2.7% 2016 $109,348 3.1% $16,385,170 1.5% Compound % Chg (2007-2016) 3.4% 1.1% GDP Per Capita 2016 $45,006 $50,708

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.

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Household Income The San Antonio MSA has a similar level of household income as the United States. Median household income for the San Antonio MSA is $56,143, which is comparable to the United States.

The following chart shows the distribution of households across nine income levels.

The San Antonio MSA has a comparable concentration of households in the lower income levels than the United States. Specifically, 30% of the San Antonio MSA households are below the $35,000 level in household income as compared to 31% of United States households. A smaller concentration of households exists in the higher income levels, as 37% of the San Antonio MSA households are at the $75,000 or greater levels in household income versus 38% of United States households.

Median Household Income - 2018 Median

San Antonio MSA $56,143 United States $56,124

Comparison of San Antonio MSA to United States 0.0%

Source: Esri 2018. Compiled by JLL Valuation & Advisory Services, LLC.

Household Income Distribution - 2018

Source: Esri 2018. Compiled by JLL Valuation & Advisory Services, LLC.

10.6%

9.7%

9.9%

13.5%

19.1%

12.7%

13.9%

5.3%

5.4%

11.5%

10.0%

9.7%

13.1%

17.8%

12.4%

13.9%

5.7%

6.1%

0% 5% 10% 15% 20% 25%

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

San Antonio MSA United States

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Education and Age Residents of the San Antonio MSA have a lower level of educational attainment than those in the United States. An estimated 28% of the San Antonio MSA residents are college graduates with four- year degrees or higher, while United States residents have an estimated 31% with at least a four- year degree. People in the San Antonio MSA are younger than their peers in the United States. The median age of the San Antonio MSA is 35 years, while the United States is 38 years.

Conclusion Over the long term, the subject’s region is forecast to experience population growth above that of the national average. The region is expected to experience employment growth at a rate above that of the nation as a whole. Area income levels are average. We anticipate the area’s economy will keep pace with the national economy over the foreseeable future.

Education & Age - 2018

Source: Esri 2018. Compiled by JLL Valuation & Advisory Services, LLC.

31%

28%

0% 20% 40% 60% 80%

United States

San Antonio MSA

Percent College Graduates

38

35

10 15 20 25 30 35 40 45 50 55 60

United States

San Antonio MSA

Median Age

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Brookdale Castle Hills

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 miles12 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

12. 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.

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Brookdale Castle Hills

service provider nearest their location. Each of these factors is considered in the delineation of the subject’s PMA.

Physical Barriers There are no significant physical barriers in the immediate proximity of the subject that are believed to limit the subject's market area.

Psychological Barriers The subject’s market area is not constrained by any known psychological barriers.

Location of Competing Facilities There are competing facilities scattered throughout the area, indicating that seniors have a wide 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 the physical and psychological barriers, population density, and the competing facilities’ concentration, we have concluded that an appropriate PMA for the subject is the area within a 4 mile radius of the site. 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.

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Primary Market Area Map

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Brookdale Castle Hills

Composition The predominant land use in the market area is single-family residential. The estimated land use composition is shown in the following table:

5%

10%

5%

100%

Retail & Personal Service

Office

Industrial

Vacant Land 5% Total

10%Schools, Churches, Public Buildings, Rec. Areas

Multi-Family 15%

Estimated Land Use Composition Property Type % Used For Type

Single-Family Residential 50%

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 Esri.

Population Growth Population growth figures are shown below:

Area 2000 2010

Annual % Change 2000-2010 2018

Annual % Change 2010-2018 2023

Annual % Change 2018-2023

PMA 213,888 213,956 0.00% 225,013 0.63% 234,221 0.81% United States 281,421,906 308,745,538 0.93% 330,088,686 0.84% 343,954,683 0.83% Source: Esri

Population Growth

Between 2010 and 2018, 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.

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Household Growth Household growth figures are shown below:

Area 2000 2010

Annual % Change 2000-2010 2018

Annual % Change 2010-2018 2023

Annual % Change 2018-2023

PMA 88,286 88,327 0.00% 92,643 0.60% 96,449 0.81% United States 105,480,101 116,716,292 1.02% 124,110,001 0.77% 129,076,036 0.79%

Household Growth

Source: Esri

Between 2010 and 2018, PMA household growth was less than the national average. The forecasted growth for the PMA is at a rate greater than the nation as a whole.

Income Levels Pertinent income data are shown below.

Area 2018 Median Household Income Income Levels

2018 Average HH Income

United States $46,482 $58,100

Source: Esri

$72,291 $83,694

PMA

Current PMA income levels are lower than the national average.

Housing Market Esri reports the housing market statistics shown below:

2018 Owner Occupied Housing Percent Housing Market Statistics

Area 2018 Median Housing Value

Source: Esri

$168,465 United States 63.1% $218,492 PMA 43.5%

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. As of January 2018, the S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a higher year-over-year gain with a 6.2% annual increase in January 2018. The 10-City Composite is up 6.0% compared to last year. The 20-City Composite’s year-over-year gain was 6.3%. The National Index is up 38% from its low point in 2012.

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Brookdale Castle Hills

According to the Zillow’s January 2018 Market Report, U.S. home values increased 6.7% over the past year with a median home value of approximately $207,600. In the short term, home values are expected to grow 3.1% over the next year through January 2019.

The subject is located in San Antonio, Texas. The median home value (as determined by Esri) within a 5 mile radius of the subject property is $177,504. The housing market in the PMA is considered to be weaker than average based upon the preceding information.

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Public Services

Street Improvements The market area benefits from the following road infrastructure:

Interstate Highways - North-South: Interstate 10, Interstate 410, Interstate 35 East-West: Interstate 10 & Interstate, 410 Other Highways - North-South: US 281, SH 537 East-West: SH 16/421 Major City Streets -

North-South: San Pedro Avenue, West Avenue, Northwest Military Highway

East-West: Basse Road, Hildebrand Avenue

Overall, accessibility to and within the PMA is rated as average.

Police/Fire Protection Police and fire protection is provided by the City of San Antonio.

Schools The area is within the San Antonio School District.

Shopping The area is adequately served by a number of shopping centers.

Medical The full service hospital nearest the subject is Methodist Texas Hospital. This facility is located 3.8 miles southwest of the subject. This hospital includes 120 beds with services that include emergency care, cardiac care, rehabilitation center, sleep lab, etc.

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Seniors Housing Market Demographics Demographics relevant to the seniors housing market are as follows:

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PMA USA

225,013 330,088,686

234,221 343,954,683

0.81% 0.83%

52,374 85,059,700

52,189 83,511,625

-0.07% -0.37%

23.28% 25.77%

36,604 52,780,182

42,002 62,005,855

2.79% 3.27%

16.27% 15.99%

17,078 21,708,863

19,560 26,009,367

2.75% 3.68%

7.59% 6.58%

6,283 6,636,923

6,457 6,990,583

0.55% 1.04%

2.79% 2.01%

$46,482 $58,100

$52,750 $65,469

$46,554 $52,012

$36,193 $33,107

Adult Child (45-64) Population

75 Plus Population

65 Plus Population

2018 Age 75+ Pop. as % of Total Pop.

Forecasted Annual Growth, 2018-2023

2018 Population 75+

Forecasted 2023 Population 75+

Forecasted Annual Growth, 2018-2023

2018 Population 65+

Forecasted 2023 Population 65+

2018 Population 45-64

2018 Age 65+ Pop. as % of Total Pop.

Forecasted 2023 Population 45-64

Forecasted Annual Growth, 2018-2023

2018 Age 45-64 Pop. as % of Total Pop.

Market Area Characteristics Item

Total Population

2018 Population

Forecasted Annual Growth, 2018-2023

Forecasted 2023 Population

85 Plus Population

2018 Population 85+

Forecasted 2023 Population 85+

Forecasted Annual Growth, 2018-2023

2018 Age 85+ Pop. as % of Total Pop.

Source: Esri

Income Levels

Median Income Level Age 75+

Median Income Level Age 55 to 64

Median Income Level Age 65 to 74

Median Household Income, All Ages

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Brookdale Castle Hills

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Total 45-64 65+ 75+ 85+F o

re ca

st A

n n

u al

G ro

w th

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+

% o

f T o

ta l P

o p

u la

tio n

Cohort

Comparison of Population Composition

PMA

USA

45

Brookdale Castle Hills

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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 below average.

Conclusion The subject’s PMA is concluded to be the area within a 4 mile radius from the site. The primary land use in the area is single-family residential and the area is approximately 95% developed. The PMA is experiencing population growth and has below average income levels. The area is considered to be in a stage of growth. Between 2018 and 2023, the market area is forecast to experience growth in demand for seniors housing at an average rate relative to the nation as a whole.

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Brookdale Castle Hills

Site Description and Analysis Specific site details are as follows:

Street Address: 1207 Jackson Keller Road Additional Frontage To: None Site Orientation: Interior Site

Primary Access Via: Jackson Keller Road, a moderately traveled roadway with two lanes extending in each direction. Jackson Keller Road is not median divided. There is not a traffic light that facilitates access to the site.

Secondary Access Via: None Accessibility Rating: Average Visibility Rating: Poor

Total Site Size: 11.76 acres Primary Site Size: 6.76 acres Excess Land: 5 acres Shape: Mostly rectangular Topography: Gently rolling Vegetation Moderate Excess Land Area: Approximately 5 acres

Zone: Zone X Panel Number: 48029C0245G, Effective September 29, 2010 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 -

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Brookdale Castle Hills

Aerial Photograph (Source: Google Earth)

North: Single-Family Residential

East: Single-Family Residential

South: Jackson Keller Road, then Single-Family Residential

West: Single-Family Residential

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 -

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Brookdale Castle Hills

Conclusion The subject’s site contains a total of 11.76 acres, include approximately 5 acres of excess land. In addition, on the excess land there is a structure that was previously utilized as dormitory type housing; however, this structure is currently is poor condition and is not usable. This structure has no contributory value and this building is currently not being utilized. The shape of the site is mostly rectangular, and the topography is gently rolling. 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 present use.

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Improvement Description and Analysis

Introduction 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; projects 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 that provide residents as part of their monthly fee with 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, toileting, etc. There are no licensed skilled nursing beds in the property.

Assisted Living Facility (ALF): State regulated rental properties that provide the same services as independent living communities listed above, but 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 activities of daily living (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 with Alzheimer’s or other forms of dementia. A property that specializes in the care of residents with Alzheimer’s or other forms of dementia should be considered an assisted living property.

Independent and Assisted Living Facility (IALF): Single communities offering both independent and assisted living within the same building or on the same campus.

Skilled Nursing Facility (SNF): Licensed daily rate or rental properties that are technically referred to as skilled nursing facilities (SNF) where the majority of individuals require 24-

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hour nursing and/or medical care. In most cases, these properties are licensed for Medicaid and/or Medicare reimbursement. These properties may include a minority of assisted living and/or Alzheimer’s/dementia units.

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/coop and rental programs. The majority of the units are not licensed skilled nursing beds.

The following are additional terms that are used in describing seniors housing properties:

Licensed beds: The number of beds a facility is licensed to operate by the appropriate state licensing agency.

Living units: The number of living units, consisting of one or more rooms, designed to accommodate residents of the facility.

Operating beds: The number of beds a facility actually operates. This may be less than the number of licensed beds.

Private bed: A bed situated in a room with no other beds/residents.

Semi-private bed: A bed situated in a room with one other bed/resident.

Ward bed: A bed situated in a room with two or more other nursing beds/residents.

Private pay: Refers to a resident whose charges are funded by: personal funds, assistance from relatives or other private individuals or groups, or by long term care insurance.

Resident day: A day for which services are rendered and billable, or a day for which a bed or unit is held and billed. For example, if a resident rents and occupies a unit for a full calendar year, that resident would have occupied the bed or unit for 365 resident days.

Medicaid: Provides health coverage for people of all ages whose incomes are low. To qualify for Medicaid, an individual, couple, or family must meet income and resource guidelines. Income includes money received each month from Social Security, employment, or other sources. Resources refer to the value of items owned such as cash and savings. Some resources, such as the family home and one car, are not counted in determining Medicaid eligibility. To qualify, individuals must be U.S. citizens, with some exceptions for certain categories of non-citizens. Medicaid pays for basic health services and for some services not covered by Medicare such as medicine, nursing facility care, eye exams, glasses, transportation for medical care, and other medical services. Medicaid is funded and regulated by both federal and state governments. As a result, Medicaid rules are different from state to state.

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Medicaid waiver: Under Section 1915(c) of the Social Security Act, Medicaid law authorizes the Secretary of the U.S. Department of Health and Human Services to waive certain Medicaid statutory requirements. These waivers enable States to cover a broad array of home and community-based services (HCBS) for targeted populations as an alternative to institutionalization. Waiver services may be optional State Plan services which either are not covered by a particular State or which enhance the State’s coverage. Waivers may also include services not covered through the State Plan such as respite care, environmental modifications, or family training. Many states have Waiver programs in place to provide for assisted living care.

Medicare: A federal health insurance program. Passed in 1965 as Title XVIII of the Social Security Act, Medicare was intended to pay the cost of some health care services in order to ensure access to a basic level of health care for the aged and other eligible persons. Medicare will cover the first 20 days of nursing facility care and will partially pay for the next 80 days for a total benefit not to exceed 100 days. A three-day hospital stay is required to qualify for this benefit.

Medicare Part A: Provides payment for post-hospital care in a Medicare certified nursing facility. Medicare (Part A) may provide payment for post-hospital care in a nursing facility for up to 100 days if Medicare coverage requirements (the 5 rules) are met. A resident is entitled to full coverage for the first 20 days. From the 21st day through the 100th day, Medicare pays for all covered services except a daily co-pay amount for which the resident is responsible. That means the resident has to pay the co-pay either with his or her own money or, if eligible, through Medicaid, or through private insurance (i.e. a Medi-Gap policy). A nursing facility resident will not be entitled to any Medicare (Part A) coverage unless he or she is admitted to a nursing facility within 30 days following a 3-day hospital stay. Medicare Certified nursing facilities are reimbursed for providing nursing facilities stays based upon the Prospective Payment System.

Medicare Part B: Seniors are required to enroll in Medicare Part B. Medicare Part B pays for doctors' services, outpatient hospital care, and some other medical services that Part A does not cover, such as the services of physical and occupational therapists, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary.

Medicare Prospective Payment System (PPS): Section 4432(a) of the Balanced Budget Act (BBA) of 1997 modified how payment is made for Medicare skilled nursing facility (SNF) services. Effective with cost reporting periods beginning on or after July 1, 1998, SNFs were no longer paid on a reasonable cost basis or through low volume prospectively determined rates, but rather on the basis of a prospective payment system (PPS). The PPS payment rates is adjusted for case mix and geographic variation in wages and covers all costs of

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furnishing covered SNF services (routine, ancillary, and capital-related costs). The amount of reimbursement for each resident is based upon the RUG-III case mix system.

RUG-IV: RUG IV is a 66- group model for classifying nursing facility residents into homogenous groups according to common health characteristics and the amount and type of resources they use. Residents are classified based on residents’ clinical conditions, extent of services used, and functional status. The groups are in seven general categories (in general order of costs associated with caring for residents): rehabilitation plus extensive services, extensive services, clinically complex, special care high, special care low, behavioral symptoms and cognitive performance and reduced physical function.

Subject Photographs

Bird’s Eye Aerial of Subject (Source: Google Earth)

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Front View Street View Looking Southeast

Street View Looking Northwest Rear View

Side View Signage

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Entry Lobby Dining Room

Commercial Kitchen Lounge Area

Beauty Salon Activity Room

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Courtyard Typical Hallway

Typical Living Room Typical Bedroom

Typical Kitchen Area Typical Bathroom

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Unit/Bed Mix and Building Areas The following is a tabulation of the unit/bed mix and building area:

Percent of Total GBA

12

4

2 2840.3%

3,408

1,1361.3%

3.8%

10,842

4.5%

12.2%

12.2%

3,992

Unit Type Number of

Units 30

26

8

Square Feet

Total Square

Feet

Assisted Living

Assisted Living

10,860

Unit Mix and Building Areas

Care Type Assisted Living

Number of Beds

Number of Beds Per

Unit 1

417

499

9,44010.6%

12 1

30Studio

Memory Care

Memory Care

Studio Deluxe

Alcove

One Bedroom

Private

Private - Shared Bath

Assisted Living

Memory Care

1

1

1

1

26

8

16590 16

1

362

2

284

284 4

284Semi-Private

Total Gross Building Area

44.8%97 - 98Totals

89,140

39,962

Plus Common Areas 55.2% 49,178

The subject is licensed for 160 beds. In many cases, ALFs are licensed for a greater number of beds than the facilities are ever likely to fill. This is due to the fact that most units can be licensed for occupancy by two or more persons, but the majority of residents prefer private occupancy. Our forecasts will be based upon the bed mix shown above, as this mix most accurately reflects the composition of beds with which the subject actually operates.

As shown in the preceding table, the subject is configured for 97 units and 98 primary beds. However, the subject also is occupied by second persons who are related to the primary occupant of some units. Currently, the subject has 3 second persons. Thus, our forecast of total operating beds is based upon 3 second persons, as shown below:

3

101

98Number of Beds Configured for Specific Private or Semi-Private Occupancy

Total Number of Operating Beds

Plus Forecasted Net Number of Second Persons in Unspecified Units

Calculation of Operating Beds

Payor Types The subject is 100% private pay, accepting no Medicaid or Medicare reimbursement.

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Summary of Construction Components Based on the structural frame and major construction components, the building is classified as a Class D structure of good quality by the Marshall Valuation Service. A summary of the improvements follows.

Size and Shape Gross Building Area (Square Feet): 89,140 Number of Buildings: 3 Basement: No Stories: 1 & 2 Building Shape: Rectangular Unit Access: Via fully heated and cooled interior hallways

Structure and Exterior Surfaces Foundation: Reinforced concrete slab Wall Frame: Wood/lightweight steel frame Roof Frame: Wood/lightweight steel frame Exterior Walls: Veneer of stone and stucco Roof: Pitched roof with composition shingles

Windows and Doors Entry Doors: Wood with glass Other Exterior Doors: Steel Interior Doors: Hollow core wood or Masonite Windows: Aluminum frame, residential style

Living Unit Finish and Mechanicals Wall Finish: Gyprock finished with paint and wallpaper Ceiling Finish: Gyprock finished with paint Floor Surfaces: Carpet and tile Bathroom: One bathroom per unit with sink, toilet and walk-in

shower

Kitchen: Full kitchens, kitchenettes or no kitchen areas Closets: One per resident HVAC: Through wall package units Hot Water: Common boiler

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Common Area Finish and Mechanicals Common Area Room Types: Offices, lounge areas, activity room, commercial

kitchen, dining room and library

Wall Finish: Gyprock finished with paint and wallpaper Ceiling Finish: Suspended acoustical ceiling with lighting

Floor Surfaces: Carpet and tile Bathrooms: Multiple common area bathrooms HVAC: Central Hot Water: Common boiler Elevators: Two

Safety and Health Care Fire Protection: Fire sprinkler system with alarms Smoke Protectors: Hard-wired, ceiling-mounted smoke detectors

Lighting: Battery-powered, wall mounted emergency lighting Call Systems: Centrally monitored resident call system Care Stations: 3 care stations Security: Exterior door locks, intercom system, etc. Memory Care Security: 17 units are “secure” to prevent residents with

memory care issues from wandering outside of the building and designated exterior walking areas. Doors are equipped with keypads for entry and exit. In addition, the facility incorporates other specialized design features. The floor plan is designed to be easy to understand, and colors are selected for their soothing effects on memory care patients.

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Other Improvements Other Structures: Maintenance shed Paving/Parking: Asphalt paved drives and open parking lot with

concrete curbs

Parking Spaces (#): 54 spaces including 4 handicap spaces Sidewalks: Concrete Landscaping: Native grasses, shrubs, and trees

Lawn Irrigation: Automatic underground distribution

Signage: Monument sign at front of site

FF&E Administrative: Copiers, filing cabinets, desks, chairs, computers,

etc.

Common Areas: Tables, chairs, couches, artwork, etc.

Kitchen: Fully equipped commercial kitchen Housekeeping: Mops, brooms, vacuum cleaners, buckets, carts, etc. Laundry and Linen: Laundry carts, washing machines, dryers, etc. Maintenance: Mowers, weed eaters, blowers, ladders, tools, etc.

Commercial Space The subject has a beauty shop that is leased.

Intangible Items In addition to the hard assets described herein, the going concern values include the following intangible items:

■ Systems and procedures ■ Referral network ■ Name recognition ■ Management expertise ■ Assembled work force ■ Goodwill

Condition The subject is in good overall condition. We noted no significant items of deferred maintenance during our inspection.

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Third Party Reports We did not observe any issues during our inspection and none were identified by ownership. We have not been provided a PCNA to identify critical items in need of repair at the subject property nor were we provided with a copy of a Phase I Environmental Assessment.

Effective Age and Remaining Economic Life According to Marshall & Swift, the life expectancy for a Class D, good quality facility of the subject’s use is 50 years, which we consider to be low. To support this, we can look to the implied life assigned to buildings involved in recent transactions. JLL conducted valuations of several large portfolios of seniors housing facilities, including a mix of nursing and assisted living. Important statistics are as follows:

■ Portfolio A had 261 assets in operation. The average age was 36 years. Of the total 261 assets, 22% were already 40 years old. The entire portfolio was leased to an operator for a term of 20 years, implying a life of at least 56 years (36-year average + 20-year lease).

■ Portfolio B had 336 assets with an average age of 24 years. The portfolio was leased for a maximum term of 22 years, implying a life of at least 46 years.

■ Portfolio C had 19 assets with an average age of 45 years. The portfolio was leased for a maximum term of 20 years, implying a life of at least 65 years.

Based upon the preceding, we conclude the total economic life for the subject to be 55 years. The subject was built in 2000, thus the actual chronological age is 18 years. The subject has not been updated. The level of maintenance received appears to have been average. We have concluded the effective age of the subject to be 12 years. Therefore, the concluded remaining economic life for the subject is 43 years (55 years less 12 years).

Functional Utility The subject’s functional utility is rated 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

Greater than Typical

Subject’s Functional Utility

Average

Overall, the subject is similar to the typical facility and has good functional utility.

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Conclusion The subject offers assisted living and memory care, with a total of 97 units and 101 operating beds. The improvements contain a total of 89,140 square feet. Its construction quality is rated as good. The subject’s amenities are considered similar to the competing properties in the market. Overall, the subject’s appeal to the market is considered average.

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Legal Constraints Analysis

Zoning According to the city of San Antonio, the subject is currently zoned C. A description of the zoning classification is presented below:

Department and Telephone Number:

Planning Department at 210-342-2341

Zoning Classification: C (Low Rise Apartment) and a small portion along the east side of the site )100 feet wide) is zoned B (Duplex)

Permitted Uses: Multi-family residential and retirement facilities

Zoning Compliance: The subject is a legal, conforming use

Maximum Height: 2 stories

Maximum Site Coverage: 33%

Setbacks-

Front: 25 feet

Rear: 20 feet

Side: 10 feet or 15 feet if adjacent to another residential district

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.

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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 Texas.

License Terms Assisted Living Facilities:

The Texas Department of Aging and Disability Services (DADS) licenses several types of assisted living facilities (ALFs): assisted living apartments (single-occupancy), residential care apartments (double-occupancy), and residential care non-apartments. A person establishing or operating a facility that is not required to be licensed may not use the term "assisted living" in referring to the facility or the services provided. The ALF statute requires careful monitoring to detect and report unlicensed facilities.

A facility's licensure type--A or B--is based on residents' capability to evacuate the facility. Any facility that advertises, markets, or otherwise promotes itself as providing specialized care for persons with Alzheimer's disease or other disorders must be certified as such and have a Type B license.

Adult foster care (AFC) provides a 24-hour living arrangement with supervision in an adult foster home for people who are unable to live independently in their own homes because of physical, mental, or emotional limitations. Providers and residents must live in the same household and share a common living area. With the exception of family members, no more than three adults may live in the foster home unless it is licensed as a Type C ALF, which is a four-bed facility that must have an active contract with the Department to provide AFC services before it can be licensed. A provider wishing to serve more than four individuals must obtain a DADS Type A ALF license. Separate rules apply to adult foster homes and Type C facilities, which 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 Type A and Type B ALFs. The complete regulations are online at the links provided at the end.

Definitions Assisted living facility means an establishment that furnishes, in one or more facilities, food and shelter to four or more persons who are unrelated to the proprietor and provides personal care services, supervision or direct administration of medications, and other permitted services.

Resident Agreements Facilities must have a written admission agreement with each resident that includes information about the services to be provided and their cost.

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Disclosures The facility must have written policies regarding aging in place, admission criteria, services provided, charges, refunds, the normal 24-hour staffing pattern, residents' responsibilities and privileges, and other rules and regulations. Before admitting a resident, facility staff must explain and provide a copy of the disclosure statement to the resident, family, or responsible party and must also provide a copy of the Resident Bill of Rights.

An ALF that provides brain injury rehabilitation services must attach to its disclosure statement a specific statement that licensure as an ALF does not indicate state review, approval, or endorsement of the facility's rehabilitative services. The facility must document receipt of the disclosure statement.

If the facility provides services and supplies that could be covered Medicare benefits, the facility must disclose this information to the resident.

Facilities that provide care to residents with Alzheimer's disease or other dementias are required to disclose the services they provide using a DADS disclosure form, which includes the pre-admission and admission processes, discharge and transfer, planning and implementation of care, change in condition issues, staffing and staff training in dementia care, and the physical environment. The facility must give the required DADS disclosure statement to any individual seeking information about the facility's care or treatment of residents with Alzheimer's disease or other dementias. The disclosure statement must be updated and submitted to the Department as needed to reflect changes in special services for residents. Prior to admitting a resident to the facility, staff must discuss and explain the information in the disclosure statement with the family or responsible party.

Admissions In a Type A ALF, a resident must be mentally and physically capable of evacuating the facility unassisted in the event of an emergency and capable of following directions, and must not require routine attendance during sleeping hours.

In a Type B ALF, a resident may require staff assistance to evacuate the facility, be incapable of following directions under emergency conditions, require attendance during sleeping hours, and may not be permanently bedfast but may require assistance in transferring to and from bed.

All residents must be appropriate for the facility licensure type when admitted. After admission, if the resident's condition changes, the resident may no longer be appropriate for the facility's license, and if so, the facility is not required to retain them.

The regulations list some general characteristics of residents in an ALF, including residents who: (1) exhibit symptoms of mental or emotional disturbance, but are not considered at risk of imminent harm to self or others; (2) need assistance with mobility, bathing, dressing, and grooming; (3) need

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reminders to encourage toilet routine and prevent incontinence; (4) need assistance with medication, supervision of self-medication, or administration of medication; or (5) are incontinent without pressure sores.

A facility must not admit or retain a resident whose needs cannot be met by the facility or who cannot secure the necessary services from an outside resource. As part of the facility's general supervision and oversight of the physical and mental well-being of its residents, the facility remains responsible for all care provided in the facility. If the individual is appropriate for placement in a facility, then the decision that additional services are necessary and can be secured is the responsibility of facility management with written concurrence of the resident, resident's attending physician, or legal representative.

If the Department or an ALF determines that a resident is inappropriately placed in the facility, or if a resident experiences a change of condition, but continues to meet the facility evacuation criteria, as long as the facility is willing the resident may be retained if certain conditions are met, including: (1) a physician describes the resident's medical conditions and related nursing needs, ambulatory and transfer abilities, and mental status, and states that the resident is appropriately placed; and (2) the resident or a legal representative desires retention in the facility.

If the DADS surveyor or an ALF determines that a resident is inappropriately placed because the resident no longer meets the evacuation criteria, a facility may request that the resident remain at the facility by obtaining an evacuation waiver and providing a detailed emergency plan that explains how the facility will meet the evacuation needs of the resident, which includes provisions for a sufficient number of trained staff on all shifts to move all residents to a place of safety. The facility must meet the previously listed conditions and submit additional information.

Services ALFs provide personal care, including assistance with activities of daily living (ADLs); general supervision or oversight of the physical and mental well-being of a person who needs assistance to maintain a private and independent residence in the facility or who needs assistance to manage his or her personal life; and supervision or direct administration of medications. The facility must also provide an activity and/or social program for residents at least weekly.

An ALF may provide skilled nursing services for limited purposes: (1) coordinating resident care with an outside home and community support services agency or health care professional; (2) providing or delegating personal care services and medication administration; (3) assessing residents to determine required services; and (4) delivering, for a period not to exceed 30 days, temporary skilled nursing services for a minor illness, injury or emergency.

Facilities that provide care to residents with Alzheimer's disease or other dementias must encourage socialization, cognitive awareness, self-expression, and physical activity in a planned and structured activities program. Activities must be individualized, based upon the resident

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assessment, and appropriate for each resident's abilities. Residents must be encouraged, but never forced, to participate in activities. Residents who choose not to participate in a large group activity must be offered at least one small group or one-on-one activity per day. A health care professional may coordinate the provision of services to a resident within the professional's scope of practice authorized by the Texas Health and Safety Code, however, a facility must not provide ongoing services to a resident that are comparable to the services available in a licensed nursing facility.

Service Planning Within 14 days of admission, the facility must conduct a comprehensive assessment and complete an individualized service plan (ISP). The comprehensive assessment must be completed by the appropriate staff and documented on a form developed by the facility.

Facilities that provide care to residents with Alzheimer's disease or other dementias must establish procedures, such as an application process, interviews, and home visits, to ensure that prospective residents are appropriate and their needs can be met. Within 14 days of admission, the facility must comprehensively assess the resident and develop an ISP. The service plan must address the residents' individual needs, preferences, and strengths and be designed to help the resident maintain the highest possible level of physical, cognitive, and social functioning. The service plan must be updated annually and upon a significant change in condition.

Third-Party Providers A resident may contract with a licensed home and community support services agency or with an independent health professional to have health care services delivered at the facility.

Medications Residents who self-administer their own medications and keep them locked in their room must be counseled at least once a month by facility staff to ascertain if they continue to be capable of self- administering their medications/treatments and if security of medications can continue to be maintained.

Supervision of a resident's medication regimen by facility staff may be provided to residents who are incapable of self-administering without assistance. Supervision includes and is limited to: reminders to take medications at the prescribed time, opening containers or packages and replacing lids, pouring prescribed dosage according to the resident's medication profile record, returning medications to the proper locked areas, obtaining medications from a pharmacy, and listing the medication taken on a resident's medication profile record.

Residents who choose not to or cannot self-administer medication must have medication administered by a person who: (1) holds a current license to administer medication; (2) holds a current medication aide permit (this person must function under the direct supervision of a licensed nurse on duty or on call); or (3) is an employee of the facility to whom the administration of

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medication has been delegated by a registered nurse who has trained them to administer medications or verified their training, according to rules in the state's Nursing Practice Act.

Food Service Facilities must provide at least three balanced and nutritious meals or the equivalent per day. The meals must be served daily, at regular times, with no more than a 16-hour span between a substantial evening meal and breakfast the following morning. All exceptions must be specifically approved by the Department. Menus must be prepared to provide a balanced and nutritious diet, such as that recommended by the National Food and Nutrition Board.

Therapeutic diets as ordered by the resident's physician must be provided according to the service plan. Therapeutic diets that cannot customarily be prepared by a layperson must be calculated by a qualified dietician. Therapeutic diets that can customarily be prepared by a person in a family setting may be served by the ALF.

Staffing Type of Staff. Each facility must have a manager who is on duty 40 hours per week and may manage only one facility, except for managers of small Type A facilities, who may have responsibility for no more than 16 residents in no more than four facilities. The managers of small Type A facilities must be available by telephone or pager when conducting facility business off-site. An employee competent and authorized to act in the absence of the manager must be designated in writing. An attendant (direct care staff person) must be in the facility at all times when residents are present. Attendants are not precluded from performing other functions as required by the ALF.

Staff Ratios. No minimum ratios. A facility must develop and implement staffing policies that require staffing ratios based upon residents' needs as identified in their ISPs. A facility must have sufficient staff to: (1) maintain order, safety, and cleanliness; (2) assist with medication regimens; (3) prepare and serve meals that meet requirements; (4) assist with laundry; (5) ensure that each resident receives the kind and amount of supervision and care required to meet his/her basic needs; and (6) ensure safe evacuation of the facility in the event of an emergency.

In Type A facilities night shift staff in a small facility must be immediately available and in a large facility, they must be immediately available and awake. In Type B facilities, night shift staff must be immediately available and awake, regardless of the number of licensed beds.

Training All managers must complete a 24-hour course which must include information on the assisted living standards; resident characteristics (including dementia); resident assessment; skills for working with residents; basic principles of management; food and nutrition services; federal laws, such as the Americans With Disabilities Act (ADA), Civil Rights Act of 1991, the Rehabilitation Act of 1993,

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Family and Medical Leave Act of 1993, and the Fair Housing Act, with an emphasis on the ADA's accessibility requirements; community resources; ethics; and financial management.

All managers must have 12 hours of annual continuing education in at least two of the following areas: resident and provider rights and responsibilities, abuse/neglect, and confidentiality; principles of management; skills for working with residents, families, and other professional providers; resident characteristics and needs; community resources; accounting and budgeting; basic emergency first-aid; and federal laws as listed above.

All staff must receive 4 hours of orientation before assuming any job responsibilities, covering topics at a minimum: reporting abuse and neglect, confidentiality of resident information, universal precautions, conditions that require notification to the manager, resident rights, and emergency and evacuation procedures.

Attendants (direct care staff) must also complete 16 hours of on-the-job training and supervision on a range of topics, including: (1) providing assistance with ADLs; (2) resident health conditions and how they affect the provision of tasks; (3) safety measures to prevent injury and accidents; (4) emergency first-aid procedures and actions to take when a resident falls, suffers a laceration, or experiences a sudden change in physical and/or mental status; (5) behavior management, for example, prevention of aggressive behavior and de-escalation techniques, practices to decrease the frequency of the use of restraint, and alternatives to restraints; and (6) fall prevention.

Attendants must complete 6 hours of education annually, including 1 hour on fall prevention and 1 hour on behavior management, as described above, and a range of other topics suggested by the regulations, including: (1) promoting resident dignity, independence, individuality, privacy, and choice; (2) resident rights and principles of self-determination; (3) communication techniques for working with residents with hearing, visual, or cognitive impairment; (4) communicating with families and other persons interested in the resident; (5) common physical, psychological, social, and emotional conditions and how these conditions affect residents' care; (6) essential facts about common physical and mental disorders, for example, arthritis, cancer, dementia, depression, heart and lung diseases, sensory problems, or stroke; (7) cardiopulmonary resuscitation; (8) common medications and side effects, including psychotropic medications, when appropriate; (9) understanding mental illness; (10) conflict resolution and de-escalation techniques; and (11) information regarding community resources. Subject matter must address the unique needs of the facility.

Facilities that employ licensed nurses, certified nurse aides, or certified medication aides must provide annual in-service training, appropriate to their job responsibilities, on one or more of several suggested topics, including: (1) communication techniques and skills useful when providing geriatric care (e.g., skills for communicating with the hearing impaired, visually impaired and cognitively impaired; therapeutic touch; recognizing communication that indicates psychological abuse); (2) assessment and interventions related to the common physical and psychological

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changes of aging for each body system; (3) geriatric pharmacology, including treatment for pain management, food and drug interactions, and sleep disorders; (4) common emergencies of geriatric residents and how to prevent them (e.g., falls, choking on food or medicines, injuries from restraint use); (5) how to recognize sudden changes in physical condition, such as stroke or heart attack, and obtain emergency treatment; (6) common mental disorders with related nursing implications; and (7) ethical and legal issues regarding advance directives, abuse and neglect, guardianship, and confidentiality.

Apartment Provisions The licensing rules do not require private units but some types of facilities provide them. In facilities that do not provide private units, a maximum of four people may share a room, and not more than 50 percent of the beds in a facility may be in rooms with more than two residents. One toilet and one sink are required for every six residents and one tub or shower for every ten residents. A minimum of one toilet, sink, and bathing unit must be provided on each sleeping floor accessible to residents of that floor.

The Medicaid STAR+PLUS home and community-based services (HCBS) waiver program pays for services in three types of settings: single-occupancy assisted living apartments, residential care apartments, and residential care non-apartment settings.

An assisted living apartment setting is an apartment for single-occupancy that is a private space with individual living and sleeping areas, a kitchen, a bathroom, and adequate storage space. Double-occupancy units may be provided if requested.

Residential care apartments are units with two bedrooms, each with a single occupant, with a shared kitchen and bathroom. Kitchens must be equipped with a sink, refrigerator, cooking appliance (stove, microwave, built-in surface unit) that can be removed or disconnected, and space for food preparation.

A residential care non-apartment setting is defined as a licensed ALF with 16 or fewer beds, with living units that do not meet the definition of either an assisted living apartment or a residential care apartment. Most have dual-occupancy rooms but some have rooms with up to four residents.

Dementia Provisions Dementia Care Staff. Facilities must have a manager or supervisor. Facilities with 17 or more residents must have an activity director 20 hours a week. Smaller facilities may designate a person to plan and implement activities.

A facility must employ sufficient staff to provide services for and meet the needs of its residents with dementia. In large facilities or units with 17 or more residents, two staff members must be immediately available whenever residents are present.

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Dementia Staff Training. All staff in Alzheimer's facilities must receive 4 hours of dementia-specific orientation prior to assuming job responsibilities, providing basic information about the causes, progression, and management of dementia.

Direct care staff must receive 16 hours of on-the-job supervision and training within the first 16 hours of employment following orientation. Training must cover providing assistance with ADLs; emergency and evacuation procedures specific to the dementia population; behavior management, including prevention of aggressive behavior and de-escalation techniques; and fall prevention.

Direct care staff must complete12 hours annually of in-service, competency-based training regarding Alzheimer's disease, 1 hour of which must address behavior management, as described above. Additional suggested topics include: (1) assessing resident capabilities and developing and implementing service plans; (2) promoting resident dignity, independence, individuality, privacy and choice; (3) planning and facilitating activities appropriate for the dementia resident; (4) communicating with families and other persons interested in the resident; (5) resident rights and principles of self-determination; (6) care of elderly persons with physical, cognitive, behavioral and social disabilities; (7) medical and social needs of the residents; (8) common psychotropic medications and side effects; and (9) local community resources.

Managers or supervisors and activity directors or their designees must annually complete 6 hours of continuing education regarding dementia care.

Dementia Facility Requirements. A monitoring station must be provided within the dementia care unit as well as access to at least two approved exits remote from each other. The outdoor area of at least 800 square feet must be provided in at least one contiguous space. This area must be connected to, be a part of, be controlled by, and be directly accessible from the facility. Locking devices may be used on control doors provided criteria specifically stated in the rules are met for their use.

Background Checks An ALF must keep current and complete personnel records on facility employees for review by DADS staff, including documentation that the facility performed a criminal history check (offenses which preclude employment are listed in statute), an annual employee misconduct registry check, and an annual nurse aide registry check.

Monitoring To be licensed, a facility must pass an on-site life safety code inspection and a separate on-site health inspection. Licenses are renewed every 2 years, for which an on-site inspection is required, which must include observation of the care of a resident.

The Department developed a training program to provide specialized training to DADS employees who inspect ALFs. The training emphasizes the distinction between an ALF and a nursing facility.

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License According to management, the subject’s license is currently in force. We are aware of no pending actions that would result in the revocation of the subject’s license.

Potential Changes in the Regulatory Environment We are aware of no pending changes in the regulatory environment in the state of Texas that would negatively impact the subject.

Conclusion The subject’s use represents a legal use under the current site zoning. Furthermore, the subject is licensed by the state of Texas and the license is currently in good standing. We are aware of no pending changes in the regulatory environment in the state of Texas that would negatively impact the subject.

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Ad Valorem Tax Analysis

Tax Rate The subject is under the taxing jurisdiction of Bexar County and related entities, the San Antonio School District, and the City of San Antonio. For the pro forma, taxes will be forecast for the 12 months following the date of value. For purposes of forecasting taxes for that period, the aggregate tax rate is forecast as follows.

x = x =2.6131 2.6131

Forecast Tax Rate

Forecast Tax Rate

0.00% 2017 Forecast Rate Change

Current Assessed Value

$11,886 $12.93

Subject's Current Market Value Assessment

Item Assessor's Estimate of Market

Value Land

MV Assessment Per Unit $1,152,990

$7,185,780

$441,580

Total

$74,080

Current MV Assessment

Per Square Foot of Building

$4,552

$98.50

$4.95

$80.61

$90,519$8,780,350

FF&E

Improvements

The assessor’s estimate of market value is shown above. The subject’s account number is 05682- 000-0490. In this jurisdiction, property is assessed at 100% of the assessor’s estimated market value and is reassessed on an annual basis. Also, in this jurisdiction, sale of a property does not trigger an automatic reassessment the following year.

Texas is a non-disclosure state with a mandate to assess property at 100% of market value. Some Texas county assessors are more successful at achieving the mandate than others. In Texas counties with little or no transaction activity, values can lag the market. However, there is no limit on increases in the event of a reassessment. Property owners in Texas may protest ad valorem assessments using one of two tests: 1) Market Value or 2) Equal Appraisal. Market Value is self- explanatory. Equal appraisal means there is a burden on the district’s assessor to ensure mass appraisal methods produce consistent results from property to property. To measure equality, the appraisal review board will consider the assessed values of competing properties in the district.

The assessor’s estimate of market value is well below our estimate of value. This is a common situation as few assessors have the knowledge, expertise or training to accurately value seniors

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housing properties. Further, part of the value of a well performing seniors housing property is intangible business value, which is not subject to ad valorem taxation. As underassessments are typical, another means for evaluating an assessed value is to compare assessed values for similar properties in the same, or nearby, assessment district.

$7,500,000

227 173,089 $62,334

$109.52

$89.53$70,323

$14,149,9301982

119

$78,592

93,470

$81.75

Averages for Comparables (Excludes Subject)

1997 $8,368,480 Brookdale Hamilton Wolfe

$13,923,150

$8,000,000

New Forest Estates

Brookdale N. Fredericksburg Road

$7,630,760

Property Name

$103,11874 48,515

89,140

$157.29$130,760

$226,780

$368,480

1996

MV Per Square Foot

Tax Assessment Comparables

Sq. Ft.

$98.50$90,51997$8,780,3502000

MV Per UnitUnitsTotal

$8,338,770 $441,580

FF&E

Subject

Assessor's Estimate of Market Value

Real EstateYOC

Based upon the preceding, the subject’s assessment is considered fair and equitable.

Special Assessments Our investigation discovered no special assessments that will affect the subject.

Texas Franchise Tax The State of Texas Net Franchise Tax is a privilege tax imposed on corporations, limited liability companies, and partnerships, among other entities, that are chartered in Texas. Corporations pay the greater of the tax on net taxable capital or net taxable earned surplus. Taxable capital is apportioned using a single gross receipts factor. Taxable capital for an annual report is based on the end of the corporation’s last accounting period in the calendar year prior to the calendar year in which the report is due. The tax rate on taxable capital is 0.25% per year of privilege period. A corporation’s first (initial) report is due one year and 89 days after the corporation’s beginning date. After the initial report is filed, the corporation will file annual reports each May 15.

According to the Texas Tax Code (171-1011), a health care provider may exclude 100% of revenues from Medicaid and Medicare, which limits the subject’s gross revenue to that derived from the private pay residents. This revenue is shown in the following table based on our income estimate that follows.

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House Bill 32 relating to the Texas Franchise tax was signed into law on June 15, 2015. As of January 1, 2016, the Texas Franchise tax changed. The major changes were as follows:

■ Decrease the franchise tax rate from 1.00% to 0.75% ■ Decrease the franchise tax on retailers or wholesalers from 0.50% to 0.375% ■ A taxable entity with no more than $20 million in total revenue, up from $10 million, could

choose to pay the franchise tax under the E-Z computation and rate provisions ■ Decrease the tax rate under the EZ computation from 0.575% to 0.331%

As a property with less than $20 million in annual revenue, the E-Z compensation method may be used in estimating the subject’s franchise tax liability. Note that the apportionment factor is 100%, since all of the subject gross receipts are derived in Texas.

Resulting Franchise Tax $10,856

Resulting Margin $1,990,082 Taxable Due Before Discounts (0.75%) on Resulting Margin $14,926

Minus Wages and Benefits ($1,289,759)

Tax For Revenue of $20,000,000 or Less (.331% x Revenue) $10,856

Total Revenue $1,990,082 Compensation Deduction For Service Provider (70%) $2,295,889

Net Franchise Tax Estimate Total Revenue - Year 1 $3,279,841

Total Taxes Total real estate taxes (excluding FF&E) that will be payable in the 12 month period following the date of valuation are as follows.

X = / = X = X

Taxable Value

Percent = Taxable

Value 100% 83,388

=Subtotal Tax

Rate

Real Estate Pro Forma Year Tax Estimate

Real Estate Market Value / X Total Taxes$100 =

$2.61$8,338,770 $100$8,338,770 $217,902

Total FF&E taxes that will be payable in the 12 month period following the date of valuation are as follows.

X = / = X =4,416 $2.61 Total Taxes

Taxable Value $100 = X=

$441,580 100% $11,539 =

Tax Rate

$441,580

Taxable Value

Percent FF&E Market

Value X Subtotal/

FF&E Pro Forma Year Tax Estimate

$100

Total taxes are summarized as follows.

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Texas Franchise Tax

Pro Forma Year Tax Estimate Summary

FF&E Real Estate

$240,297

$0 $11,539

$217,902

$10,856 Total Tax Summary

Special Assessments/Other

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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

Po pu

la ti

on (T

ho us

an ds

)

85+ 75 to 84 65 to 74 45 to 64 20 to 44 Under 20

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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+

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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 14,105 seniors housing properties consisting of 1,810,824 units/beds in the primary and secondary markets of the U.S. as of the 1st quarter 2018, as shown below.

1,394

4,506

718

6,278

1,209

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Independent Living

Assisted Living Memory Care Nursing Care CCRC

Pr op

er ti

es

Seniors Housing Supply

407,812 383,237

122,751

897,024

- 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000

1,000,000

Independent Living

Assisted Living Memory Care Nursing Care

U ni

ts /B

ed s

Seniors Housing Supply

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New Development According to NIC Map Construction Monitor for the 1st quarter of 2018, national construction start activity (not including senior apartments) was as follows.

There were 519 seniors housing properties under construction as of the 1st quarter of 2018. The majority of the construction was within new properties, with construction in these properties totaling 48,940 units spread across 376 properties. In addition, there were also 143 existing properties undergoing expansions, totaling 8,499 units.

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.

18,000 18,000 15,000

21,000

14,603 14,942

19,765

23,469

33,743 30,539

45,713 43,408

61,367

57,439

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1Q2018

U ni

ts

Construction Start Activity

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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.

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

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Source: The State of Seniors Housing 2017, ASHA

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).

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1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 Independent Living1 90.9% 90.3% 91.6% 91.1% 3.2% 1.9% 2.2% 2.3% 2.0% 1.6%

East North Central 91.0% 90.0% 91.4% 90.8% 4.5% 0.6% 0.8% 2.0% 1.3% 0.9%

Mid-Atlantic 92.7% 92.4% 93.2% 92.9% 3.3% 2.7% 2.1% 2.5% 2.4% 2.1%

Mountain 89.0% 89.1% 89.9% 89.8% 3.9% 1.6% 2.3% 0.6% 2.3% 0.7%

Northeast 92.2% 92.0% 92.5% 92.5% 2.2% 2.4% 2.0% 1.4% 1.8% 1.3%

Pacific 92.1% 92.2% 92.3% 92.4% 3.2% 4.0% 1.2% 1.0% 1.0% 1.1%

Southeast 89.9% 88.5% 90.9% 89.8% 2.9% 1.7% 2.2% 3.7% 2.2% 2.1%

Southwest 86.8% 85.6% 89.2% 87.5% 2.2% -0.2% 6.1% 4.8% 3.6% 3.3%

West North Central 91.3% 90.6% 92.0% 91.4% 3.8% 1.6% 2.6% 2.5% 2.0% 1.8%

Assisted Living1 86.5% 85.6% 89.1% 87.9% 2.8% 2.6% 4.8% 4.6% 3.0% 3.4%

East North Central 85.2% 83.5% 88.5% 86.8% 2.7% 1.7% 6.6% 7.4% 4.2% 5.3%

Mid-Atlantic 86.1% 84.4% 88.5% 86.6% 2.6% 2.4% 4.2% 5.1% 1.1% 2.9%

Mountain 85.7% 82.5% 88.2% 85.8% 2.8% 1.7% 4.9% 8.7% 3.9% 4.7%

Northeast 88.8% 88.5% 90.4% 90.3% 2.5% 2.6% 3.1% 1.9% 2.3% 1.6%

Pacific 89.3% 89.4% 90.7% 90.1% 4.5% 4.0% 2.8% 1.2% 1.3% 1.3%

Southeast 84.5% 84.8% 87.7% 87.2% 1.6% 2.3% 6.6% 3.9% 4.1% 4.3%

Southwest 81.9% 79.6% 85.7% 82.4% 2.5% 2.0% 6.4% 8.0% 6.2% 5.0%

West North Central 86.2% 85.1% 89.5% 88.6% 2.9% 2.6% 7.0% 8.5% 4.0% 7.2%

Nursing Care1 86.9% 86.3% 87.2% 86.5% 2.8% 2.3% -0.1% -0.4% -0.5% -1.2%

East North Central 84.1% 83.5% 84.3% 83.7% 2.9% 2.4% 0.0% -1.0% -0.2% -1.7%

Mid-Atlantic 89.2% 88.5% 89.2% 88.6% 3.3% 2.6% 0.2% 0.0% -0.2% -0.7%

Mountain 81.9% 81.7% 82.6% 82.4% 2.3% 2.3% 1.6% 0.3% 0.5% 0.1%

Northeast 91.2% 90.8% 91.3% 90.8% 2.3% 2.0% -0.5% -0.7% -0.8% -1.2%

Pacific 90.1% 89.2% 90.1% 89.4% 3.7% 3.4% -0.2% 0.2% -0.9% -0.7%

Southeast 88.9% 88.4% 89.0% 88.5% 2.9% 2.0% -0.3% -0.2% -0.8% -0.7%

Southwest 77.0% 76.2% 77.6% 76.6% 2.4% 1.7% 1.1% -0.2% 1.4% -1.2%

West North Central 82.2% 80.8% 82.5% 81.0% 3.7% 2.8% -0.6% -0.3% -2.0% -2.0%

CCRCs1 91.1% 91.0% 91.2% 91.1% 3.6% 2.8% 1.0% 0.7% 1.3% 0.6%

East North Central 90.0% 90.2% 90.1% 90.2% 7.1% 1.7% 0.7% -0.2% 0.7% 0.0%

Mid-Atlantic 93.6% 93.5% 93.8% 93.8% 3.8% 2.9% 1.1% 2.0% 1.8% 2.0%

Mountain 84.9% 86.2% 85.4% 86.6% 4.3% 1.8% 2.0% -0.8% 3.1% 0.8%

Northeast 92.6% 92.9% 92.6% 92.9% 2.4% 3.3% 1.1% 0.5% 1.3% 0.8%

Pacific 92.1% 91.9% 92.1% 92.2% 2.0% 4.8% 0.7% 1.3% 0.5% 1.0%

Southeast 91.0% 90.2% 91.0% 90.2% 3.7% 2.9% 0.4% 0.8% 1.6% 0.0%

Southwest 88.2% 86.9% 88.2% 86.9% 2.2% 1.1% 2.3% 1.2% 2.3% -0.4%

West North Central 90.2% 89.6% 90.3% 89.6% 3.3% 2.2% 1.2% 1.7% 0.5% 1.0%

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 (%)

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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.

Payment Types

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 2017, 87.8% 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:

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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.

Conclusion 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.

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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 San Antonio MSA, which includes the counties shown in the following map.

An overview of the seniors housing market is shown in the following table.

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Brookdale Castle Hills

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, the data for which is shown in the following table.

For stabilized properties that are mostly assisted living, the average occupancy rate is 76.0%. In addition, for Bexar County (the subject’s county), assisted living occupancy is 73.9%.

Delineation of the Market Area As discussed previously, we consider the subject’s PMA to be the area within a 4-mile radius of the site.

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.

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Methodology for Quantifying Supply In the case of facilities located some distance from the subject, we have allocated only a portion of the units based upon the estimated percent the market area for each competing facility overlaps the PMA. For example, the map below shows two fictional facilities, A and B, along with the concluded market area for Facility A.

Facility B is not within the market area for Facility A. However, Facility B’s market area does overlap some of the market area for Facility A, as shown as follows:

JLL’s methodology for estimating supply considers Facility B as being partially competitive with Facility A. We base the degree of its competitiveness upon the percentage of the subject’s market area, Facility A in this example that is overlapped by the estimated market area for Facility B.

The percentage of overlap is mathematically calculated using a formula that factors in the size of the market area and the distance between each comparable and the subject. For example, if Facility

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B has 100 beds and the market area for Facility B overlaps Facility A’s market area by 20%, then 20 of Facility B’s beds are considered competitive. This same procedure is used to estimate competitive supply for each facility in and around the subject’s market area.

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 serving the subject’s market area.

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Brookdale Castle Hills

Brookdale Castle Hills 12078 Jackson Keller Rd, San Antonio, TX

43

44%104 2.5

96 2.5

29

ALF

32 5.1

7

46

Existing Supply of Assisted Living

Property Name Type

Number of Assisted Living

Beds

44%

Number of Competitive

Beds

18%

ALF D/MC: Free-standing assisted living facility, 100% memory care wing

CCRC: Continuing care retirement community

Total Number of Existing Competitive Beds Type Key

Brookdale Hollywood Park ALF/MC 62 6.6 5% 3

16911 San Pedro Ave, Hollywood Park, TX Shavano Park Senior Living

ALF/MC 68 6.8 3% 3

IALF

5996 Whitby Rd, San Antonio, TX

101

The Forum at Lincoln Heights

CCRC 3.9 19

The Adante IALF/MC

The Village of Incarnate Word

68 25

80 2702 Cembalo Blvd, San Antonio, TX

36% Morningside Ministries at the Manor

27 46%2.4

74

Brookdale Oakwell

IALF/MC

ALF/MC

4.9

602 Babcock Rd, San Antonio, TX

4.8

Brookdale Alamo Heights NC/ALF

Regent Care Center Of San Antonio NC/ALF/MC 33 5.7 9% 4

16400 Blanco Rd, San Antonio, TX

ALF/MC 101

3.0

ALF/MC 80

230 W Sunset Rd, San Antonio, TX

Miles From Subject

100%

Percent Beds Considered Competitive

CCRC 58 311 W Nottingham Dr, San Antonio, TX

0.0

9505 Fredericksburg Rd, San Antonio, TX

29 4.6 5034 New Forest St, San Antonio, TX

3220 N Loop 1604 W, San Antonio, TX

Brookdale San Antonio

7

23% 17

19% 22 ALF/MC 112 4.5 9203 Cinnamon Hl, San Antonio, TX

Brookdale N. Fredericksburg Road

15%

18323 Sonterra Pl, San Antonio, TX

Brookdale Shavano Park ALF/MC 78 5.8 9%

Poet's Walk San Antonio ALF D/MC 60 7.2 2%

Brookdale Medical Center Whitby

2

ALF/MC: Free-standing assisted living facility with memory care wing NC: Nursing center

6

Brookdale Hamilton Wolfe ALF/MC 119

5331 Hamilton Wolfe Rd, San Antonio, TX

10 Lynn Batts Ln, San Antonio, TX

17%

Colonial Gardens

4.1

4.8

Franklin Park - Alamo Heights

Inn At Los Patios IALF

8700 Post Oak Ln, San Antonio, TX

4.7

5

15%

NC/ALF

70

35%

4707 Broadway St, San Antonio, TX 26%

3.1

16% 19

17%

28

ALF D/MC 36

Newforest Estates IALF

3360 Oakwell Ct, San Antonio, TX 16% 14

855 E Basse Rd, San Antonio, TX

37 5.0 13303 Jones Maltsberger Road, San Antonio, TX

109 5.5 15430 Huebner Rd, San Antonio, TX

11%

The Cottages at Danny Kaye ALF/MC

12

6 Brookdale Maltsberger

454

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

5982 Danny Kaye Dr, San Antonio, TX 14% 5

9000 Floyd Curl Dr, San Antonio, TX Brookdale Medical Center Kingsley

ALF/MC

ALF 49 5.7 9% 5

4096 Dezavala Rd, San Antonio, TX

52 7.3 2% 1

5.0

Heartis San Antonio ALF/MC

79

Arden Courts - San Antonio ALF D/MC 64 5.4

15290 Huebner Rd, San Antonio, TX 12% 8

Franklin Park Sonterra 5438 Presidio Parkway, San Antonio, TX

12

11%5.5 8003 North Hallow, San Antonio, TX Villa De San Antonio

IALF 55 6

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Occupancy of Competitive Supply The occupancy and waiting list status of the competitive supply of assisted living are as follows:

100% Yes

Occupancy of Competitive Assisted Living

Current Occupancy % Waiting List Status Brookdale Castle Hills

71% No 12078 Jackson Keller Rd, San Antonio, TX

92% No

100% Yes

10 Lynn Batts Ln, San Antonio, TX

2702 Cembalo Blvd, San Antonio, TX The Adante

15430 Huebner Rd, San Antonio, TX

Arden Courts - San Antonio

Heartis San Antonio

92%

15290 Huebner Rd, San Antonio, TX

No 18323 Sonterra Pl, San Antonio, TX Franklin Park Sonterra

Property Name

9203 Cinnamon Hl, San Antonio, TX Colonial Gardens

94% No

Brookdale San Antonio 80% No

Based upon the reported occupancy levels, the weighted average occupancy for competitive beds is as follows:

Franklin Park Sonterra 1 92%

180 -

1

8 100% 8

12 92% 11 15430 Huebner Rd, San Antonio, TX

Arden Courts - San Antonio 15290 Huebner Rd, San Antonio, TX Heartis San Antonio

72

22 80% 18

7 94% 7

Brookdale Castle Hills 12078 Jackson Keller Rd, San Antonio, TX

Property Name Current Occupancy % Number of Occupied Beds

101 71%

2702 Cembalo Blvd, San Antonio, TX Brookdale San Antonio 9203 Cinnamon Hl, San Antonio, TX

10 Lynn Batts Ln, San Antonio, TX

Weighted Average Occupancy of Competitive Assisted Living

29 100% 29

Colonial Gardens

The Adante

18323 Sonterra Pl, San Antonio, TX

Number of Competitive Beds

TOTALS 145

WEIGHTED AVERAGE OCCUPANCY

AVERAGE OCCUPANCY REPORTED BY NIC

80% -

75%

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Occupancy at the subject property has lagged that of the market. Management noted that its location and layout are the two biggest factors impacting occupancy. The majority of incoming residents cannot live on the second floor due to evacuation restrictions; therefore, the second floor units are difficult to lease-up. In addition, the subject’s location and visibility is inferior to competing properties in the market.

Assisted Living under Construction or Proposed Our research revealed no competitive projects under construction or proposed to be complete within the coming 36 months.

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 2018 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 5.7 million Americans of all ages have Alzheimer’s dementia in 2018. This figure includes 5.5 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 37% 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 5.5 million people over age 65 with Alzheimer’s in the United States, 3.4 million are women and 2.1 million are men. Based on estimates from ADAMS, 16% of women aged 71 and older have memory care issues compared with 11% of men.

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■ 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 16% in 2018). 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 29% increase from the 5.5 million aged 65 and older currently affected in 2018.

■ By 2050, the number of people aged 65 and older with Alzheimer’s disease may nearly triple, from 5.5 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 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.

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Existing Supply of Memory Care The existing supply of memory care within the PMA is as follows.

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ALF/MC

Brookdale Shavano Park ALF/MC 17 5.8 9% 2

4096 Dezavala Rd, San Antonio, TX

Total Number of Existing Competitive Beds 120

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 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

Heartis San Antonio ALF/MC

15430 Huebner Rd, San Antonio, TX Regent Care Center Of San Antonio

NC/ALF/MC 33 5.7 9% 4 16400 Blanco Rd, San Antonio, TX

ALF/MC 64 5.4 12% 8 15290 Huebner Rd, San Antonio, TX

11% 4 32 5.5

Type Key ALF/MC: Free-standing assisted living facility with memory care wing

Brookdale Castle Hills ALF/MC 18 0.0 100% 18

1207 Jackson Keller Rd, San Antonio, TX

230 W Sunset Rd, San Antonio, TX The Adante

9505 Fredericksburg Rd, San Antonio, TX

Property Name Type

Number of Memory Care

Beds Miles From

Subject

Percent Beds Considered Competitive

Number of Competitive

Beds

CCRC 20 3.9 26% 6

30 4.5 19% 6

Bader House in Shavano Park

311 W Nottingham Dr, San Antonio, TX Franklin Park - Alamo Heights

IALF/MC

The Forum at Lincoln Heights CCRC

ALF D/MC 16 1418 Walkers Way, San Antonio, TX

Arden Courts - San Antonio

Colonial Gardens ALF/MC

5438 Presidio Parkway, San Antonio, TX

3411 Paesanos Parkway, San Antonio, TX Shavano Park Senior Living

ALF/MC 28 6.8 3% 1 3220 N Loop 1604 W, San Antonio, TX

ALF D/MC 24 6.8 4% 1

Poet's Walk San Antonio ALF/MC 60

Brookdale Hollywood Park ALF/MC 16 6.6 5% 1

16911 San Pedro Ave, Hollywood Park, TX

4707 Broadway St, San Antonio, TX

40 2.5 44% 18

IALF/MC 20 3.1 35% 8

Brookdale N. Fredericksburg Road

4.6 19% 3

36 4.7 10 Lynn Batts Ln, San Antonio, TX

2702 Cembalo Blvd, San Antonio, TX The Village of Incarnate Word

28 2.4 46% 13

Autumn Grove Cottage Blanco 9203 Cinnamon Hl, San Antonio, TX

17% 7

Brookdale Oakwell ALF/MC

Existing Supply of Memory Care

The Cottages at Danny Kaye ALF/MC 16 5.1

5982 Danny Kaye Dr, San Antonio, TX

Brookdale Medical Center Kingsley ALF/MC 20 5.0

9000 Floyd Curl Dr, San Antonio, TX 15% 3

14% 3

4.9 5331 Hamilton Wolfe Rd, San Antonio, TX

16% 4 Brookdale Hamilton Wolfe

ALF/MC 20

24 4.8 3360 Oakwell Ct, San Antonio, TX

16% 4

Brookdale San Antonio

ALF/MC 15 4.1 23% 4

7.2 2% 2

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Occupancy of Competitive Supply The occupancy and waiting list status of the competitive supply of memory care is as follows:

80%

Occupancy of Competitive Memory Care

Current Occupancy % Waiting List StatusProperty Name Brookdale Castle Hills

100% No

Brookdale San Antonio 9203 Cinnamon Hl, San Antonio, TX

Heartis San Antonio 92% No

15430 Huebner Rd, San Antonio, TX

89% No 1207 Jackson Keller Rd, San Antonio, TX

Arden Courts - San Antonio 15290 Huebner Rd, San Antonio, TX

The Adante 100% No

2702 Cembalo Blvd, San Antonio, TX

No

Colonial Gardens 10 Lynn Batts Ln, San Antonio, TX

94% No

Based upon the reported occupancy levels, the weighted average occupancy for competitive beds is as follows:

51 - 47 TOTALS

8 100% 8

4 92% 4

Arden Courts - San Antonio 15290 Huebner Rd, San Antonio, TX Heartis San Antonio 15430 Huebner Rd, San Antonio, TX

6 80% 5

7 94% 7

2702 Cembalo Blvd, San Antonio, TX The Adante

Property Name Brookdale Castle Hills

8 100% 8

Colonial Gardens 10 Lynn Batts Ln, San Antonio, TX

9203 Cinnamon Hl, San Antonio, TX Brookdale San Antonio

1207 Jackson Keller Rd, San Antonio, TX

Weighted Average Occupancy of Competitive Memory Care Number of Competitive

Beds Current Occupancy % Number of Occupied Beds

18 89% 16

WEIGHTED AVERAGE OCCUPANCY

AVERAGE OCCUPANCY REPORTED BY NIC

92% -

75%

Memory Care under Construction or Proposed Our research revealed no competitive projects under construction or proposed to be complete within the coming 36 months.

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Barriers to Entry The subject is in a market with limited barriers to entry. Vacant sites are plentiful and zoning and building permits are easily obtained. Thus, it is likely that future competition will be developed as warranted by demand.

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

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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 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

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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.

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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.

2018 2019 2020 2021 2022 2023 2028 A. PMA Persons Age 65+ 36,604 37,684 38,763 39,843 40,922 42,002 48,196 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) 739 760 782 804 826 848 973

2018 2019 2020 2021 2022 2023 2028 A. PMA HHs Age 75+ 7,044 7,322 7,601 7,879 8,158 8,436 10,103 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) 467 485 504 522 541 559 670

2018 2019 2020 2021 2022 2023 2028 A. PMA HHs Age 75+ W/Inc. $35,000+ 5,540 5,799 6,059 6,318 6,578 6,837 8,438 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) 1,194 1,250 1,306 1,362 1,418 1,474 1,819

2018 2019 2020 2021 2022 2023 2028 A. PMA Persons Age 45-64 52,374 52,337 52,300 52,263 52,226 52,189 52,005 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) 597 597 596 596 595 595 593

2018 2019 2020 2021 2022 2023 2028 Indicated Demand 896 923 951 979 1,007 1,034 1,206 Adjustment for Local Market Conditions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Concluded Demand 896 923 951 979 1,007 1,034 1,206

Demand For Assisted Living

Target Group 4 - Persons Age 45-64 (Adult Children)

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

Item Year

Demand Conclusions

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.

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Comparison of Supply and Demand The following table summarizes our conclusions of supply and demand for assisted living.

2018 2019 2020 2021 2022 2023 2028 A. Indicated Demand 896 923 951 979 1,007 1,034 1,206 B. Less Existing Supply 454 454 454 454 454 454 454 C. Existing Unmet Demand or Oversupply 442 469 497 525 553 580 752 D. Additions/Subtractions to Supply 0 0 0 0 0 N.A. N.A. E. Unmet Demand After Additions 442 469 497 525 553 580 752

Comparison of Supply and Demand For Assisted Living

Item Year

Our analysis shows that the PMA has an undersupply of assisted living in the current year. This is supported by the higher occupancy levels of existing facilities in the PMA. No new supply is forecast to be added over the next three years, so market conditions should continually improve.

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 1st quarter of 2018, NIC MAP reported that there were 405,869 assisted living units and 129,002 memory care units in the top 140 metro markets. Thus, the combined assisted living supply count inclusive of memory care was 534,871 units. The memory care assisted living supply figure in turn equated to 24.12% of the total assisted living supply. The average occupancy was 87.5% for assisted living and 83.9% 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 484,000 people age 65 or older that developed Alzheimer’s disease in the United States in 2018. Also, the Alzheimer’s Association provided the following data regarding projected change by state for those residents with Alzheimer’s disease.

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As shown in the figures above, between 2018 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.

The following table summarizes our conclusions of supply and demand for memory care.

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2018 2019 2020 2021 2022 2023 2028 A. Indicated Demand 313 323 333 343 352 362 422 B. Less Existing Supply 120 120 120 120 120 120 120 C. Existing Unmet Demand or Oversupply 193 203 213 223 232 242 302 D. Additions/Subtractions to Supply 0 0 0 0 0 N.A. N.A. E. Unmet Demand After Additions 193 203 213 223 232 242 302

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 higher occupancy levels of existing facilities in the PMA. No new supply is forecast to be added over the next three years, so market conditions should continually improve.

Supply and Demand Conclusion The PMA is a growing market. There are low barriers to entry in this market. Our analysis shows that the assisted living and memory care markets are under-supplied. This is supported by our occupancy survey as shown as follows.

Segment Assisted

Living Memory

Care

MSA 76.0% 76.0%

Submarket 73.9% 73.9%

Rent Comparables 92.6% 94.1%

All Facilities in PMA 75.0% 75.0%

Subject 71.0% 89.0%

Market Occupancy Summary

Given the subject’s location, condition, and design, the subject should be capable of reaching and maintaining a stabilized occupancy in the near term.

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Highest and Best Use Analysis Highest and best use is shaped and determined by forces within the market such as supply and demand. The four criteria used in evaluating the highest and best use of a property are:

■ Legally permissible ■ Physically possible ■ Financially feasible ■ Maximally productive

The four criteria are applied in sequential order. A property often will have numerous uses that are legally permissible, but the test of physical possibility may remove some options from consideration, fewer still may meet the test of financial feasibility, and only a single use is maximally productive.

Highest and Best Use of the Land as though Vacant The analysis of the highest and best use of the land as though vacant assumes that the property being appraised is vacant or can be made vacant by demolishing any improvements. This determination is crucial to determine the value of the site as though vacant and is also used in examining improvements and their conformance to the highest and best use of the site.

Legally Permissible Private restrictions, zoning, building codes, historical district regulations, and environmental regulations must all be considered in determining the legally permissible uses of a site. Potential changes in these restrictions must also be addressed. The legally permissible uses were discussed in detail in the site analysis and zoning sections of this report.

The subject site is currently zoned C. Permitted uses include multi-family and retirement facilities. Seniors housing is a permitted use. There are no known zoning changes pending or contemplated.

Physically Possible The physical characteristics of the subject site were discussed in detail in the site analysis section. The site is functional in size and shape and is serviced by standard municipal utilities. The site has below average accessibility and visibility. The site is suitable for a broad range of uses, including seniors housing.

Financially Feasible An analysis of local market conditions provides an indication of the financial feasibility of a given use. The market analysis presented earlier in this report assessed the local market and indicated that there is demand for the subject. Further, the income and expense analysis that follows reveals

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Brookdale Castle Hills

the subject is forecasted to produce a positive return, yielding a value well in excess of cost. Therefore, development of a seniors housing facility is a financially feasible use.

Maximally Productive The final test of highest and best use of the site as though vacant is whether the use is maximally productive, yielding the highest land value. Analysis of physically possible, legally permissible, and financially feasible uses indicates that the maximally productive use of the site as though vacant is for development of a seniors housing facility. While there are potentially other feasible uses, this use is believed to provide the highest net return to the site.

Highest and Best Use of the Property as Improved This analysis considers the subject as improved.

Legally Permissible The current use is a legal use.

Physically Possible The physical characteristics of the subject improvements were discussed in detail in the improvement analysis section of this report. Overall, the layout and position of the improvements are considered functional. Since seniors housing facilities are specialized facilities, there are no other physically possible uses of the structure that would not require substantial reconstruction or demolition.

Financially Feasible Operation of the subject as a seniors housing facility is a financially feasible use, yielding a positive value well in excess of the subject’s land value.

Maximally Productive The maximally productive use of the subject as improved is for continued use as a seniors housing facility. The subject is valued based upon this use as a seniors housing facility. The most likely potential purchaser is a REIT, investor, or owner/operator.

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Income Capitalization - Direct Capitalization The income capitalization approach is based upon the premise that the present value of a property is based upon the present worth of future benefits. There are two primary methods that are normally utilized in developing the income capitalization approach - the yield capitalization method and the direct capitalization method. Development of the direct capitalization method is presented below.

The direct capitalization method is a method that converts an income estimate for a single year into an estimate of value through the application of a capitalization rate. An overall capitalization rate (RO) is normally used. The RO reflects the relationship between a single year’s income and value. The most common way to estimate overall capitalization rates is via analysis of comparable sales. The direct capitalization method is developed in four basic steps:

■ Analyze the market and contractual income of the subject. ■ From available market data, estimate a proper allowance for vacancy and credit loss

forecast to occur during the projected period of ownership. ■ Estimate and project anticipated fixed and operating expenses to be incurred by the real

estate. ■ Select and apply an appropriate capitalization rate.

Income and Expense Analysis We have been provided with operating statements for the following periods:

■ Year ending 12/16 ■ Year ending 12/17 ■ 3 Months ending 05/18 ■ Budget year ending 12/18

The income and expenses for these periods is presented on the following page. Below are notes regarding our reconstruction of the operating statements:

■ The year to date figures have been annualized. ■ The additional care revenue shown in the historical summary below is inclusive of

Personalized Living revenue. Personalized Living is a Brookdale program that offers a coordinated suite of social, advisory, wellness, home care, and cleaning services. We assume this program will continue to be offered at the subject property and have included this revenue in our forecast of additional care income.

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■ The subject’s historical wages and salaries data are aggregated into “exempt” and “nonexempt” categories, although some individual departmental salaries and wages are reported. As such, we have forecast salaries and wages by department based on the income and expense comparables, with consideration given to the available historical data as appropriate.

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Annual Budget

Year Per % of Year Per % of 3 Months Per % of For Year Per % of

Item Ending Resident Total Ending Resident Total Ending Resident Total Ending Resident Total

12/16 Day Income 12/17 Day Income 05/18 Day Income 12/18 Day Income Total Resident Days 23,638 25,227 25,278 25,116 Income Rent al Income Rental Income $2,765,739 $117.00 98.6% $2,676,676 $106.10 91.7% $2,459,592 $97.30 85.2% $2,478,584 $98.68 89.8% Less Vacancy & Coll Loss $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% Less Conc./Loss to Leases ($435,067) ($18.41) -15.5% ($343,243) ($13.61) -11.8% ($299,324) ($11.84) -10.4% ($298,882) ($11.90) -10.8%

Net Rental Income $2,330,672 $98.60 83.1% $2,333,433 $92.50 79.9% $2,160,268 $85.46 74.9% $2,179,702 $86.78 79.0% Sundry Income Additional Meals/Care $373,631 $15.81 13.3% $507,296 $20.11 17.4% $590,300 $23.35 20.5% $485,239 $19.32 17.6% Commercial $22,722 $0.96 0.8% $17,204 $0.68 0.6% $19,024 $0.75 0.7% $21,797 $0.87 0.8% Parking $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% Entrance/Community Fees $51,211 $2.17 1.8% $29,925 $1.19 1.0% $47,500 $1.88 1.6% $50,834 $2.02 1.8% Second Persons $12,951 $0.55 0.5% $19,403 $0.77 0.7% $51,696 $2.05 1.8% $10,104 $0.40 0.4% Other Income $13,595 $0.58 0.5% $12,436 $0.49 0.4% $16,828 $0.67 0.6% $11,544 $0.46 0.4%

Total Sundry Income $474,110 $20.06 16.9% $586,264 $23.24 20.1% $725,348 $28.69 25.1% $579,518 $23.07 21.0% Effective Gross Income $2,804,782 $118.66 100.0% $2,919,697 $115.74 100.0% $2,885,616 $114.15 100.0% $2,759,220 $109.86 100.0% Expenses Propert y Real Estate Taxes $209,849 $8.88 7.5% $176,681 $7.00 6.1% $222,260 $8.79 7.7% $234,622 $9.34 8.5% Ground/Facility Rent $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% Licenses $1,296 $0.05 0.0% $3,116 $0.12 0.1% $2,576 $0.10 0.1% $3,379 $0.13 0.1% Insurance (Prop.& Liability) $75,856 $3.21 2.7% $48,037 $1.90 1.6% $46,440 $1.84 1.6% $46,473 $1.85 1.7% Utilities $152,962 $6.47 5.5% $174,890 $6.93 6.0% $160,488 $6.35 5.6% $168,037 $6.69 6.1% Building R&M, Supplies & Other $194,004 $8.21 6.9% $159,587 $6.33 5.5% $154,704 $6.12 5.4% $159,556 $6.35 5.8% Wages $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% Payroll Taxes/Benefits $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0%

Total Property Expense $633,967 $26.82 22.6% $562,311 $22.29 19.3% $586,468 $23.20 20.3% $612,067 $24.37 22.2% Housekeeping Wages $37,954 $1.61 1.4% $36,610 $1.45 1.3% $32,756 $1.30 1.1% $38,719 $1.54 1.4% Payroll Taxes/Benefits $9,256 $0.39 0.3% $9,582 $0.38 0.3% $8,605 $0.34 0.3% $10,596 $0.42 0.4% Supplies & Other $12,905 $0.55 0.5% $14,884 $0.59 0.5% $19,772 $0.78 0.7% $16,452 $0.66 0.6%

Total Hskping & Lndry Expense $60,115 $2.54 2.1% $61,076 $2.42 2.1% $61,133 $2.42 2.1% $65,767 $2.62 2.4% Diet ary Wages $95,037 $4.02 3.4% $95,951 $3.80 3.3% $91,936 $3.64 3.2% $95,653 $3.81 3.5% Payroll Taxes/Benefits $23,176 $0.98 0.8% $25,113 $1.00 0.9% $24,151 $0.96 0.8% $26,176 $1.04 0.9% Food $132,391 $5.60 4.7% $141,733 $5.62 4.9% $133,096 $5.27 4.6% $142,187 $5.66 5.2% Supplies & Other $7,874 $0.33 0.3% $10,937 $0.43 0.4% $11,568 $0.46 0.4% $12,108 $0.48 0.4%

Total Dietary Expense $258,478 $10.93 9.2% $273,734 $10.85 9.4% $260,751 $10.32 9.0% $276,124 $10.99 10.0% Care Wages $527,185 $22.30 18.8% $561,129 $22.24 19.2% $543,088 $21.48 18.8% $605,020 $24.09 21.9% Payroll Taxes/Benefits $128,562 $5.44 4.6% $146,860 $5.82 5.0% $142,665 $5.64 4.9% $165,569 $6.59 6.0% Supplies & Other $11,049 $0.47 0.4% $4,521 $0.18 0.2% $4,268 $0.17 0.1% $5,658 $0.23 0.2%

Total Care Services Expense $666,796 $28.21 23.8% $712,510 $28.24 24.4% $690,021 $27.30 23.9% $776,247 $30.91 28.1% Act ivit ies Wages $42,325 $1.79 1.5% $37,131 $1.47 1.3% $12,272 $0.49 0.4% $35,405 $1.41 1.3% Payroll Taxes/Benefits $10,322 $0.44 0.4% $9,718 $0.39 0.3% $3,224 $0.13 0.1% $9,689 $0.39 0.4% Supplies & Other $30,909 $1.31 1.1% $31,772 $1.26 1.1% $29,048 $1.15 1.0% $31,011 $1.23 1.1%

Total Activities Expense $83,556 $3.53 3.0% $78,621 $3.12 2.7% $44,544 $1.76 1.5% $76,105 $3.03 2.8% General & Administ rat ive Wages-Admin $589,545 $24.94 21.0% $606,144 $24.03 20.8% $676,116 $26.75 23.4% $674,561 $26.86 24.4% Payroll Taxes/Benefits $143,770 $6.08 5.1% $158,642 $6.29 5.4% $177,611 $7.03 6.2% $184,600 $7.35 6.7% Wages-Marketing $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% Payroll Taxes/Benefits $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% Marketing & Advertising $79,881 $3.38 2.8% $51,629 $2.05 1.8% $26,520 $1.05 0.9% $86,107 $3.43 3.1% Legal & Audit $324 $0.01 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $180 $0.01 0.0% Telephone $17,321 $0.73 0.6% $18,096 $0.72 0.6% $18,460 $0.73 0.6% $18,192 $0.72 0.7% Bad Debt Expense $20,643 $0.87 0.7% $9,434 $0.37 0.3% ($448) ($0.02) 0.0% $17,888 $0.71 0.6% Supplies & Other $88,431 $3.74 3.2% $77,489 $3.07 2.7% $63,632 $2.52 2.2% $72,219 $2.88 2.6%

Total G&A Expense $939,915 $39.76 33.5% $921,434 $36.53 31.6% $961,891 $38.05 33.3% $1,053,747 $41.95 38.2% Management Expense

Total Management Expense $14,349 $0.61 0.5% $25,334 $1.00 0.9% $27,012 $1.07 0.9% $36,489 $1.45 1.3% Reserves Expense

Total Reserves Expense $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% $0 $0.00 0.0% Total Expenses $2,657,176 $112.41 94.7% $2,635,019 $104.45 90.2% $2,631,820 $104.11 91.2% $2,896,546 $115.33 105.0% Net Operating Income $147,606 $6.24 5.3% $284,678 $11.28 9.8% $253,796 $10.04 8.8% ($137,326) ($5.47) -5.0%

Subject's Income and Expenses

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Annual Budget Year Year 3 Months For Year

Ending % of Ending % of Ending % of Ending % of 12/16 Total 12/17 Total 05/18 Total 12/18 Total

Salaries & Bonuses Property $0 0.0% $0 0.0% $0 0.0% $0 0.0% Housekeeping $37,954 2.9% $36,610 2.7% $32,756 2.4% $38,719 2.7% Dietary $95,037 7.4% $95,951 7.2% $91,936 6.8% $95,653 6.6% Care Services $527,185 40.8% $561,129 42.0% $543,088 40.0% $605,020 41.7% Activities $42,325 3.3% $37,131 2.8% $12,272 0.9% $35,405 2.4% General & Administrative $589,545 45.6% $606,144 45.3% $676,116 49.9% $674,561 46.5% Marketing $0 0.0% $0 0.0% $0 0.0% $0 0.0% Total Salaries & Bonuses $1,292,046 100.0% $1,336,965 100.0% $1,356,168 100.0% $1,449,358 100.0% Taxes & Benefits Payroll Taxes $121,161 38.5% $122,367 35.0% $123,728 34.7% $133,091 33.6% Group Health/Benefits $80,965 25.7% $119,409 34.1% $129,252 36.3% $139,767 35.2% Pension Plan $6,339 2.0% $8,447 2.4% $864 0.2% $11,882 3.0% Worker's Comp. Ins. $10,815 3.4% $9,955 2.8% $18,348 5.2% $17,583 4.4% Vacation/Holiday/Sickday $82,125 26.1% $77,451 22.1% $67,240 18.9% $80,819 20.4% Other $13,681 4.3% $12,285 3.5% $16,824 4.7% $13,488 3.4% Total Taxes & Benefits $315,086 100.0% $349,914 100.0% $356,256 100.0% $396,630 100.0%

Payroll Tax and Benefit Allocation

Pricing Structures There are a number of ways in which to price seniors housing services. A brief description of the pricing structures follows:

■ A-La-Carte: Residents are charged a base rate for all basic services. Additional services are charged on an individual need.

■ Tiered Rate: Residents are charged a flat rate for services or a per diem rate based upon their care level. Typically, a need assessment of each resident is performed to determine the care level required for the individual and the amount of staff assistance needed. This structure has been widely accepted by assisted living providers.

■ Flat Rate: Residents are charged a flat fee based on the unit that they occupy. ■ Extensive Agreement: Residents are charged one flat fee regardless of care level – either

congregate care, assisted living, or nursing. This is normally found in older life care communities or continuing care retirement communities (CCRCs).

The subject has tiered rate pricing. It has a base level additional care on an a la carte basis.

Base level services include:

■ Housekeeping, linen changes, and laundry weekly ■ Three meals per day ■ All utilities except telephone and cable ■ Full activities program ■ Scheduled transportation

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Market Rent Analysis In estimating market rent for each unit type, we shall consider the operator’s asking rates for the subject, which are summarized in the following table. The rates shown are for the base level of care.

Totals 98 $264,140

Total Annual Gross Potential Rental Income $3,169,680

Semi-Private $9.56Memory Care 284 2

Memory Care 284 4 $3,565

$2,715 $5,430

Private - Shared Bath

$20,120

One Bedroom Assisted Living 590 16 $2,935 $4.97 $46,960

Alcove $5.04Assisted Living 499 8 $2,515

$12.55 $14,260

Private Memory Care 284 12 $4,110 $14.47 $49,320

Subject's Rate Structure

Unit/Bed Type Care Type Square Feet Number of Units/Beds Monthly Rent

Rent Per Square Foot

Monthly Gross Potential Income

$2,375 $5.70 $61,750

Studio Assisted Living 362 30 $2,210 $6.10 $66,300

Assisted Living 417 26Studio Deluxe

Market Rent Survey We have surveyed six facilities that are comparable to the subject. Detailed comparable profiles are included in the Addendum of this report. They are as follows:

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Brookdale Castle Hills

Brookdale Castle Hills: 1207 Jackson Keller Road, San Antonio, Texas 78213

Franklin Park Sonterra: 18323 Sonterra Pl, San Antonio

Heartis San Antonio: 15430 Huebner Road, San Antonio

Colonial Gardens: 10 Lynn Batts Lane, San Antonio

Arden Courts - San Antonio: 15290 Hueber Road, San Antonio

The Adante: 2702 Cembalo Boulevard, San Antonio

Brookdale San Antonio: 9203 Cinnamon Hills, San Antonio

Rent Comparable Location Map

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Brookdale Castle Hills

20161997 2011

The Adante Heartis San

Antonio

10 Lynn Batts Lane, San Antonio

Colonial Gardens

2010 19981998

4.7 3.1Miles from Subject 4.57.3 5.4

Year Built (Original)

5.5

Summary of Rental Comparables

Element of Comparison Comparable Number 1 2

IL, AL

3 4 5 6

AL, MCMCAL, MC

Property Name Franklin Park

Sonterra

IL, AL, MCMC

Brookdale San Antonio

Arden Courts - San Antonio

Address 18323 Sonterra Pl,

San Antonio

Levels of Care IL = Independent Living AL = Assisted Living NC = Nursing Care MC = Memory Care

80%100%92%

15430 Huebner Road, San Antonio

15290 Hueber Road, San Antonio

9203 Cinnamon Hills, San Antonio

$3,900-$4,400Range of Monthly Rental Rates

94%92%

$4,500$3,550-$4,275

Facility Occupancy

$1,182$4,000-$6,000

100%

$2,550-$4,290

2702 Cembalo Boulevard, San

Antonio

Adjustment for Concessions Occasionally, properties may offer reduced rents on specific unit types, but concessions are not standardized or widespread. No adjustments are required.

Adjustment for Entrance Fees None of the comparables charge significant upfront entrance fees, so no adjustments are required.

Adjustment for Size and/or Type Comparables 3, 4, and 6 do not offer an alcove unit type. Therefore, the one bedroom unit type is utilized and adjusted downward 5% in comparison. Comparables 2 and 3 do not offer a semi- private memory care unit. Therefore, the private unit type is utilized and adjusted downward 10% in comparison.

Adjustment for Levels of Care The subject has a base rate plus levels of care. All comparables have a similar level of care for assisted living beds when compared to the subject property. No adjustments are needed for this care type. Comparables 2 and 3 rates for memory care beds includes a greater level of care than the subject. Thus, these comparables are adjusted downward $500 per month in comparison to the subject's base rate.

Adjustment for Utilities The subject and comparables have similar utility structures, requiring no adjustments.

Adjustment for Meals The subject and the comparables all provide similar meal plans. No adjustments are needed.

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Adjustment for Housekeeping The comparables and subject all provide regular housekeeping in the base rates. No adjustments are needed.

Adjustment for Parking The comparables all include open surface parking in the base rates. Carports and garages, when available, are rented for additional charges. No adjustments are needed.

Adjustment for Location Comparables are located in superior locations when compared to the subject property. A downward adjustment of 10% is deemed reasonable.

Adjustment for Age/Quality/Condition Comparables 1, 3 and 4 are considerably more modern, attractive facilities when compared to the subject property. An adjustment downward by 15% is deemed reasonable.

Summary of Adjustments Adjustment grids for each subject unit type follow. In the grids, each subject unit is compared to the most similar unit for each comparable.

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$0

$0

$0 - $0

-

($255)

$0 Adjustment for Meals

- $0

Adjustment for Age/Quality/Condition - ($600) -($585)

-

JLL Market Rent Conclusion Per SF

$8.60

$0 - Adjustment for Location ($355) - ($400) Adjustment for Parking $0

Adjusted Rent Per SF $6.66

Size (Square Feet) 400

Comparable Name Franklin Park

Sonterra

Studio - Studio

$0 - $0

$0 -

$0

$0

-

($390) -

$0 - $0 $0 -

Adjustment for Concessions $0

- $0 - $0

$0

- $0Adjustment for Size/Type

$0 -Monthly Rent

$3,000 $2,925 ($533)

- $0

Rental Comparable Adjustment Table For Assisted Living Studio 362 SF Item

Comparable Number 1 2 3 4 65

$2,550 $0

$3,900

- Studio

Heartis San Antonio

-

- 371 340 286-

Arden Courts - San Antonio

Brookdale San Antonio

Studio

$6.10 JLL Market Rent Conclusion $2,325

$2,721 Average Adjusted Rent Per SF $7.84

Adjusted Monthly Rent $2,663 - -

$0 $0

$0

$8.02

Colonial Gardens The Adante

Unit Type

$8.09

$3,550

-

- - $4,000

Adjustment for Levels of Care $0 $0

Adjustment for Utilities $0

Adjustment for Entrance Fees $0 $0

$2,295

-Adjustment for Housekeeping $0

Quoted Rent $2,210

Average Adjusted Rent

Quoted Rent Per SF

$6.42

The comparables’ adjusted rental rates range between $2,295 and $3,000 per month, with a mean of $2,721 per month. The subject has 30 of this unit type, and 20 are occupied at rents ranging from $1,725 to $3,536 with an average of $2,262. Considering the adjusted rents and the rents in place, the current quoted rental rate of $2,210 appears to be slightly low. We will utilize a market rent of $2,295 in our forecast.

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Brookdale Castle Hills

Adjusted Monthly Rent Adjusted Rent Per SF

Quoted Rent $2,375

$2,663 -

Average Adjusted Rent

Item Comparable Number

-

Rental Comparable Adjustment Table For Assisted Living Studio Deluxe 417 SF

Monthly Rent $3,550 - $4,000 286

Unit Type Studio Studio 340

Comparable Name Franklin Park

Sonterra Colonial Gardens The Adante

Heartis San Antonio

Arden Courts - San Antonio

$2,550

1 2 3 4 65

Adjustment for Concessions $0 - $0 $0 - $0 $3,900 -

Studio -- Studio

Brookdale San Antonio

Adjustment for Entrance Fees $0 - $0

-Size (Square Feet) 400 - 371

$0

$0 - $0

$0 -

-

$0

$0 - $0 $0 $0

$0 -

Adjustment for Levels of Care $0 - $0

$0 Adjustment for Utilities $0 - Adjustment for Meals $0 -

Adjustment for Size/Type $0 - $0

$0

$0Adjustment for Housekeeping $0 -

($400)Adjustment for Location Adjustment for Parking

$0

($355) - ($255) -$0

($390) - $0$0 $0

-$0 -

Average Adjusted Rent Per SF $7.84

- $8.02$8.09 $8.60$6.66

$0 $2,295$2,925

($600) - -

($585) $3,000

Adjustment for Age/Quality/Condition -($533)

$2,721

JLL Market Rent Conclusion Per SF $6.12

Quoted Rent Per SF $5.70 JLL Market Rent Conclusion $2,550

The comparables’ adjusted rental rates range between $2,295 and $3,000 per month, with a mean of $2,721 per month. The subject has 26 of this unit type, and 16 are occupied at rents ranging from $1,938 to $3,082 with an average of $2,462. Considering the adjusted rents and the rents in place, the current quoted rental rate of $2,375 appears to be low. We will utilize a market rent of $2,550 in our forecast.

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Adjustment for Parking

Adjustment for Levels of Care

$0

$0 - $0 $0- $0

- $0

($337)

$2,675 JLL Market Rent Conclusion Per SF $5.36 JLL Market Rent Conclusion

Comparable Name

Rental Comparable Adjustment Table For Assisted Living Alcove 499 SF Item

Comparable Number 1 2 3 4 5 6

Brookdale San Antonio

Adjustment for Concessions $0 Adjustment for Entrance Fees $0 - $0

469 Monthly Rent $3,550 - $4,250 $4,000 - $3,370 Size (Square Feet) 400

Arden Courts - San Antonio

Colonial Gardens The Adante

462 -

Franklin Park Sonterra

- 474

Heartis San Antonio

Unit Type Studio - One Bedroom One Bedroom - One Bedroom

$0 $0 - $0

$0 - $0

$0 - $0 $0$0 -

$0 $0$0 -

-

($169)($200) -

Adjustment for Location ($355)

$0

- ($425)

- $0 $0$0 -

($400) - -

Adjusted Monthly Rent Adjusted Rent Per SF

Adjustment for Utilities $0 $0 -Adjustment for Meals

$0 Adjustment for Housekeeping

$2,800 -$2,663 - $2,975 -$6.66 - $6.28 $6.06

Adjustment for Age/Quality/Condition ($533) - ($638) ($600) - $0

$6.11

$2,515

$2,865

$5.04

Average Adjusted Rent $2,826 Average Adjusted Rent Per SF Quoted Rent Quoted Rent Per SF

$6.28

- ($213)Adjustment for Size/Type $0

The comparables’ adjusted rental rates range between $2,663 and $2,975 per month, with a mean of $2,826 per month. The subject has 8 of this unit type, and 5 are occupied at rents ranging from $2,301 to $2,969 with an average of $2,558. Considering the adjusted rents and the rents in place, the current quoted rental rate of $2,515 appears to be low. We will utilize a market rent of $2,675 in our forecast.

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Rental Comparable Adjustment Table For Assisted Living One Bedroom 590 SF

Colonial Gardens The Adante

4 5

Arden Courts - San Antonio

Brookdale San Antonio

Heartis San Antonio

Comparable Name Franklin Park

Sonterra

1 2 3

$0 -

462 -

Item Comparable Number

6

One BedroomOne Bedroom --Unit Type One Bedroom One Bedroom

$0-

- Size (Square Feet)

Adjustment for Entrance Fees $0

$4,275 520

Adjustment for Concessions $0 - $0 $0

$0

- $0 Monthly Rent $4,000 -

$0

600- 474 $4,250 $3,630

Adjustment for Housekeeping $0 - $0 $0 - $0 Adjustment for Meals $0 - $0 $0 - $0

$0

Adjustment for Utilities $0 - $0

$0

$0 - $0

$0 Adjustment for Levels of Care $0

$0 -- - $0

$0 -- $0

Adjusted Monthly Rent $3,206 - $3,188 Adjustment for Age/Quality/Condition ($641)

$0 Adjustment for Location ($428) - ($425) ($400) - ($363) Adjustment for Parking $0

-

$0 $3,267$3,000 -

($600) -

$5.08

$6.17

- ($638)

- Average Adjusted Rent $3,165

$5.45Adjusted Rent Per SF $6.49 -$6.72

Average Adjusted Rent Per SF $6.21 Quoted Rent $2,935

$0Adjustment for Size/Type

$3,000 JLL Market Rent Conclusion Per SF

Quoted Rent Per SF $4.97 JLL Market Rent Conclusion

The comparables’ adjusted rental rates range between $3,000 and $3,267 per month, with a mean of $3,165 per month. The subject has 16 of this unit type, and 12 are occupied at rents ranging from $2,422 to $3,889 with an average of $2,930. Considering the adjusted rents and the rents in place, the current quoted rental rate of $2,935 appears to be low. We will utilize a market rent of $3,000 in our forecast.

119

Brookdale Castle Hills

$0 Adjustment for Meals - $0 $0

$0 - $0

$0

Brookdale San Antonio

Franklin Park Sonterra

Heartis San Antonio

Arden Courts - San Antonio

Colonial Gardens The Adante

5 Item

6

322 - 313

Adjustment for Levels of Care - ($500)

Adjustment for Concessions - $0 $0

Unit Type Private Private -Private

Monthly Rent - $4,500 $6,000 -

Private-

$0 $0 - $0 $0 -

$0 $0

$0

Adjustment for Size/Type - Adjustment for Entrance Fees $0

- $0 -

($500) $0

$0 Adjustment for Utilities -

Adjustment for Housekeeping - $0 $0 $0 $0

$0 Adjustment for Location - ($450) ($600) ($429) Adjustment for Parking -

$0 - $0 -

($400) -

$0

Adjusted Rent Per SF - - $17.02 - $3,861

($600) -

$9.32 - $12.34

Adjustment for Age/Quality/Condition - $0 ($900) $0 Adjusted Monthly Rent - $3,550 $4,000 $3,000

Average Adjusted Rent Per SF $12.89

Quoted Rent Per SF $14.47 Quoted Rent $4,110

Average Adjusted Rent $3,603

$4,150 JLL Market Rent Conclusion Per SF $14.61

Comparable Name

- -

1 2 3 4

$0 -

$0 $0 -

Comparable Number Rental Comparable Adjustment Table For Memory Care Private 284 SF

Size (Square Feet) $4,000

235 $4,290

JLL Market Rent Conclusion

The comparables’ adjusted rental rates range between $3,000 and $4,000 per month, with a mean of $3,603 per month. The subject has 12 of this unit type, and 11 are occupied at rents ranging from $3,309 to $6,538 with an average of $4,147. Considering the adjusted rents and the rents in place, the current quoted rental rate of $4,110 appears to be reasonable. We will utilize a market rent of $4,150 in our forecast.

120

Brookdale Castle Hills

- - $3,861$3,000

Adjusted Rent Per SF

$0

($400) -

Adjustment for Meals - $0 Adjustment for Housekeeping - $0 $0 $0 -

$0

51 2

Arden Courts - San Antonio

3 4

The Adante

235

Brookdale San Antonio

Colonial Gardens

6

Adjustment for Utilities - $0 $0 $0

-- $4,500 $6,000 $4,290 Adjustment for Concessions - $0 $0 $0

Private

Comparable Name

Size (Square Feet) - 322 - Unit Type - -Private Private Private

Franklin Park Sonterra

313

Heartis San Antonio

Adjustment for Levels of Care -

$0 $0

$0

- $0 ($429)

-

$0 -

($500)

$0 $0 -

$0

$0

$0

($500)

$0 $0 $0 $0

$0 ($900) ($600)

-

-

Average Adjusted Rent Per SF Quoted Rent Quoted Rent Per SF

Average Adjusted Rent $3,603 $9.32

$12.55 $3,565

Adjustment for Parking - $0 $0 Adjustment for Location - ($450)

- ($600)

$12.89 $3,565

Adjustment for Age/Quality/Condition -

- $17.02 $12.34 Adjusted Monthly Rent - $4,000$3,550

JLL Market Rent Conclusion JLL Market Rent Conclusion Per SF $12.55

-

-

Rental Comparable Adjustment Table For Memory Care Private - Shared Bath 284 SF Item

Comparable Number

Adjustment for Entrance Fees - - $0

Monthly Rent $4,000

Adjustment for Size/Type - $0 $0

The comparables’ adjusted rental rates range between $3,000 and $4,000 per month, with a mean of $3,603 per month. The subject has 4 of this unit type, and 4 are occupied at rents ranging from $2,805 to $4,440 with an average of $3,406. Considering the adjusted rents and the rents in place, the current quoted rental rate of $3,565 appears to be reasonable. We will utilize a market rent of $3,565 in our forecast.

121

Brookdale Castle Hills

$0

6

$3,500

$0 $0

$0 $0

Rental Comparable Adjustment Table For Memory Care Semi-Private 284 SF

Heartis San Antonio

Arden Courts - San Antonio

4 5

Comparable Name Franklin Park

Sonterra Colonial Gardens The Adante

Brookdale San Antonio

Semi-PrivatePrivate

Item Comparable Number

1 2 3

Semi-Private

Adjustment for Entrance Fees - $0 $0 Adjustment for Size/Type - Adjustment for Levels of Care -

Unit Type - 286

Monthly Rent - $4,500 $6,000 $1,182 -

$0 $0($600)

Adjustment for Housekeeping - $0 $0$0 $0

Adjustment for Utilities -

$0 Adjustment for Parking - $0 $0 $0 $0

$0 Adjustment for Meals - $0 $0 $0 $0 $0

$0 $0 $0 $0

Adjustment for Location - ($450) ($600)

Adjusted Monthly Rent - $3,100 $3,400 Adjustment for Age/Quality/Condition -

($400) ($118) $0 $0

($350) ($600)

$0

JLL Market Rent Conclusion

$14.47 $5.17 Average Adjusted Rent $2,743 Average Adjusted Rent Per SF $10.22 Quoted Rent $2,715

$2,750

$0 ($900) $3,000 $1,064

Quoted Rent Per SF

$3,150 Adjusted Rent Per SF - - -

JLL Market Rent Conclusion Per SF $9.68

235

$0

$0 $0 $0$0

Private Semi-Private

Adjustment for Concessions -

Size (Square Feet) - $4,000

($450) ($500) ($500)

580

$0

$9.56

-

$0

$11.01

The comparables’ adjusted rental rates range between $1,064 and $3,400 per month, with a mean of $2,743 per month. The subject has 2 of this unit type, and 1 is occupied at $2,585 per month. Considering the adjusted rents and the rents in place, the current quoted rental rate of $2,715 appears to be reasonable. We will utilize a market rent of $2,715 in our forecast.

122

Brookdale Castle Hills

Rent Roll Summary The subject’s rent roll summary along with our market rent conclusions are as follows:

Unit Type Mix Units Occupied Square

Footage Average Rent In

Place Minimum Rent

In Place Maximum Rent

In Place Asking Rent JLL Conclusion

Assisted Living Studio 30 20 362 $2,262 $1,725 $3,536 $2,210 $2,325

Assisted Living Studio Deluxe

26 16 417 $2,462 $1,938 $3,082 $2,375 $2,550

Assisted Living Alcove 8 5 499 $2,558 $2,301 $2,969 $2,515 $2,675

Assisted Living One Bedroom

16 12 590 $2,930 $2,422 $3,889 $2,935 $3,000

Memory Care Private 12 11 284 $4,147 $3,309 $6,538 $4,110 $4,150

Memory Care Private - Shared Bath

4 4 284 $3,406 $2,805 $4,440 $3,565 $3,565

Memory Care Semi- Private

2 1 284 $2,585 $2,585 $2,585 $2,715 $2,750

Rent Roll Summary

Occupancy, Concessions, Collection Losses, Loss to Leases

Resident Day Occupancy The subject’s reported occupancy is as follows:

Resident Day Occupancy

Year Ending 12/17 36,865 25,227 68.4%

Item 12/16

Year Ending

Annual

36,865 Actual Resident Days 25,27823,638 25,116

Budget 3 Months For Year

Potential Resident Days

Occupancy Percent 64.1% 68.6% 68.1%

Ending Ending 05/18 12/18 36,865 36,865

Occupancy at the subject property has lagged that of the market. Management noted that its location and layout are the two biggest factors impacting occupancy. The majority of incoming residents cannot live on the second floor due to evacuation restrictions; therefore, the second floor units are difficult to lease-up. In addition, the subject’s location and visibility is inferior to competing properties in the market.

Market Area Occupancy As noted in the supply and demand analysis, the subject’s PMA has weighted average occupancy as shown below:

123

Brookdale Castle Hills

Franklin Park Sonterra 1 92%

180 -

1

8 100% 8

12 92% 11 15430 Huebner Rd, San Antonio, TX

Arden Courts - San Antonio 15290 Huebner Rd, San Antonio, TX Heartis San Antonio

72

22 80% 18

7 94% 7

Brookdale Castle Hills 12078 Jackson Keller Rd, San Antonio, TX

Property Name Current Occupancy % Number of Occupied Beds

101 71%

2702 Cembalo Blvd, San Antonio, TX Brookdale San Antonio 9203 Cinnamon Hl, San Antonio, TX

10 Lynn Batts Ln, San Antonio, TX

Weighted Average Occupancy of Competitive Assisted Living

29 100% 29

Colonial Gardens

The Adante

18323 Sonterra Pl, San Antonio, TX

Number of Competitive Beds

TOTALS 145

WEIGHTED AVERAGE OCCUPANCY

AVERAGE OCCUPANCY REPORTED BY NIC

80% -

75%

51 - 47 TOTALS

8 100% 8

4 92% 4

Arden Courts - San Antonio 15290 Huebner Rd, San Antonio, TX Heartis San Antonio 15430 Huebner Rd, San Antonio, TX

6 80% 5

7 94% 7

2702 Cembalo Blvd, San Antonio, TX The Adante

Property Name Brookdale Castle Hills

8 100% 8

Colonial Gardens 10 Lynn Batts Ln, San Antonio, TX

9203 Cinnamon Hl, San Antonio, TX Brookdale San Antonio

1207 Jackson Keller Rd, San Antonio, TX

Weighted Average Occupancy of Competitive Memory Care Number of Competitive

Beds Current Occupancy % Number of Occupied Beds

18 89% 16

WEIGHTED AVERAGE OCCUPANCY

AVERAGE OCCUPANCY REPORTED BY NIC

92% -

75%

The subject’s occupancy compares to the broader market as illustrated in the following table:

124

Brookdale Castle Hills

Segment Assisted

Living Memory

Care

MSA 76.0% 76.0%

Submarket 73.9% 73.9%

Rent Comparables 92.6% 94.1%

All Facilities in PMA 75.0% 75.0%

Subject 71.0% 89.0%

Market Occupancy Summary

National Occupancy Data NIC MAP reports the following occupancy levels for the recent past in 99 primary and secondary markets. These are indicative of national trends.

3Q 2013

4Q 2013

1Q 2014

2Q 2014

3Q 2014

4Q 2014

1Q 2015

2Q 2015

3Q 2015

4Q 2015

1Q 2016

2Q 2016

3Q 2016

4Q 2016

1Q 2017

2Q 2017

3Q 2017

4Q 2017

1Q 2018

Majority Independent Living 90.2% 90.6% 90.8% 91.0% 91.2% 91.6% 91.4% 91.4% 91.5% 91.7% 91.6% 91.4% 91.6% 91.7% 91.6% 91.4% 91.4% 91.5% 91.1%

Majority Assisted Living 90.7% 90.6% 90.6% 90.7% 91.1% 91.1% 90.4% 90.2% 90.4% 90.4% 90.1% 89.8% 89.7% 89.7% 89.2% 88.7% 88.7% 88.6% 87.9%

Majority Nursing 87.8% 88.0% 88.4% 88.2% 88.2% 88.2% 88.4% 87.8% 87.5% 87.3% 87.4% 87.0% 87.1% 86.8% 87.1% 86.4% 86.1% 86.1% 86.5%

CCRC 89.8% 90.1% 90.3% 90.4% 90.6% 90.8% 90.9% 90.9% 90.8% 91.0% 91.0% 90.7% 90.7% 90.9% 91.2% 91.3% 91.1% 91.2% 91.1%

86%

87%

88%

89%

90%

91%

92%

A ve

ra ge

O cc

up an

cy

Quarter

Occupancy Levels - NIC MAP 99 Markets

125

Brookdale Castle Hills

Forecasted Stabilized Occupancy The subject is a good quality asset located in a market with high occupancy levels. The metro market average for assisted living is 76% according to NIC MAP, and the average of the rent comparables is 93%. However, three of the rent comparables are superior in age/condition and all are superior in location. Occupancy at the subject property has lagged that of the market. Management noted that its location and layout are the two biggest factors impacting occupancy. The majority of incoming residents cannot live on the second floor due to evacuation restrictions; therefore, the second floor units are difficult to lease-up. In addition, the subject’s location and visibility is inferior to competing properties in the market. Considering all the preceding factors, our stabilized occupancy conclusion is 80.0%. Thus, our forecast of resident days is as follows:

X = X = X = X =101

Forecasted Resident Days

365

Potential Resident Days Forecasted OccupancyOperating Beds

Calculation of Forecasted Resident Days

36,865 80.0% Days In A Year

29,492

Concessions/Loss to Leases Review of the rent roll indicates that rents in place total $2,332,896. This compares to market rent for the same beds of $2,392,020. Thus, rents in place lag market rents by 2.5%. Some of this variance will be absorbed over the coming year by rental rate increases upon rollover of the existing tenant base. Historically, this has ranged from 10.4% to 15.5% with an average of 12.5%. Thus, a market concession/loss to lease forecast of 5.0% is used in our analysis.

Additional Meals/Care Income

Meals The subject provides three meals per day and does not generate any income from additional meals; therefore, no additional meal income is forecast.

Additional Care/Level of Care Income The subject has additional care on an a la carte basis. The subject has generated income from additional meals/care of $15.81 to $23.35 prd. Our forecast of $21.87 prd is reasonable based upon the subject’s financials.

4 Average 41,846 30,532

$634,826 $363,888 $15.17 $10.38

2 3

Annual

$9,431 23,993 25,116Resident Days 31,883 25,27825,227

$590,300 $485,239$373,631$53,691 $507,296 $23.35$15.81 $19.32$20.11

Year

23,638 29,492

3 Months Ending Ending

12/16 12/18 Ending 12/17

Year Ending

For Year

05/18

Additional Meals/Care Comparison

Item

Income & Expense Comparables Subject

JLL Pro Forma

Budget

$645,000 Additional Meals/Care Income PRD $21.87$23.76 $2.20 $0.39

1 24,407

Additional Meals/Care Income $757,603

126

Brookdale Castle Hills

Commercial Income As noted in the improvement analysis, the subject has a beauty salon which generates commercial income. Our forecast of commercial income is as follows:

30,532 $7,968 $13,736 $0.19 $0.52

4 Average 25,278

$19,024

2 Ending

25,227

Year Budget For Year

Commercial Income Comparison

Annual Item

Income & Expense Comparables

1 3 Ending

$20,000 23,638

$22,722 $17,204

Subject

12/16 12/17

3 Months

41,846

JLL Pro Forma05/18

Ending 12/18

Ending

24,407 23,993

Year

25,116 $44,279 $181 $21,797

$0.96 $0.68 $0.75Commercial Income PRD $0.08 $1.81 $0.01 Commercial Income

29,492

$0.87

Resident Days 31,883 $2,515

$0.68

Parking Income The subject has no sources of parking income so none is forecast.

Assessment/Community Fee The following table summarizes the policy of the subject and comparables in the subject’s market area.

Franklin Park Sonterra

Subject - Brookdale Castle Hills $1,750-$2,000

$2,000

Brookdale San Antonio $2,500

Arden Courts - San Antonio

JLL Fee Conclusion $1,550

$500

Heartis San Antonio $1,500

Property Name

Colonial Gardens $2,000

The Adante

$2,000

Summary of Assessment/Community Fees Amount

Based upon this data, a community fee of $1,550 is forecast for the subject. Turnover rate data from The State of Seniors Housing 2017 is as follows:

127

Brookdale Castle Hills

Annual Resident Turnover Rates

Community Type Lower

Quartile Median Upper

Quartile Independent Living 22.9% 37.4% 51.2%

Independent/Assisted 27.7% 41.7% 59.7%

IALF/ALZ 28.1% 39.7% 66.6%

Assisted Living 34.8% 54.1% 84.8%

Assisted Living/ALZ 38.9% 56.1% 84.2%

CCRCs 7.1% 21.5% 38.7%

Source: State of Seniors Housing 2017

The following table summarizes our anticipated income from assessment/entry fees for the subject property on a stabilized basis. The turnover rate is based upon the data from The State of Seniors Housing 2017.

X = X =

X = X =

Net Annual Assessment/

Community Fee Income

Calculation of Assessment/Community Fee Income

Annual Turnover Rate Annual Turnover of

Beds Beds/Units (Second

Person Beds Excluded)

Assessment/ Community Fee Per

Unit/Bed

$60,45098 40% 39 $1,550

The total number of beds used for the calculation excludes Second Person beds. Our forecast of $2.05 prd is reasonable based on the subject’s financial activity that ranged from $1.19 to $2.17 prd.

41,846 30,532 $75,902 $59,663

4 Average

$47,500 23,993

05/1812/17

Year Annual

Item

$1.81 $2.02$1.36 $3.96 $50,834 $60,450 25,116 29,492

$2.17 $1.19

12/16 Ending

12/18

$0.95 $1.88 Entrance/Community Fee Income $43,397 $96,666

25,27825,227Resident Days

3 Months

$22,686

1 2 3 31,883 24,407

Ending

$2.02

Ending Year

Ending

$29,925 23,638

Budget For Year

JLL Pro Forma

$2.05 $51,211

Entrance/Community Fee Income PRD

Income & Expense Comparables Entrance/Community Fee Income Comparison

Subject

128

Brookdale Castle Hills

Second Person Charges The facility charges a second person fee for occupancy of a unit by a second person related to the primary occupancy. Second person charges for the subject and comparables are as follows:

Colonial Gardens

The Adante

Heartis San Antonio

Arden Courts - San Antonio

N/A

$1,000

$795

N/A

$750

$800

Assisted Living

Franklin Park Sonterra

$800

Property Name Type

Summary of Second Person Fees

Subject - Brookdale Castle Hills

$800

Brookdale San Antonio

JLL Second Person Fee Conclusion

According to the rent roll, the subject had 3 persons paying second person fees.

X = X =

X = X =

Type

Net Annual Second Persons

Income

3Assisted Living

$2,400

Number of Months

Monthly Fee For Second Persons

$800

Calculation of Second Persons Income

12 $28,800

TOTAL $28,800

$2,400

3

Number of Second Persons

Net Monthly Second Persons Income

Based on the subject’s financials that ranged from $0.55 to $2.05 prd, our conclusion $0.98 prd is deemed reasonable.

$1.02 $3.23 $12,951

4 Average 41,846 30,532 $3,391 $47,009 $0.08 $1.85

23,638Resident Days

Second Persons Income PRD $0.40

For Year

3 12/16

Year 3 Months

25,227 25,278

$3.05 $73,279 23,993

$51,696 $10,104

Ending

$28,800 $0.98$0.55

Year

05/18 Ending

$2.05 $78,920

31,883 Second Persons Income $32,445

$0.77 $19,403

25,116 12/18

Ending 12/17

Ending

Annual

29,492

Subject

JLL Pro Forma

Budget

Second Persons Income Comparison

Item

Income & Expense Comparables

1 2 24,407

129

Brookdale Castle Hills

Other Income In addition to the foregoing, the subject is expected to realize other income from ancillary sources such as late fees, insufficient funds, forfeited deposits, vending, guest meals, cleaning fees, tray service, unscheduled transportation for residents, etc. The following table shows other income for the subject and the income and expense comparables.

41,846 30,53224,407 $2,258 $11,384 $0.05 $0.40

4 Average

Other Income Comparison

Item

$11,544 $17,500 $0.59$0.67

SubjectIncome & Expense Comparables

3 Ending

$0.46$0.26 $0.45 $0.58Other Income PRD $0.82 $0.49

Year Ending 12/17

$16,828Other Income $26,000 $6,452 $10,825 $13,595 $12,436 Resident Days 29,49231,883

Ending 12/16

Ending 05/18

3 MonthsYear Annual

1 2

For Year

25,11623,993 25,227 25,27823,638

JLL Pro Forma

Budget

12/18

Other income is forecast at $0.59 prd or $17,500 annually. As the data is based upon reported actual income, after vacancy, the other income is not subject to vacancy and collection losses.

130

Brookdale Castle Hills

Estimate of Effective Gross Income Utilizing the preceding estimates, total effective gross income for the subject is now calculated:

Total Effective Gross Income $3,279,841

Plus Second Persons $28,800

Plus Other Income $17,500

$3,300,120

Less Vacancy and Collection Losses 20.0% ($660,024)

$60,450Plus Entrance/Community Fee Income

$645,000

Plus Commercial Income $20,000

Plus Parking Income

$2,508,091

Rental Income Net of Vacancy and Collection Losses $2,640,096

Effective Gross Rental Income

$0

Plus Additional Meals/Care Income

$275,010Totals

Less Concessions/Loss to Leases 5.0% ($132,005)

Annual Gross Potential Unit Rental Income

98

$9.68

$12.55 $3,565

284 2 $2,750 $5,500 Semi-Private Memory Care

$14,260

Private Memory Care 284 12 $4,150 $14.61 $49,800

Private - Shared Bath Memory Care 284 4

$5.36

$6.12 $2,550

499 8 $2,675 $21,400

One Bedroom Assisted Living 590 16 $3,000 $5.08 $48,000

Alcove Assisted Living

$66,300

Studio Assisted Living 362 30 $2,325 $6.42 $69,750

Studio Deluxe Assisted Living 417 26

Unit/Bed Type Care Type Square Feet Number of Units/Beds Monthly Rent

Estimate of Effective Gross Income (Stabilized, Untrended Basis)

Rent Per Square Foot

Monthly Gross Potential Income

The preceding estimate is in current, untrended dollars and is based upon stabilized operations for the 12 months following the date of value. In the following table, the subject’s income conclusions are compared to actual realized income (trended) for similar income and expense comparables.

131

Brookdale Castle Hills

($39,036) $634,826

$7,968 $0

$75,902 $3,391 $2,258

$4,685,210 $95.59 $0.00 ($0.93) $15.17

1.8%

100.0% 100.0% 100.0% 0.4% 0.6%

100.0% 100.0% 0.3%

100.0% 0.4%

100.0%100.0%

1.8%

$19,024

$2.05

Other Income Total Income

$0.08

($3.13) $23.35

$0.68

($11.90)

$1.19

$3,867,486 $97.73 $106.10

$2,919,697 $11,384

$3,279,841 $111.90

$19.32

Second Persons $12,436

($13.61)

$19,403

$0.75$0.96

$17,500

Entrance/Community Fees $51,211

$0.19

$114.15

1.1% 0.0%

$78,920 $73,279

$0.00 $1.36

$23.76

$0.00$0.00

$2.20 ($7.74)

$118.66

0.0%

8.3%17.8%

$133.82

17.4% 0.6%

$0.77

$128.65 $0.40

$0.00 $1.81 $0.08 $0.05

$0.00 $1.81 $0.01

0.2%

$0.98 $2.17

$111.21

0.0% 100.0%

0.7% 0.6% 0.2% 0.4%

$1.88 $0.00

$0.59

$0.00 $0.00

1.3%

$0.00

$0.40 $2.02

0.0%

$3.96

98.6% 0.0%

$1.02 $0.95

85.2%

$0.00 $2.02

$0.52

0.1%

$0.55 $0.58

$3.23 $0.82

$166.22

13.3% -2.3% -15.5%

$102.58

0.0% 85.6% 93.5% 95.3%

$111.96 85.4% 0.0% -0.8%

$0.46

1.0% 2.4%

-5.8% -0.4%

0.0% 0.0% 0.0%

$0.49

0.7%

-10.4%

100.0%

1.6% 0.1%

91.7% $115.74

1.0% 0.5%

0.0%

20.5%

1.4%

0.0%

17.6%

Total Income %

0.9% 0.5%

0.0% 0.3%

0.0% -10.8%

1.8%

0.8%

Less Conc./Loss to Leases %

1.6%

Other Income %

Commercial %

Entrance/Community Fees % 0.8% 1.9%Second Persons %

0.0% 0.0%

-11.8%

Rental Income % Less Vacancy & Coll Loss %

Less Vacancy & Coll Loss PRD

3.0%

89.9%

0.9%

Entrance/Community Fees PRD

($0.71)

13.5%

$0.00

$10.38 $15.81 $20.11 Commercial PRD Parking PRD

Parking %

0.0%

$0.00

Second Persons PRD Other Income PRD

1.5%

$1.85

0.0% 0.0%

Additional Meals/Care % 0.4%

$0.26 $0.45 Total Income PRD

$3.05

Income Comparison

29,492

Income & Expense Comparables

Ending

25,116

Ending 3 Months

Budget For YearYear

Average 12/17

Annual

Commercial Parking

Rental Income

Additional Meals/Care

Less Vacancy & Coll Loss ($17,312) ($101,019)

$363,888 $20,000

$0 ($435,067)

$0 $0

$0

12/16

Item

$181

$2,459,592 ($660,024) ($132,005)

$2,478,584 $0

($298,882) $0

Resident Days

($246,710)

Ending

$3,447,572

($299,324)

Rental Income PRD $4,266,590

$47,009$32,445

$115.82 $2,461,142

$10,825

$59,663

$13,736$44,279 $53,691

$2,804,782 $6,452

$114.52

$22,686 $29,925 $28,800$10,104

1

$13,595

05/18 25,278

$590,300

$0

$485,239 $21,797

$0 $50,834 $60,450

$0 ($343,243)

23,638

$373,631 $22,722 $17,204

$507,296

24,407

Year

30,532 $3,794,308

23,993 $3,651,339

$9,431

$3,300,120

$96,666

$2,765,739

$0

$2,344,739 25,227

$2,676,676

Less Conc./Loss to Leases $757,603

$0 $0

4 41,846

$0.39Additional Meals/Care PRD Less Conc./Loss to Leases PRD

$155.46 $0.00

$4,057,004 $26,000

$0.00

$43,397 $0$0

$2,515 $0

($18.41)

$12,951

$117.00

31,883 $3,999,901

$0

0.0%

32 Ending

Subject

JLL Pro Forma

$0.00

0.8%

$645,000

$0.00

12/18

$0.00 $97.30

$51,696

($4.48)

$0.68 $21.87

$47,500

($22.38)

$2,885,616 $16,828

$0.87

($11.84)

$0

$11,544 $2,759,220

100.6%89.8% $109.86

19.7% -4.0%

0.4%

0.6%

0.5%

-20.1%

1.8%

$0.67 $2.05

$98.68

The subject’s forecasted total income per resident day falls within the range of the expense comparables.

132

Brookdale Castle Hills

Operating Expenses We will now forecast operating expenses for the subject on a stabilized basis.

Income and Expense Comparables In forecasting income and expenses, we will rely upon the subject’s figures. We will also rely upon expense data derived from income and expense comparables. Each is similar to the subject in location, design, and rate structure. The data for the income and expense comparables has been trended to the current year at an annual rate of 2.5% per year. The averages present consist of those numbers greater than zero. The comparables are profiled as follows:

Item Comparable 1 Comparable 2 Comparable 3 Comparable 4 City Dallas Georgetown Nacogdoches San Antonio State Texas Texas Texas Texas Year Built/Year Renovated 1994 2013 1990; 2016 1997; 2014 Units 95 80 59 116 Beds 99 83 71 128

IL Beds 0 0 0 0 AL Beds 71 61 55 98 MC Beds 24 22 16 30

Average Occupancy 88.23% 80.56% 92.58% 89.57% Operating Year End Data 07/31/16 05/31/15 02/28/18 05/31/15

Income and Expense Comparables

Expenses In the analysis to follow, we will give limited consideration to the subject’s expenses reported previously. The subject has not been operating on a stabilized basis with expenses higher than market comparables. In addition, the subject’s historical wages and salaries data are aggregated into “exempt” and “nonexempt” categories, although some individual departmental salaries and wages are reported. As such, we have forecast salaries and wages by department based on the income and expense comparables, with consideration given to the available historical data as appropriate.

133

Brookdale Castle Hills

Property Expenses Property expenses typically include all operating property items such as maintenance staff expenses, utilities, property taxes, ground or facility rent, minor repairs, upkeep and maintenance costs, supplies, and grounds keeping expenses. In the insurance expense, we have included both property insurance, including fire and extended coverage, and liability insurance.

$80,723

$3.55 $1.93

1.7% 0.3%

Total Property Expense PRD

2.7%

4.2% $20.46

5.7% 0.0% 0.1% 1.7% 5.5% 3.2%

18.3%

0.0%

Ground/Facility Rent PRD $0.00 $0.00 $0.01

$3.51

0.1%

$0.00

6.1% 1.7%

3.3% 4.1% 2.1%0.6%

$18.21 $26.20

Ground/Facility Rent % 0.0%

Insurance (Prop.& Liability) % 1.6%

0.0%0.0%

0.0%

$26.82

1.3%Wages %

0.0%0.0%

5.3%

1.5% 3.4%Utilities %

0.0%

Real Estate Taxes/Sp. Assess. % 4.6% 6.8%

Payroll Taxes/Benefits % 0.1%

$1.85 $0.10

$1.89

$122,975

$102,941

$63,819 $202

$0

Wages

Insurance (Prop.& Liability) PRD

$3.50

0.0%

$0.37

2.7%

$163 $0

Real Estate Taxes/Special Assess. $198,207 $276,205

Utilities $81,290

$259,014

1.2% 0.0%

$3,542 $328,899

$2.61

$0.00

$10,590

$4.29

$0.83

5.5%

1.0%

$6.47

1.3%

$5.25

$0.13

$234,622 $240,297 $3,279,841

$48,500

4 41,846

$0

$4,685,210Total Income $4,266,590

$2,804,782

$54,144 $43,671

$6.22Real Estate Taxes/Sp. Assess. PRD Total Property Expense

$0.05

$15,312 $856,132

$6.41 $0.00 $0.08 $1.94 $6.19

$176,750

$0 $268,063

$23.20

6.0%

$4,057,004

$51,686

$0.41 $0.15

Utilities PRD $5.54 $5.55 $2.26

$3,318

0.0%

$580,491

5.8% 1.3%0.0%

6.9% 0.0% 0.0%

Building R&M, Supplies & Other % 2.9% 2.6% 2.2% 0.0%

$0.05

$6.69

$0

$107,894

$1.84

$148,412

$0

Average

$3,867,486

$154,833

$2,576

$160,488

$8.79

YearYear

$2,759,220

$633,967

$0

$586,468

12/18 25,116

$222,260

$46,440

0.0%

$8.88

$1.65

$19.64 $0.32

$6.93 $3.21

$0

Subject Annual

Property Expense Comparison

Resident Days 31,883

$3.50

1.5% 0.1%0.1%0.1%

0.0% 0.0%

$0.00

$6.35 $1.90

1.6%

$0.00

$0.12

$8.21

$0.00

$0.00

3.1%

$154,704

$5.20

$0.04

12/17

$48,037

$103,222

25,278

Ending

$0

$55,854

$0 $0

$0.00$0.00

$176,681

$3,116

$174,890

$2,885,616

Ending Ending

$42,763

29,492

$601,574 $8,125

JLL Pro Forma

$6.12

$1.64

$0.00 $9.34

$3,379

$211,354

$163,875

$1,296 $75,856

$159,556

$612,067

$1,340

$2,919,697

For Year

$168,037 $46,473

$152,962

05/18 23,638 12/16

25,227

3 Months

$84,219

1 2

Ground/Facility Rent

Ending

$209,849

$47,580

$7.06

$9,893

Item

Income & Expense Comparables

24,407 23,993 30,532 3

$2,461,142

Insurance (Prop.& Liability) $26,622 $1,678Licenses

$135,515

$0

$106,045

$0.00 Building R&M, Supplies & Other PRD $3.86 Wages PRD $1.37

$6.35$6.33$4.34 $1.95 $1.34

Building R&M, Supplies & Other

Licenses PRD

$0

$0.00 $13.71

$0.00 $0.00

$22.29

$8.15 $601,244

$20.40 Payroll Taxes/Benefits PRD $0.33

$194,004 $159,587 $51,035$32,165

$0.01

$0

$7.00 $562,311

$0

$2.15

$639,455 $11.32

Payroll Taxes/Benefits $10,127

6.1%7.5%

0.2%

Licenses %

18.3%22.6% 22.2%19.3%15.3%

0.0%

4.7%

0.2% 0.0% Total Property Expense % 13.6% 15.8% 13.4%

0.2%

$24.37 8.5%

$0 $0 $3,834

$0.13

$0.28

7.3%

$0.00 $1.45

Budget

0.2%

1.6%

7.7%

5.6%

20.3%

5.4% 4.1%

5.5%

0.0%

The ad valorem tax estimate was developed for this section in the Ad Valorem Tax section of this report.

The State of Seniors Housing 2017 provided the following information pertaining to property/liability insurance:

134

Brookdale Castle Hills

Cost of Property/Liability Insurance

Community Type Lower

Quartile Median Upper

Quartile Independent Living $46 $268 $814

Independent/Assisted Living $30 $377 $1,147

IALF/ALZ $36 $358 $1,036

Assisted Living $31 $358 $916

Assisted/Memory Care $33 $358 $1,630

CCRCs $107 $380 $1,300

Source: State of Seniors Housing 2017

The premium is forecast to be $48,500 which equates to $500 per unit. This is more than the total median as shown in the preceding chart. This is reasonable considering the historicals and the comparables.

The State of Seniors Housing 2017 provided the following information pertaining to total utilities by resident day by community type.

Total Utilities by Resident Day by Community Type

Community Type Lower

Quartile Median Upper

Quartile Independent Living $1.25 $4.76 $13.72

Independent/Assisted Living $1.45 $5.62 $14.44

IALF/ALZ $3.02 $6.14 $14.51

Assisted Living $1.97 $4.67 $12.90

Assisted/Memory Care $1.76 $5.30 $12.74

CCRCs $2.15 $5.54 $14.89

Source: State of Seniors Housing 2017

Total utilities for the subject property are forecasted based upon historicals and comparables. Our estimate is within the range of the comparables and by community type in the above chart.

The forecast for building repairs and maintenance, supplies, and other is based upon historicals and comparables. Wages are based upon comparables given the historicals are not separated.

135

Brookdale Castle Hills

For this and all categories, payroll taxes and benefits are forecast at 19.0% of wages. This is based upon the expense comparables, which indicated percentages of 11.0% to 24.2% with an average of 18.9%, and the subject’s percentages which range from 24.4% to 27.4%.

Housekeeping and Laundry Housekeeping and laundry services are typically covered in standard room and board fees. Housekeeping expenses consist of labor, supplies, and some minor equipment repair costs. Housekeeping services are either performed in-house or via contract labor.

41,846 $4,685,210

$36,003

1.3% 1.4% $2.32

0.2% 0.6%

2.1% 0.5%

2.1% 0.5% 0.2%0.1% 0.3%

0.7%

$2.62

0.3% 0.3% 1.1%

$2.42 1.3%

2.4%1.9%

$0.76 $1.78 0.8% 0.1% 0.7% 1.6% 2.1%

$0.66 $0.65$0.78$0.55 $0.59 $2.42

2.1%

$2.46 $0.66

0.5%

$68,303 $16,452

$8,768 $9,256 $9,582

$65,767 $2.40 $1.06 $1.50 $1.61$0.86

$0.16

$6,829 $31,789 $74,621

$0.34 $0.27

$7,845

$1.40

$19,170

$0.51Payroll Taxes/Benefits PRD Supplies & Other PRD

Payroll Taxes/Benefits % 0.3% 0.3%

$12,905

$1.67 $1.54 $38,287 $72,306 $60,115 $61,076

$1.45 $1.30

1.4%1.0% $1.60

1.1%1.3% 1.4%

Total Hskping & Lndry Expense %

$0.35 $2.44

$8,605 Supplies & Other $11,290 $27,556 $9,926

$0.30

$61,133 $14,884 $19,772

$0.39 $1.13 $0.41

Supplies & Other % 0.3% 0.7%

$98,677 Wages PRD

Total Hskping & Lndry Expense PRD Wages %

$4,266,590 $4,057,004

Item

Total Hskping & Lndry Expense

1.8% 2.4%

43

$20,140 $77,640

Income & Expense Comparables

$2,813

24,407

Payroll Taxes/Benefits $12,949 $12,481

$0.41

$4.04

$0.12

23,993

Ending

Budget For Year

Annual Year Year

Ending 12/16 12/17 05/18

$36,610Wages $53,401 $58,640 $25,548 $43,398 $37,954

3 Months

30,532 23,638 25,11625,227 $2,759,220

Ending 12/18

$3,867,486

Average Resident Days 31,883

$3,279,841

JLL Pro Forma

$32,756

1 2

$2,804,782 $2,919,697

$2.54

$38,719 $41,289

29,492

$10,596

0.6% 0.4%

$2,885,616 25,278

1.6%

$2,461,142

0.4%

$0.38 $0.42

Ending

Housekeeping and Laundry Expense Comparison Subject

Total Income

We will use a wage forecast of $1.40 prd for the Housekeeping and Laundry expense based upon historicals and comparables. Our projection is in line with both the historical and comparable data. Supplies and other are forecast at $0.65 prd based upon historicals and comparables. Our projection is in line with both the historical and comparable data.

136

Brookdale Castle Hills

Dietary Costs Dietary costs typically consist of dietitians’ salaries, dietary supervision, dietary staff cost, raw food costs, food supplements, dietary consultants, equipment rental, dietary supplies, uniform cost, cleaning supplies, and minor repairs.

$26,176 $133,096

$25,113 $185,640 $15,805

$0.18 $8.64 1.5%

$7,568 $361,744

$1.65 $0.31 $6.50

$139,242

$7.44 $5.80 $0.56 $6.11

8.3%

$296,350

$169,579

Annual

$91,936$104,062 $3,279,841

23,638 29,492 12/17

Dietary Expense Comparison

Item

31,883 23,993 30,532

Income & Expense Comparables

$86,869 $24,151

3

$13,069 $272,207

$3,867,486

JLL Pro Forma

$4,685,210 $68,899

Ending

25,227

$95,951 $2,759,220

$95,037 $2,885,616

25,278 25,116 $2,804,782 $2,919,697

$92,900

$132,391

$95,653 $23,176

3 Months

Average

For Year Ending

Ending 12/16

Ending 4

Year

05/18

Budget

9.2%

$273,734$266,601

$10.93 3.4%

0.5% 4.9% 4.7%

3.2%

$0.85

0.8% 5.7%

3.0% $10.68

0.8%

$260,751$310,213

$10.85

$5.27

0.2%

$10.32

9.4%

$4.02 $258,478

$4.34

10.8%

$1.00 $4.69

0.4%

$0.55

0.5%0.4%

$0.43

3.3%

$0.49

4.2% $10.99

5.2% 0.2% 7.7%

4.6% 0.5%

0.3% 5.8%

$16,221

$0.48

$0.48

3.5%

0.6% 9.0%

0.5% 0.3%

0.9%

0.4% 4.9%

$0.46 $5.62

$3.16

$7,874

9.0%

Subject

$142,187 $11,459

$3.15

$141,733

1

Supplies & Other %

Payroll Taxes/Benefits PRD

Supplies & Other

$16.04 $11.11

$2,461,142

Payroll Taxes/Benefits Wages

$149,510Food

Total Dietary Expense PRD $6.93

$5.01

$4,266,590Total Income

$26,025 $181,601

$52,238

Wages % 1.2%

$391,413 $61,512

Wages PRD

Resident Days 2

$122,275

$6,679

0.6% Food %

Total Dietary Expense % 5.2% 1.5%

0.3%

Supplies & Other PRD $0.21 $2.52

3.5% 4.5% Payroll Taxes/Benefits %

$221,094 $1.64

$12,108$10,937

$0.98

24,407

$12,667

$4,057,004

Total Dietary Expense

9.6%

$0.40 $1.07 Food PRD

$21,899

Year

41,846

$3.81$3.64

$5.66 $5.75 $0.60$1.04

$10.05 2.8%

12/18

$17,651

5.2% 0.9%

$5.60

2.5%

$11,838 $276,124

10.0%

$0.33

0.4%

$0.96

$11,568

$3.80

The State of Seniors Housing 2017 reported the following raw food costs:

Average Food Costs per Resident Day Region ILF IL/AL IALF/ALZ ALF AL/ALZ CCRC Northeast $6.88 $7.55 $7.97 $5.96 $7.09 $6.07

Southeast $4.90 $5.76 N/A $5.48 $6.41 $7.31

North Central $4.74 $6.56 $6.90 $5.17 $6.14 $6.71

South Central $4.99 $6.41 N/A $5.84 $6.62 $7.33

West $5.22 $6.70 $7.32 $6.62 $7.10 $8.18

Entire United States $5.18 $6.63 $7.36 $5.86 $6.70 $6.88

Source: State of Seniors Housing 2017 We will use a wage forecast of $3.15 prd for the Dietary expense based upon historicals and comparables. Our projection is below the historical and in line with the comparable data. Our forecast of the Food expense is $5.75 prd based upon historicals and comparables. Our projection is below the historical and in line with the comparable data. Supplies and other are forecast at $0.55 prd based upon historicals and comparables. Our projection is below the historical and in line with the comparable data.

137

Brookdale Castle Hills

Care Expense Care expense includes wages and benefits for care attendants, which may include LPNs and RNs, in providing residents of the facility with assistance during activities of daily living. Also included are supplies used by the care staff.

22.3%28.1%18.9% 23.8%

4.9% 6.0%

22.2% 24.4% 0.2% 0.1%

23.9% Supplies & Other % 0.5% 1.0%

$27.30

$3.90

$15.40 $30.91

$480,240

0.2%

12.9% 18.0% 19.5% 15.4% 18.8%

$0.23 $28.21

$530,083 $100,550 $13,671

$644,305 $776,247 $14,345

$6.59 $19.98

11.3% 2.1% 0.3%

13.8%

$0.60 $0.45 $28.24

$0.47 $22.14

Payroll Taxes/Benefits

Total Care Services Expense $705,742 Supplies & Other

$155,668 $5,658

$561,129 $142,665

Payroll Taxes/Benefits PRD $0.66 $1.67

$6.38

3 12/17

Income & Expense Comparables

Average

$52,883

$927,706 $547,469 $12.67 $21.48

4 41,846

$4,685,210

Ending

Subject

3 Months For Year

JLL Pro Forma

23,638 05/182

$543,088

Ending 12/18

$2,804,782 $2,919,697 $2,885,616

12/16

25,116 $2,461,142 $3,867,486

Year

Care Expense Comparison

25,278

$2.40 $0.33

3.8%

Supplies & Other PRD

5.0%

$40,665

Ending

22.9%

$38.01 $0.81

$5.64

$24.85

2.1% 2.8% 4.6% 3.5% 0.6% 0.6% 0.4%

$732,729 $22.24 $20.50

0.4%

18.4%

$29.97

Year

$17.29

30,53223,993

$690,021

$114,871

25,227 $2,759,220Total Income

Wages PRD

3.1%

$20.02

$4,266,590 $551,131

$110,687 $573,207

$22,412 $11,049 $4,521 $4,268 $128,562 $146,860

$706,305 $666,796 $712,510

$22.82 $24.59 $0.18 $0.17

Wages

Total Care Services Expense PRD 19.2%

Item

24,407

Wages %

Total Care Services Expense % 16.5%

Resident Days $4,057,004 $731,373

$20,966

Payroll Taxes/Benefits %

$4.19

Annual

31,883 1

$2.20 $3.79 $5.44

$133,645 $13,271

$24.09

Budget

29,492 $3,279,841

$605,020 $604,586 $165,569

$5.82

18.8%

$22.30

$527,185

21.9%

Ending

We will use a wage forecast of $20.50 prd for the Care expense based upon historicals and comparables. Our projection is below the historical and in line with the comparable data. Supplies and other are forecast at $0.45 prd based upon historicals and comparables. Our projection is in line with both the historical and comparable data.

138

Brookdale Castle Hills

Activities and Other Expenses Activities and other expenses depend on the residence and management’s ability to offer these services. These additional services can include social and recreational activities, crafts, and transportation.

0.4%

$2.09 $1.20

1.9%

$0.00

$128,450

$0.13$0.44$0.10

0.4%2.0%

$0.36

0.7% 0.1% 0.2% 0.1%

$0.49

1.5%3.2% 1.5% 1.5%

0.3%

$43,633 $1.56 $0.94

Payroll Taxes/Benefits %

2.8%

$0.95 $0.14

$1.79

0.1% 0.4% 0.4% 0.1%

$3.53 0.4%

$1.31

Total Activities Expense

Total Activities Expense PRD $1.37 $5.26

0.3%

Supplies & Other PRD $0.92 $3.37

1.1%1.1% 1.0% 1.1%

$1.47 Payroll Taxes/Benefits PRD $0.09

Supplies & Other

$0.17

$82,303

1.0%

Wages %

Wages PRD

25,27830,532 23,638

$42,325 $12,272 $3,867,486 $2,804,782

$22,625 $2,759,220

41,846 $4,685,210

$0 $0

$21,051 $21,051

$4,462 $3,224Payroll Taxes/Benefits

Supplies & Other %

0.7%

31,883

$2,491

25,227 $2,919,697

$10,322

Ending

$31,772

$2,885,616 $24,067 $37,131

2.7%

$9,718

$44,544

Ending 12/172

3 Months

3 Average

1.3%0.9% $1.54

$1.32

$0.00

$0.50 $0.50 0.0% 0.0%

$57,515 $83,556

05/18

Budget

0.7% 0.1%

$1.76

Income & Expense Comparables

$2,795 $11,528

$9,689 $29,309

Annual

$36,118 $8,098

$4,057,004 $38,048

0.5% 0.9% 1.1%

Resident Days 1

Year

4

$29,048

$35,405

$11,809

For Year

Wages $2,461,142

Activities Expense Comparison

25,116

Item

$1.41 $76,105 $61,712

$35,390 $4,203

$78,621

$4,266,590 24,407

Total Income

$30,909

Total Activities Expense %

$0.39 $0.39

$3,279,841

JLL Pro Forma

Subject

Ending 12/1812/16

Ending

$22,119

29,492

$0.49

1.3% $3.03 $1.23

3.0%

$0.75

1.5%

$1.15 $3.12 $1.26

$31,011

0.9%

$36,925

Year

23,993

$2.17

$0.33

We will use a wage forecast of $0.75 prd for the Activities expense based upon historicals and comparables. Our projection is in line with both the historical and comparable data. Supplies and other are forecast at $1.20 prd based upon historicals and comparables. Our projection is in line with both the historical and comparable data.

139

Brookdale Castle Hills

General and Administrative Expenses General and administrative expenses vary from residence to residence but typically include administrative salaries, office salaries, legal expenses, office supplies, penalties, bad debt expense, dues, subscriptions, office equipment rental, bank charges, educational costs, telephone, and advertising and marketing costs.

0.7%

Total G&A Expense PRD Supplies & Other PRD $3.07

Wages-Marketing PRD $0.00 $0.00 $0.00

$2.52$2.51

0.0%

$21,529

$88,476 $8,848$17,888

$9.50 $2.38 $0.00

$0.02

$12.22

$0.88 $0.00

0.1% 0.0%

$3.74

$0.64 $0.97

$3.42

0.0% 0.0%

$21.62 11.2% 2.1% 0.0% 0.0% 0.0%

0.0% 3.1%

$921,490 $685,908

$3,894

$11.97

2.3% 2.6%

$0

6.7% 8.5%24.4%

$41.95

2.9%

$0.00

$0.16

$0.00 $0.31 $0.55 $0.72

$0.00$0.01

2.8%

23.4%

$0.00

$0.00

$28.90 $1.96 $5.86

$11.98

5.4% 6.2%

$6.29

Payroll Taxes/Benefits $0 $0 $0 $0Wages-Marketing $0

Wages-Admin Payroll Taxes/Benefits

Marketing & Advertising $121,707 $0 $0

$86,107 $0

$51,629 $26,520$155,550 $38,880

$582,448 $292,174 $145,844 $141,239

$0 $0 $177,611

$606,144 $674,561 $280,174 $184,600 $53,233

$105,926

General and Administrative Expense Comparison

Item 3 Months For Year

4

$800

Income & Expense Comparables

$0

1.6% 0.0%

0.0% 0.0%

0.9% 0.0%

0.0%

0.3%

0.0% 0.0%

0.6%

0.0% 0.6% 0.9% 2.2%

0.3%

19.3%

-0.1% 0.7%

Telephone $17,464 $21,425 $4,785 $18,192 Legal & Audit $0 $7,539 $0

2.7% 38.2% 16.7% 2.6%

Total G&A Expense % 21.6% 16.9% 11.7% 17.4% 33.5% 33.3% Supplies & Other % 1.5% 3.5% 3.3%

1.5% 0.7% 1.9% 5.1%

0.6%0.4% 0.0%

0.2% Bad Debt Expense % Telephone %

0.7%

Payroll Taxes/Benefits % 0.0% 3.8%

0.4% 0.5%

Marketing & Advertising % 2.9% Legal & Audit %

1.8%

31.6%

1.6%

$39.76

$0.71

0.0%

0.0%0.0% 0.0%

20.8% $28.10

0.0% 0.0%

0.0% 0.2% 0.0%

$3.00$2.88 $18.59

Wages-Admin % 13.7% 7.2% 5.9%

0.1% 0.0%

2.2%

0.6%

2.6% 3.2%

0.6%

2.7% 0.3%

Payroll Taxes/Benefits PRD $0.00

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00

$0.00 $3.59 $3.38 $2.05

$0.73Telephone PRD Legal & Audit PRD

0.0%

9.5% 21.0%

$0.73$0.57

Wages-Marketing %

$0.87

$36.53 $38.05

$0.37 ($0.02) $3.44

Bad Debt Expense PRD ($0.12)

Payroll Taxes/Benefits % 3.3%

Total G&A Expense Wages-Admin PRD

$7.03 $6.08

$699,897 $939,915

$2.51 $6.08 $24.94 $24.03

Payroll Taxes/Benefits PRD $0.67

Bad Debt Expense -$3,962

Marketing & Advertising PRD $3.82 $6.37 $1.62

Supplies & Other $62,593 $13,466 $20,643 $9,434 -$448$40,464

$104,885 $904,662 $12.57

$0.00 $2.53

$2.55 $18.27

$0 $0

$526,067 $99,789

$0 $0

$4,266,590 $4,057,004

$95,849 $0 $0

$4,685,210 $2,759,220 $3,279,841$2,885,616 Resident Days 31,883 25,22723,993

Subject

1 29,49241,846

Total Income

Average3

$3,867,486 $2,804,782 30,532 23,638

$26,731

$0.16 $0.20

EndingEnding 12/172

JLL Pro Forma

$17,601

$0.30 $0.73$0.72

$0.00

$548,109

$180 $0

$1.81

$0.01 $3.43

$0.00

$0.00 $3.25

$0

$105,516 $79,881

25,116

Year

12/16

Budget

12/18 Ending

$0.00 $0.00

Ending

Year

Annual

$0 $0

$79,819

$4.43

24,407

$62,187

$18,096 $18,460

$143,770

$88,431

$26.75 $26.86

05/18 25,278

$0.33

$386,633 $589,545

$1,053,747

$16,060

$287,529

$22.65

$17,321

$72,219

$7.35

$77,489

$4,169 $324

$1.05

$158,642

$2,461,142 $676,116

$2,919,697

$63,632$143,138 $81,961 $98,144 $921,434 $961,891

We will use a wage forecast of $9.50 prd for the General and Administrative expense, which includes marketing wages, based upon comparables. Our projection is below the historical and in line with the comparable data. Note that historically this expense has been high since it also includes other departmental wages. The marketing and advertising expense, which excluded marketing wages, is forecast at $3.50 prd based upon historicals and comparables. Our projection is below the historical and in line with the comparable data. Telephone expenses are forecast at $0.73 prd based upon historicals and comparables. Our projection is in line with both the historical and comparable data. Historically, the subject's bad debt expense has ranged from $0.37 to $0.87 prd. Therefore, we will conclude a bad debt expense of $0.30 prd to be reasonable. Lastly, supplies and other are forecast at $3.00 prd based upon historicals and comparables. Our projection is in line with both the

140

Brookdale Castle Hills

historical and comparable data. The total general and administrative expense is well supported by the historical and the comparable data on the basis of expense per resident day.

Management Fees Management Fees are paid to management companies that are responsible for the operations of the senior living business enterprise. Management company responsibilities vary from facility to facility; however, some of the typical responsibilities of management companies are financial performance, occupancy, profitability of the business, compliance with government regulations, business activities such as billing and collection of receivables, marketing, documentation, and assistance in budgeting. The management is also responsible for the maintenance and repairing of the subject property and grounds, supervision of day-to-day operations, and providing monthly or quarterly reports on occupancy, cash flow, operating expenses, and capital accounts.

Year Annual

12/17 05/182 4

Total Management Expense $213,329 $193,374 Total Management Expense PRD $6.69 $8.31 $5.13

5.0% 5.0% $6.43 $5.56

5.0%

Ending Ending

$144,281

Ending 12/1812/16

$234,260 $5.60 5.0%

$5.79

1

$202,850 $123,057

Total Management Expense % 5.0%

$145,985

5.0%

41,846 $4,685,210

$5.93 $5.49

25,227 $2,885,616

$137,961 $163,992

5.0% 5.0%

$140,239

Budget For Year

$2,759,220 $3,279,841$3,867,486 $2,804,782 30,532 23,638

Year

Resident Days 31,883 24,407 29,49225,278 Average

Subject

3 Months

5.0%

Total Income $4,266,590 $4,057,004 $2,461,142

3

$5.71

Management Expense Comparison

Item

JLL Pro Forma

23,993

5.0%

$2,919,697

Ending

25,116

Income & Expense Comparables

The State of Seniors Housing 2017 provided the following information pertaining to management fees:

Management Fees (Percentage of Total Revenue)

Community Type Minimum Average Maximum Independent Living 2.7% 5.1% 6.4%

Independent/Assisted Living 1.4% 4.8% 7.8%

IALF/ALZ 2.8% 5.2% 8.2%

Assisted Living 2.0% 5.1% 7.4%

Assisted/Memory Care 2.0% 4.9% 9.1%

CCRCs 1.6% 4.1% 9.0%

All Communities 1.4% 4.8% 9.1%

Source: State of Seniors Housing 2017 The subject is managed by the owner, Brookdale, and will be managed by Greenbrier Senior Living upon the sale. Typically, management fees charged by unaffiliated third party companies are in the range of 4% to 7% of EGI for seniors housing projects. Although the comparables actually reported a

141

Brookdale Castle Hills

variety of management expenses, we have shown an expense of 5.0% so that the comparables can be compared to the subject on a consistent basis in the analysis of total expenses.

Replacement Reserve The Realty Rates Investor Survey from the 1st quarter 2018 indicated the following reserve requirements:

Reserve Requirements for Health Care/Senior Housing Per Unit Minimum $255

Maximum $695

Typical $388

Source: 1st Quarter 2018 Realty Rates Investor Survey Based on the foregoing, a reserve of $300 per unit has been utilized. The pro forma for the sales used to develop the capitalization rates were developed in the same fashion for consistency.

Ending

30,532

1.0%

25,227

Subject

JLL Pro Forma

0.7% 1.0% $1.16$1.15

12/16 12/17

$0.98 $0.74 $34,800

$0.83 0.7%

4 41,846

$2,919,697 23,993

$24,000

Total Reserves Expense %

$26,250 $29,100 $29,100 $4,685,210

Resident Days 31,883 24,407 23,638

Annual Budget

$2,759,220

2

Total Reserves Expense PRD $0.89

For Year

12/18

1.0% 1.1%

29,492 $2,885,616 $3,279,841

$29,100$29,100

Reserves Expense Comparison

Item

$3,867,486 $2,804,782

Average Ending Ending

Year 3 Months

$0.99 0.9%

25,116

0.7% 0.6% 0.7%

Ending 31

$4,266,590 $4,057,004 $2,461,142 25,278 05/18

Year

$1.15$0.86

Total Income $17,700 $29,100Total Reserves Expense $28,500

Income & Expense Comparables

$1.23

Although the expense comparables actually reported no reserve expense, we have shown an expense of $300 per unit so that the comparables can be compared to the subject on a consistent basis in the analysis of total expenses.

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Brookdale Castle Hills

Total Payroll, Bonuses, Taxes, and Benefits Total payroll, bonuses, taxes, and benefits are detailed in the chart that follows:

31.5% 66.9% 0.0% 0.0% 0.0% 0.0%

TTL Salary, Bonus, Tax, Benefit % Marketing % General & Administrative %

37.7% 38.6% 38.8%

$630,634

0.0% 0.0% 7.0%17.0% 8.7% 11.5%

$0 $625,856

$0 $1,477,325

$2.29 $1.02 $1.96

$15.07 $0.00

$14.96 $0.00

$35.30 2.0% 0.9% 1.7%

13.4% 0.0%

$47,210 $41,361

Activities % Care Services % Dietary % Housekeeping % Property %

$64.11

13.5% 0.0%

$0.00

1.8% 1.2% 1.4% 5.0% 3.0%

23.0% 18.6% 1.1% 0.9%

$2.23

1.6% 1.3% 1.4% 1.5% 1.6%

Marketing $0 $0

1.6% 0.5% 26.1%

0.0%

1.6% 31.1%

Dietary PRD $4.85

General & Administrative PRD

1.5% 3.7% 16.0% 21.9% 0.3% 1.1%

Care Services PRD $21.48 $36.34

$47.41 $67.99 $66.87 $0.00

$31.02 $30.32

$50.44

4.4%

$4.80 $4.59

0.0%

$0.61

$39.80

$0

$684,777

General & Administrative

Marketing PRD TTL Salary, Bonus, Tax, Benefit PRD

$14.52 $0.00

$1.15Activities PRD $1.89$0.45 $14.83

$24.12 $27.74

Total Salaries, Bonus, Tax, Benefits $1,608,304 $1,564,677 $955,011

$1.82Housekeeping PRD $1.70 $2.36 $1.58 $2.08 $2.91

$1.11

$0.00

$2.04 $23.59

$692,082

$0

$655,747 Dietary $64,906 $148,301 $122,619

$50,888$0

$104,448 $118,213 $121,064 $116,087 $121,829 $110,551

$96,035 $42,832 $81,969

Property $54,260 $57,707 $37,901 Housekeeping $66,350 $71,121 $30,104 $52,602 $49,315 $49,134

25,227

Annual

12/17

$3,867,486 $2,919,697 $2,885,616

Ending

Budget

Ending

4

Year

Total Income

JLL Pro Forma1 2

$4,266,590 $4,057,004 $2,461,142

Item

12/18 25,116 29,492

$3,279,841

Ending For Year

Subject

12/16 23,638

$2.00 $1.83

$46,192

$2,804,782 41,846

$4,685,210

Activities $14,323

4.1% 4.0%

$723,688 $354,361 $171,851 $468,939 $733,315

$0.00

21.9% 0.8%

10.2% 0.0%

39.3%

$46,146 $26,659 $29,043 $52,647 $46,849

$1.25 Property PRD

$1,686,879$1,607,132 $0.00

$0$61,476 $0

Care Services

$0.00

$11.31

Income & Expense Comparables

Resident Days 31,883 24,407

$0.89

$1,401,329 $1.99

$0 $0

$22.70 $7.16

27.9%

26.2% 29.6%

0.0%

36.6%

1.7% 4.2%

23.4% 24.2% 23.8% 1.9%

57.3% 57.8% 59.3%

$33.77

$73.50 $0.00

$67.74 $0.00

$27.13 $30.68

$34.21

$1,289,759 $1.73$0.00 $0.00

$1,712,424 $1,845,988 $0

$3.75 $1.64

1.6% 1.5% 3.4%

$1.86

$0.00 $43.73

$24.40

0.0% 1.6% 1.4%

0.0%

$1.80 $28.07

$0

$770,589 $719,457

$764,786 $853,727

Ending

$859,161 $333,407 $15,496 $45,094 $26,322

$887,040 $565,877 $707,989 $685,753

$5.11 $3.80 $1.96 $1.67

$0

1.8%

$6.08 $5.00

Payroll Salaries, Bonuses, Taxes and Benefits Expense Comparison

$2,759,220

Year

3 30,532 Average

23,993 25,278

3 Months

05/18

The total payroll, bonuses, taxes, and benefits expense is within the range of the expense comparables on the basis of expense per resident day.

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Brookdale Castle Hills

Total Expenses Total expenses are detailed in the chart that follows:

13.8% 0.4%

4 41,846

0.7%

15.3%

66.8% 33.2%

$1,553,633 $20.46 $1.78 $8.64

$15.40 $0.50

$21.62 $5.60 $0.83

$74.84 $37.13 18.3% 1.6% 7.7%

$4,685,210 $856,132

109.7% 76.3%

$84.83 $26.38

9.0%

1.9% 22.3%

9.0% 2.1%

22.2% 18.3%

$36.53 $38.05 $3.03 $2.09

$27.30

95.4% 96.3% 1.0% 1.0% 5.0% 5.0%

16.7% 5.0%

$5.35 -$10.67 $120.52

$18.59

-9.7% 23.7%4.6% 3.7% 68.9% 100.3%

1.1% 0.9% 5.0%

$5.93

5.0% 0.6%

19.3% 5.0%

23.8% 24.4% 23.9% 2.8%

28.1% 1.5%

1.9% 22.6%

Net Operating Income % 34.6% Total Expense % Reserves %

65.4% 33.1%23.6%

16.5% 22.2% 1.0% 3.2%

66.9% 0.7%

11.7%

31.1% -0.3%

Care Services % Activities %

0.7% 1.0% 5.0%

76.4% 0.7%

General & Administrative % 21.6% 16.9% 5.0% 5.0%Management % 5.0%

5.2%

Property % 15.8% Housekeeping & Laundry % 1.8%

$0.74

Net Operating Income PRD 13.6%

Total Expense PRD

9.6% 2.4%

Dietary %

$46.25 $39.27 $33.95 13.4%

1.5%

10.8% 1.6%

22.9%

Total Expense $2,791,919

$4.04

$22.82

$1,646,468 $2,667,106 $1,200,381$814,673

$2.46 $2.54

($7,384)

Dietary PRD $24.59 $28.21$38.01

$10.85

$68.62 $0.89

$87.57 $126.95

General & Administrative PRD $28.90 $28.10 $11.98

2.1% 2.1% 2.1% 19.3% 20.3%

2.4%

38.2%31.6% 33.3%

9.2%

33.5% 3.0%

10.0%

$6.69 $8.31 $5.13

$110.39

8.3%

17.4% 1.5%

18.9%

$89.49 $118.97

2.7%

9.4%

$39.15 -$0.31 $109.90

$4.25

$5.49 $5.56 $1.16 $0.99

$5.79 $5.71 $1.15

$41.95$22.65 $39.76

$1.15$0.86 $1.23 $6.43

Reserves PRD $0.98 Management PRD

$10.99 $10.05

$1.76Activities PRD $1.37 $5.26 $1.54

$20.40

$30.91 $2.17 $3.53 $3.12

$10.68 Care Services PRD $22.14

$777,971$958,546

$6.93 $16.04 $11.11

Net Operating Income

Reserves $28,500 $24,000

$24.85 $10.32

$2.42 $2.42 $19.64Property PRD $18.21 $26.20 $13.71

$1.60 $10.93

$28.24

$2.62 $2.32Housekeeping & Laundry PRD $2.44 $24.37$26.82

$134,927 $107,427 $22.29 $23.20

($267,898)$1,474,670 $3,098,458

$17,700 $163,992$137,961

$29,100 $29,100 $29,100$29,100$26,250 $145,985 $144,281

$2,784,770 $2,778,189$2,812,166 $2,501,870$3,027,118 $29,100$34,800

$3,131,576

$234,260

$61,712 $548,109

$76,105 $1,053,747

$57,515 $83,556 $921,434 $961,891 $78,621 $44,544

$699,897 $939,915General & Administrative $921,490

$547,469 $706,305

Management $213,329 $202,850 $123,057 $193,374 $140,239

Activities $43,633 $128,450 $36,925 $685,908 $287,529

$644,305 $21,051

$904,662

$61,133 $296,350

Care Services $705,742 $927,706

Housekeeping & Laundry $77,640 $98,677 Dietary $221,094

$732,729 $276,124 $776,247$712,510 $690,021

$65,767 $68,303 $273,734 $260,751 $61,076

$361,744 $74,621

23,993 1 2 3

Resident Days 31,883 24,407

$391,413 $666,796

$266,601 $38,287

$258,478$310,213 $72,306 $60,115

$4,266,590 $4,057,004 $2,461,142 $3,867,486Total Income

Item

30,532 Average

Property $580,491 $639,455 $328,899

Annual

Ending Year

12/17

Year

JLL Pro Forma

Subject

$2,885,616$2,919,697 $562,311

$2,804,782 $601,244

Ending 12/1805/18

3 Months

12/16 Ending Ending

Total Expense Comparison

For Year Budget

$612,067 $601,574 $2,759,220 $3,279,841

29,49225,116

$633,967

Income & Expense Comparables

$586,468

25,227 25,27823,638

Our total projected expenses are 76.3% of the effective gross income, within the range of the comparables.

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Brookdale Castle Hills

Income and Expense Pro Forma The following table summarizes:

■ The most recent historical period for the subject ■ The budget for the subject ■ Our pro forma conclusions for the current year ■ Our pro forma upon stabilization ■ Our pro forma conclusions for the Investment Value Assuming Not For Profit Ownership and

Ad Valorem Tax Exemption

Prospective Values For the prospective values, we must consider potential changes in income and expenses between the present date and the date the prospective value is effective. We will now forecast changes in income and expenses over the holding period. According to the State of Seniors Housing 2017, seniors housing revenue increased as follows for 2016 (comparison between 2015 and 2016):

Annual Changes In "In House" Total Revenues

Community Type Average Independent Living 4.88%

Independent/Assisted Living 3.53%

IALF/ALZ 6.82%

Assisted Living 4.51%

Assisted/Memory Care 3.21%

CCRC 2.56%

Source: State of Seniors Housing 2017

JLL Seniors Housing Investor Survey Inflation Trends (Winter 2018) Survey respondents were asked to indicate anticipated change in revenue and expenses for the next 12 months by sector. Despite the new supply coming online, respondents remain confident in improving fundamentals. A majority of respondents anticipate that rents will rise over the next 12 months. On average, survey respondents anticipate independent living, assisted living and memory care to have the greatest growth in revenue in the coming year, matched almost equally with average anticipated expense growth. In contrast, survey respondents expect skilled nursing facilities to have the lowest anticipated revenue growth, with expenses expected to grow at nearly twice the rate on average.

145

Brookdale Castle Hills

JLL Seniors Housing Investor Survey Inflation Trends (Winter 2018)

Revenue Expenses Revenue Expenses Revenue Expenses Revenue Expenses Revenue Expenses Low 3.0% 3.0% 2.5% 2.5% 0.0% 2.5% -10.0% 2.5% 0.0% 2.0% High 3.0% 3.5% 8.0% 6.0% 8.0% 6.0% 8.0% 6.0% 3.5% 4.0% Avg 3.0% 3.2% 3.7% 3.4% 3.5% 3.6% 3.0% 3.6% 1.4% 2.8%

Seniors-only Apartments Independent Living Assisted Living Memory Care Skilled Nursing

The subject’s prospective values have been adjusted to include 2.5% annual increase in income and 2.5% annual increase in expenses compared to our first year pro forma which is trended forward from the effective date to the date upon stabilization.

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Brookdale Castle Hills

$8,605 $19,772 $61,133

$91,936 $24,151

$133,096 $11,568

$260,751

$590,300 $19,024

$0 $47,500 $51,696 $16,828

$725,348

3 Months Ending

05/31/18

$2,459,592 $0

($299,324) $2,160,268

Dietary Total Hskping & Lndry Exp $65,767

$95,653

$142,187

$5,658 Payroll Taxes/Benefits

Supplies & Other

Wages $114,871

$13,271 $732,729

$142,665 $4,268

$690,021

$61,212

$156,784 $49,111$48,500

$29,163

$0

$41,289

$46,473

$0

$361,277

$3,834

$0

$103,222

Assuming Not Stabilization

Ad Valorem Exemp. Forma As OfJLL Pro Forma 12/29/1806/29/18

($132,005) ($660,024)

$3,341,701 ($668,340)

$645,000 $645,000 $653,127

$2,539,693$2,508,091

$3,300,120 ($660,024)

($133,668)

$3,300,120

$2,508,091 ($132,005)

$296,350

$17,651

$16,221 $296,350

$165,569

$169,579 $12,108

$26,176

$276,124

$605,020

$776,247

$17,651

$16,221

$92,900 $17,873

$68,303

$154,833

$243,325

$17,720 $781,474

$48,500

$17,500 $771,750

$0

$20,252

Expenses

Insurance (Prop.& Liability)

Ground/Facility Rent

$42,763 $159,556

$43,302$42,763

$612,067 $601,574

$7,845

$609,154

$46,440 $160,488 $154,704

$154,833

Payroll Taxes/Benefits $16,452

$38,719

Supplies & Other

Housekeeping

$10,596

$0 Building R&M, Supplies & Other

Payroll Taxes/Benefits Wages

Wages

Total Property Expense $0

$0 $0

$586,468

$32,756

Summary of Income and Expense Forecasts

JLL ProFor Profit andCurrent

Investment Value Upon Annual

Less Conc./Loss to Leases

$2,478,584

$2,179,702

Income

For Year

$168,037

Ending

Second Persons Entrance/Community Fees Parking

Net Rental Income

Licenses $0

$0

Other Income

Property

Total Sundry Income

Utilities

$3,379

RETaxes/Special Assess

Budget

$11,544 $579,518

$485,239

$10,104

12/31/18

$50,834

$21,797

$0 ($298,882)

Rental Income Rental Income

Commercial Additional Meals/Care Sundry Income

Less Vacancy & Coll Loss

$20,000 $0

$60,450 $28,800

$20,000 $0

$60,450 $28,800 $17,500

$771,750

$222,260

$3,882 $0

$3,834 $0

$2,576

$240,297$234,622

$8,125

$103,222

$19,411 $7,944

$41,809

$300,084

$171,716

$19,170

$8,227

$104,523

$41,289 $7,845

$68,303 $19,170

$8,125

$69,164

$116,319

$732,729 $13,271

$604,586 $114,871

$13,439 $741,961

$94,070

$169,579

$92,900

Total Dietary Expense

$604,586

$16,425

$612,204$543,088

Wages

Total Care Services Exp Supplies & Other

Food Payroll Taxes/Benefits

Care

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Brookdale Castle Hills

$177,611 $0 $0

$3,224

$29,100 $2,885,616 $2,778,189

$107,427

$0

$0

$8,848

$0

$88,476

$4,203 $35,390

$22,119

$280,174

$0

TOTAL EXPENSES

Wages-Admin

Total Reserves Expense Reserves Expense

Payroll Taxes/Benefits

TOTAL INCOME

JLL

$548,109

$35,390

$29,100 $2,759,220 $3,027,118

Annual 3 Months

Ending Forma As Of JLL ProFor Profit andFor Year

$2,533,393

$163,992

$29,100

Current

$3,279,841

$777,971 $787,774$1,018,268

$53,904 $0 $0

$97,057

$29,467 $3,321,167

$29,100

$61,712

Pro Forma 06/29/18 12/29/18 Ad Valorem Exemp.

$4,203

Stabilization UponInvestment Value

Assuming Not

Summary of Income and Expense Forecasts (Continued)

Telephone

Total Management Exp Management Expense Total G&A Expense Supplies & Other Bad Debt Expense

$137,961

$1,053,747

$86,107 $180

$18,192

$31,011

$17,888 $72,219

Total Activities Expense Supplies & Other

Budget

General & Administrative

05/31/18

$12,272

$184,600 $0

Payroll Taxes/Benefits Wages-Marketing

Marketing & Advertising Legal & Audit

NET OPERATING INCOME

$9,689

($267,898)

Activities

$76,105

$0

$35,405

12/31/18

Wages

Payroll Taxes/Benefits

Ending

$26,520 $0

$18,460 ($448)

$63,632 $961,891

$144,281

$29,048 $44,544

$676,116

$2,261,573$2,501,870

$8,848

$674,561

$3,279,841

$95,849

$0

$88,476

$0

$555,015 $89,591

$21,800 $8,959

$163,992

$62,490

$166,058

$283,704

$21,529

$95,849 $0

$22,398 $4,256

$22,119

$53,233

$21,529

$548,109

$35,836 $61,712

$280,174 $53,233

Capitalization Rate We will rely upon several methods to estimate an appropriate capitalization rate.

JLL Seniors Housing Investor Survey Capitalization Rate Trends (Winter 2018) Survey respondents were asked for the appropriate capitalization rate for assets based upon sector and class, and utilizing first-year pro forma net operating income. Respondents agreed and capitalization rates in 2018 are expected to continue on a steady trajectory. Respondents observed minimum Class A+ cap rates for the seniors-only and independent living categories of 5.0%, while survey respondents noted cap rates for the service-intensive skilled nursing sector at 11.1% on average. The influx of new inventory is also creating more pricing disparity between Class A- and B+ or Class B and C assets. Results are shown as follows:

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JLL Seniors Housing Investor Survey Capitalization Rate Trends (Winter 2018)

A+ A B C A+ A B C A+ A B C A+ A B C Min 5.0% 5.0% 6.0% 7.0% 5.0% 5.3% 6.0% 6.5% 5.5% 5.8% 6.5% 7.0% 6.0% 6.5% 7.3% 7.8% Max 6.0% 6.5% 7.5% 8.5% 7.0% 7.3% 8.0% 10.0% 8.0% 9.0% 10.0% 11.0% 10.0% 11.0% 12.0% 13.0% Avg 5.5% 5.8% 6.5% 7.6% 5.9% 6.3% 7.0% 7.9% 6.5% 6.9% 7.6% 8.7% 7.3% 7.7% 8.4% 9.3%

A+ A B C A+ A B C A+ A B C A+ A B C A+ A B C Min 5.0% 5.5% 6.3% 6.8% 5.3% 5.5% 6.3% 6.8% 5.0% 5.3% 6.0% 6.5% 10.0% 10.5% 12.0% 12.0% 8.5% 9.0% 9.5% 10.0% Max 7.0% 8.0% 9.0% 10.5% 8.0% 8.0% 9.0% 12.0% 9.0% 9.5% 10.0% 12.0% 12.0% 12.5% 13.0% 15.0% 8.5% 9.0% 9.5% 10.0% Avg 6.0% 6.5% 7.2% 8.1% 6.6% 7.0% 7.6% 8.8% 7.5% 7.9% 8.8% 10.4% 11.1% 11.6% 12.4% 13.5% 8.5% 9.0% 9.5% 10.0%

Freestanding Independent Living Freestanding Assisted LivingSeniors-only Apartments Memory Care

Net Leased NursingIndependent and Assisted Living Rental CCRC Entry-fee CCRC Nursing

Extraction from Comparable Sales Sales of seniors housing facilities included in the sales comparison approach revealed the following overall rates.

June-17

6

Going concern

$27,210,000

Carriage Inn/Village on the Park

Portfolio

Cash

Going concern Property Rights Conveyed

Going concern Sale Data

Date of Sale

Financing Terms

Arm's length

Sales Price

Arm's length

Cash

Conditions of Sale

$26,000,000

Arm's length

Cash Cash

Katy, TX Conroe, TXFlower Mound, TX

Going concern Going concern

March-16

$7,650,000

Summary of Sales Comparables

Element of Comparison Comparable Number 1

$19,100,000 $25,270,000

4

Colonial Oaks Sugar Land

5

Orchard Park at Katy

Kenne, TX

2

May-17 December-16 April-16

Tulsa, OK

May-16

Location Data

Property Name

City, State

3

Sugarl Land, TX

Chisholm Trail Estates

The Oaks at Flower Mound

Effective Gross Income

Care Levels

Number of Units

Year Built

82

70.3% –

1998

-

$16,844 $21,469

$1,760,436

-($3,028,647)

Occupancy at Sale

Expense Ratio

NOI After Reserves NOI Per Unit After Reserves

$1,473,241

ALF/MC ALF/MC

98.0% 95.0%

64,742

$251,316

4.43 –

858,229

$244.69

79,752

$316,395

$341.18

$202,507$86,932

73,111 73,000

$317,073

$355.62 Sales Price Per Square Foot

$297,294

$5,042,738

Physical Data

Overall Cap. Rate

2014

$17,332

$4,308,800

$1,280,153

Expenses

EGIM

Sales Price Per Unit

5.16

Units of Comparison

76 85

Arm's length

$7,415

$2,413,249

$104.79

($3,282,302) ($1,760,704)

IALF

99.0% 99.0%

$652,545

65.1%

2015

73.0%

1998

88

ALF/MC

3.17

$404.00 $390.32

47,277

6.70% 6.77%

Building Area

5.83%

$210,000,000

($23,883,684)

$14,091,000

IALF/MC

Arm's length

$37,974,684

$1,830,110

Cash

Going concern

($3,330,311)

Arm's length

$13,588

Cash

$21,280

2014

$5,160,421

62.9%

ALF/MC

86

91.1%

Income Data

5.53

8.53% 6.73%

94.0%

1989

1,037

64.5%

6.71%

5.27

Legend at Tulsa Hills

The range in capitalization rates is from a low of 5.83% to a high of 8.53% with an average of 6.88%.

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NIC Survey The NIC and Real Capital Analytics compile statistics for seniors housing sale transactions on a quarterly basis. The most recent data is shown below:

NIC'S Capitalization Rate Survey

1Q182Q17 6.50%

9.80%Nursing Center 10.40%

4Q17 6.70%

10.70%10.70%

3Q17 Seniors Housing 7.00% Property Type

7.00%

It should be noted that the seniors housing averages combine independent living and assisted living properties. The following graph shows capitalization trends in the seniors housing and skilled nursing sectors.

5.00%

7.00%

9.00%

11.00%

13.00%

15.00%

Cap Rate Comparison

Skilled Nursing Seniors Housing

The data above is not collected in a scientific manner. Every quarter participants submit capitalization rates by segment type without clearly labeling the property name and location. Thus, the cap rate may be skewed by the repetitive submission of well-known sales within the industry. The chart is reliable for determining cap rate movement within the seniors housing industry over an extended period of time.

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Brookdale Castle Hills

Band of Investment We will also develop a band of investment analysis. Based upon conversations with lenders, the subject would likely qualify for financing based upon the following terms:

■ Interest rate 4.50% ■ 10 year term with a 30 year amortization ■ 75% loan to value

Based upon these terms, the resulting mortgage constant is 6.08%. For the equity component, we will use an equity capitalization rate of 10.00%. The resulting rate via band of investment is as follows.

4.56%75.0% Weighted Rate

30

4.50%

Component Mortgage

Interest Rate

Band of Investment Number of Years

Applicable Rate

10.00% 25.0%

Weight

2.50%

Basic Rate

Equity

7.06%

6.08%

Capitalization Rate Conclusion The following summarizes the capitalization rate data considered:

6.88% 8.53%

7.06%Band of Investment Analysis

NIC Survey - Seniors Housing 1Q-2018

NIC Survey - Nursing 1Q-2018 10.70%

Average High

Derived From Comparables 5.83%

Item

7.00%

JLL Investor Survey - Winter 2018 - Class B - AL Facility

6.00% 7.60% 10.00%

Capitalization Rate Indicators

Low

To determine an appropriate capitalization rate for the subject, the following characteristics are considered:

Qualitative Factors Considered In Capitalization Rate Selection Upwards Influence

X

X

X

NeutralDownward InfluenceItem

X

X

Strength of Seniors Housing Market

Quality of Construction

Subject's Regional Location

Subject's Location within Market

Age of Improvements

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Brookdale Castle Hills

The subject is of good quality in a market with favorable demographics. The market has below average population growth combined with below average income levels and housing values. Also, the market is undersupplied. In addition, Comparable Sales 4, 5 and 6 are the most similar to the subject in terms of age, quality, and location; therefore, the most weight is placed upon these sales.

Considering these factors, the subject’s capitalization should fall above the average displayed by the NIC survey and above the average of the comparable sales. We conclude a capitalization rate of 7.25% to be appropriate for the subject.

3 Months Ending

05/31/18

$107,427

Total Income

-

-

$3,027,118

For Year

-

$2,501,870

Investment Value

Forma As Of

Summary of Direct Capitalization Upon

JLL Pro Assuming NotBudget

$2,885,616

$2,778,189

Annual

Ad Valorem Exemp. For Profit and

Stabilization

Capitalization Rate

Net Operating Income

Total Expenses

Ending

-

Indicated Stabilized Value

Stabilized Value Rounded

12/29/1806/29/18

7.25%

$2,759,220 12/31/18

$2,533,393

$3,321,167

$2,261,573

$3,279,841 Pro Forma

$3,279,841

Current Year JLL

7.25% 7.25%

($267,898) $787,774

- ($1,070,000)

$10,730,000

-

-

-

$777,971 $1,018,268

$11,950,000

$0-

$13,680,000

($1,410,000)

$10,700,000

$0

$0

$1,080,000 $1,080,000

-

Less Unstabilized Discount

Less Absorption/Rent Loss -

Less Repairs

Indicated Value -

- - $0

- -Add Excess Land $1,080,000

$14,045,080$10,730,638

$0

($40,000)

$14,050,000

($40,000)

$10,865,843

$10,870,000

Indicated Value via the Income Approach - Direct Capitalization The indicated value on a stabilized basis is $10,730,000 for the subject. However, the subject is not operating at its stabilized level. Therefore, adjustments were applied to get to the as is value.

The rent loss adjustment is for rent loss for the period needed to achieve the forecast stabilized occupancy level. This is calculated later in the report.

We have also applied an unstabilized discount to the indicated stabilized value. This is in recognition of the fact that buyers and lenders view the purchase and/or financing of unstabilized assets as riskier than the purchase and/or financing of stabilized assets. Thus, equity and mortgage rates are higher. The following are comparables in which unstabilized discounts are extracted for comparison purposes.

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■ Comparable 1 -This comparable consisted of a transaction that was still in lease up in which there was an as-is purchase price of $16,750,000 with a stabilized purchase price of $18,900,000. The additional $2,150,000 would be paid upon reaching stabilization. At the time of sale, the occupancy was 57% and had experienced an average net absorption of 5.42 beds/units per month. The remaining absorption/rent loss during the absorption period was forecasted to be $780,000. Therefore, the implied unstabilized discount was 7.6%.

■ Comparable 2 - This comparable was a transaction in which an experienced senior housing buyer planned to implement improvement. The as-is purchase price was $49,500,000 with an untrended stabilized value of $58,500,000. This asset had an occupancy of 100% at the time of sale with below market rents in place. The buyer planned to implement market rates and invest $750,000 in upgrades. The income loss/temporary loss to lease from the below market rents was estimated at $1,230,000. After deducting the temporary loss to lease and renovation costs from the as if stabilized value resulted in $56,520,000. This resulted in an extracted unstabilized discount of 12.4% based on the as-is purchase price of $49,500,000.

■ Comparable 3 – This was a transaction in which an experienced senior housing developer sold two recently completed facilities to an experienced owner of senior housing facilities for $50,600,000. The seller remained as the operator through a third party management agreement. At the time of contract, one asset was complete but not opened with 15 residents or 12.6% preleased. The second facility was opened two months prior to the contract and had an occupancy of 15% at the time of contract. There were two separate potential earn outs for the seller related to excess cash above the debt service with a payment of $3,400,000. The second was payable if the NOI exceeded a set threshold, but not to exceed $11,600,000. Based upon the individual valuation and analysis, the threshold would be exceeded and the maximum stabilized payment of $11,600,000 was probable. The implied unstabilized discount was $15,000,000, or approximately 20.5% based upon the as if stabilized values.

The indicated market value of the going concern on an as-is basis is $10,700,000 for the subject.

In addition, a prospective market value of the going concern upon stabilization was indicated using forecast net operating income at the date of stabilization. The indicated value is $11,950,000 for the subject. No rent loss or repairs are deducted from this value.

In addition, per the client’s request, we have provided the Investment Value Assuming Not-For- Profit Ownership and Tax Exempt status. The indicated value is $13,680,000 for the subject. No rent loss or repairs are deducted from this value.

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Brookdale Castle Hills

Sales Comparison Approach The sales comparison approach is based primarily upon the principle of substitution, which implies that a prudent individual will pay no more for a property than it would cost the individual to purchase a comparable substitute property. The steps involved in developing the sales comparison approach are:

■ Research the market to obtain information pertaining to sales, listings, and sometimes offerings of property similar to the property being appraised.

■ Investigate the market data to determine if the data is factually accurate and to determine if each sale represents an arm's length transaction.

■ Determine relevant units of comparison, i.e. sales price per square foot, and develop a comparative analysis for each.

■ Compare the subject and comparable sales according to the elements of comparison and then adjust each sale as appropriate.

■ Reconcile the multiple value indications that result from the adjustment of the comparables into a single value indication.

Units of comparison are components into which a property may be divided for purposes of comparison. All appropriate units of comparison should be analyzed for the property type being appraised and the resulting value indications reconciled to a single indicated value or value range. The sales are analyzed and adjusted for differences in elements of comparison, which are characteristics of properties that cause the prices paid for real estate to vary. The following elements of comparison are considered:

■ Real property rights conveyed ■ Financing terms ■ Conditions of sale ■ Market conditions ■ Location ■ Physical characteristics ■ Economic characteristics ■ Use ■ Non-realty components of value

Sales requiring lesser degrees of adjustment are typically the most comparable and are given greater weight than sales requiring greater degrees of adjustment. However, other factors must be considered including the reliability of the sales data and the degree of support of the required adjustments. After consideration of these factors, a final point value or value range is set forth.

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Brookdale Castle Hills

Applicability to Subject A number of factors make the application of the sales comparison approach problematic in the appraisal of a seniors housing facility. These factors include:

■ The relative scarcity of arm’s length sales; ■ The many variances in physical attributes from property to property; and ■ The complex economics of retirement housing facilities.

These challenges are so great that, according to Elderly Housing, A Guide to Appraisal, Market Analysis, Development and Financing, “value estimates using the sales comparison approach are sometimes given little or no weight in the final reconciliation of value”. While the limitations are great, we have procured an adequate amount of sale data to develop the sales comparison approach in this appraisal.

Presentation of Comparables We will now analyze consummated sales of seniors housing properties. The market for seniors housing facilities is national in scope. Most active buyers will consider a property anywhere in the country and apply similar investment criteria to properties regardless of location. Therefore, it is reflective of market behavior to use comparables from a broad geographic area. Year of construction, care mix, and date of the sale are considered much more relevant than location.

The comparable sale profiles are included in the addenda of this report. The sales we have elected to use in this analysis are as follows:

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Brookdale Castle Hills

Brookdale Castle Hills: 1207 Jackson Keller Road, San Antonio, Texas 78213

Colonial Oaks Sugar Land: 13825 Lexington Boulevard, Sugar Land, TX

Orchard Park at Katy: 24802 Kingsland Boulevard, Katy, TX

The Oaks at Flower Mound: 3281 Long Prairie Road, Flower Mound, TX

Chisholm Trail Estates: 513 Old Betsy Road, Keene, TX

Carriage Inn/Village on the Park Portfolio: 750 Longmire Road, Conroe, TX

Legend at Tulsa Hills: 701 West 71st Street, Tulsa, OK

Comparable Sale Location Map

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Brookdale Castle Hills

June-17

6

Going concern

$27,210,000

Carriage Inn/Village on the Park

Portfolio

Cash

Going concern Property Rights Conveyed

Going concern Sale Data

Date of Sale

Financing Terms

Arm's length

Sales Price

Arm's length

Cash

Conditions of Sale

$26,000,000

Arm's length

Cash Cash

Katy, TX Conroe, TXFlower Mound, TX

Going concern Going concern

March-16

$7,650,000

Summary of Sales Comparables

Element of Comparison Comparable Number 1

$19,100,000 $25,270,000

4

Colonial Oaks Sugar Land

5

Orchard Park at Katy

Kenne, TX

2

May-17 December-16 April-16

Tulsa, OK

May-16

Location Data

Property Name

City, State

3

Sugarl Land, TX

Chisholm Trail Estates

The Oaks at Flower Mound

Effective Gross Income

Care Levels

Number of Units

Year Built

82

70.3% –

1998

-

$16,844 $21,469

$1,760,436

-($3,028,647)

Occupancy at Sale

Expense Ratio

NOI After Reserves NOI Per Unit After Reserves

$1,473,241

ALF/MC ALF/MC

98.0% 95.0%

64,742

$251,316

4.43 –

858,229

$244.69

79,752

$316,395

$341.18

$202,507$86,932

73,111 73,000

$317,073

$355.62 Sales Price Per Square Foot

$297,294

$5,042,738

Physical Data

Overall Cap. Rate

2014

$17,332

$4,308,800

$1,280,153

Expenses

EGIM

Sales Price Per Unit

5.16

Units of Comparison

76 85

Arm's length

$7,415

$2,413,249

$104.79

($3,282,302) ($1,760,704)

IALF

99.0% 99.0%

$652,545

65.1%

2015

73.0%

1998

88

ALF/MC

3.17

$404.00 $390.32

47,277

6.70% 6.77%

Building Area

5.83%

$210,000,000

($23,883,684)

$14,091,000

IALF/MC

Arm's length

$37,974,684

$1,830,110

Cash

Going concern

($3,330,311)

Arm's length

$13,588

Cash

$21,280

2014

$5,160,421

62.9%

ALF/MC

86

91.1%

Income Data

5.53

8.53% 6.73%

94.0%

1989

1,037

64.5%

6.71%

5.27

Legend at Tulsa Hills

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Brookdale Castle Hills

Sales Price per Unit Analysis The first unit of comparison we will develop is the sales price per living unit. We have selected to analyze sales price per unit as opposed to sales price per bed because the number of beds operated at a given facility may fluctuate while the number of units is generally fixed. The sales will first be adjusted for the following non-physical elements of comparison.

Property Rights Conveyed Each of the sales were occupied by residents on short-term agreements at the time of sale. Each comparable was transferred as a going-concern including all FF&E. No adjustments are needed.

Financing Terms The comparables sold for cash to the seller, and no adjustments are needed.

Conditions of Sale It is noted that although Comparable 5 is a portfolio sale, we have utilized it due to the portfolio containing properties sold that are similar assets. We have adjusted this sale downward by 5% due to the portfolio premium associated with the sale. All of the other sales are similar, so no other adjustments are needed.

Occupancy at Sale The comparables were either at stabilized occupancy at the time of sale, requiring no adjustment, or were already adjusted for below stabilized occupancy in the sale write-up.

Market Conditions All of the sales are relatively recent; therefore, no adjustments were made for market conditions.

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Brookdale Castle Hills

Summary of Non-Physical Adjustments The adjustments for non-physical elements of comparison follow, along with the resulting adjusted units of comparison for the comparables.

$26,000,000

$0

$652,545 $16,844 $17,332

$1,473,241 $7,415

$4,308,800 - $5,042,738 $2,413,249

$19,100,000

$251,316 $297,294 $317,073

$0

$25,270,000 $0 $0

$0

$0 $0

$19,100,000 $26,000,000

88 $7,650,000

$1,760,436

$0

$0

$0 0.0% 0.0% 0.0% 0.0% $0

$0

3

Adjustments For Non-Physical Elements of Comparison Comparable Number

Element of Comparison 21 4

Conditions of Sale

$316,395$192,382 1,037

$37,974,684

($10,500,000)

$0

$14,091,000

$199,500,000Adjusted Sales Price

$86,932Adjusted Sales Price Per Unit Effective Gross Income

$21,469

Number of Units 76 85 82

NOI $1,280,153

$25,270,000

0.0%

Sales Price

Property Name Chisholm Trail

Estates

$7,650,000

$0

$0Property Rights Conveyed

0.0% 0.0% 0.0% 0.0%

0.0%

0.0% 0.0%

Financing Terms

The Oaks at Flower Mound

Orchard Park at Katy

0.0%

Colonial Oaks Sugar Land

$0Market Conditions

NOI Per Unit $13,588

0.0% 0.0% 0.0% 0.0% 0.0% $0

$27,210,000

6

0.0%

$1,830,110

$0

$0 0.0% 0.0% $0

5

Carriage Inn/Village on the Park

Portfolio

Legend at Tulsa Hills

$27,210,000$210,000,000 $0

-5.0% 0.0%

$5,160,421

86

$0

$0

0.0%

$21,280

Physical Elements of Comparison We will now adjust for the following physical elements of comparison.

Location Location adjustments will be determined by comparing the median home value (as determined by Esri) within a 5 mile radius of the subject property to the corresponding value for each of the comparable properties. The median home value of each property is shown in the following table.

Comparable Number City, State Median Sales Price

Subject San Antonio, Texas $168,465

1 Sugarl Land, TX $435,765

2 Katy, TX $354,439

3 Flower Mound, TX $356,900

4 Kenne, TX $116,927

5 Conroe, TX $146,245

6 Tulsa, OK $119,400

Median Home Sales Price by 5 Mile Ring Radius

Comparables 1, 2 and 3 have been adjusted downward by 20% due to their significantly superior location when compared to the subject property. Comparable 5 has not been adjusted, due to its relative similarity in location. Comparable 6 has been adjusted upward by 5% due to its slightly

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Brookdale Castle Hills

inferior location. Comparable 4 has been adjusted upward by 10% due to its inferior location when compared to the subject property.

Physical Characteristics The comparables vary in a number of physical characteristics in comparison to the subject. All are similar in basic design, being seniors housing facilities with interior hallways and an extensive amount of common areas. However, there are some variances that will require adjustment.

Age We will base the age adjustments upon the effective age for each comparable in comparison to the subject, as shown below.

12 15 2015

5.5% -18.2%

1 18

Calculated Adjustment (% Variance Applied To Price Per Unit)

12

55 5555

-$54,053$13,708

2017 2016

Property Name Chisholm Trail

Estates

12

5.5%

12 (11) 3

-20.0% 55

14.5%

-$57,526

-18.2%

$27,983

8

-$63,415

2014

The Oaks at Flower Mound

6

Age/Condition Adjustment Calculations

Element of Comparison

2017

Economic Life 3

55

2016 Less Year Sale Built

$4,742

Variance/Economic Life

12Subject's Effective Age 2 1

2015 19981998

Est. Effective Age of Sale

55

Legend at Tulsa Hills

2014

12

3

Variance in Effect. Age

18 3

1 3

Age of Sale at Sale

2

(10) (10)

4 Comparable Number

27 2

Carriage Inn/Village on the Park

Portfolio

2016 2016Year of Sale

Orchard Park at Katy

Colonial Oaks Sugar Land

1989

5

Quality The comparables are all modern seniors housing projects and do not require adjustment for quality.

Economic Characteristics In this adjustment process, economic characteristics are not considered, as they are reflected in the adjustments for location and physical characteristics. Note that following this process, we will also conduct a ranking and statistical analysis based solely upon income characteristics.

Use/Zoning The comparables all have the same use and are zoned to permit that use. No adjustments are required for use/zoning.

Non-Realty Components Each of the sales included real property, FF&E, and business value. Allocations of the contribution of each component to the sales price were not provided. We will not adjust for non-realty components in the adjustment process but will allocate the subject’s value to its components in the conclusion section of this appraisal.

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Summary of Adjustments for Physical Elements of Comparison The adjustments for physical elements of comparison are as follows:

$0

$316,395

0.0% 5.0%10.0%

0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

$0

Economic Characteristics $0 0.0%

$0

$0

Low of Adjusted Prices $100,367 High of Adjusted Prices $274,689 Average of Adjusted Prices $197,368

$100,367 $220,365 $274,689

$0

$0 0.0% 0.0% 0.0% 0.0% 0.0%

Non-Realty Components $0 $0 $0 $0

$0$0

Final Adjusted Sales Price Per Unit $214,761 $183,782 $190,244

Use/Zoning $0

$0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

$0 $0$0 0.0% 0.0% 0.0% 0.0% 0.0% $0 $0

-54,053 -63,415

$0 $0 -18.2% -57,526

14.5% 27,983

Legend at Tulsa Hills

Carriage Inn/Village on the Park

Portfolio

$0

Age/Condition 13,708 5.5% -18.2% -20.0% 5.5%

4,742

Quality $0

-20.0% -20.0% -20.0% ($50,263) ($59,459) ($63,415)

Adjusted Sales Price Per Unit

Property Name

$0 $15,820 $86,932 $192,382 $8,693

Chisholm Trail Estates

64 5

Adjustments For Physical Elements of Comparison

The Oaks at Flower Mound

$251,316 Location

0.0%

$297,294

Colonial Oaks Sugar Land

Orchard Park at Katy

$317,073

1 2 3 Element of Comparison Comparable Number

Based upon this analysis, a very wide per unit range is indicated. This is due to the fact that economics are the primary factor driving the sales prices of seniors housing properties, not physical differences.

Sales Price Trends 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 $230,100 and $200,000 in 2017, while the average and median price per assisted living unit was $221,250 and $215,800 in 2017.

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Continuum/Graphing Analysis The data is not extensive enough to accurately derive adjustments for minor physical differences using paired sales or other quantitative adjustment techniques. Furthermore, physical differences between the comparables and the subject are abundant because the comparables vary significantly in location, size, year built and facility composition. These are reasons for the significant variation in sales prices in the preceding example.

It is more pertinent to analyze the relationship of price per unit and NOI per unit. This is a relevant measure of income producing potential that should account for the different levels of services offered, varying locations, and differences in the improvements of the comparables.

1 $16,844 $251,316

5 $13,588 $202,507

$86,932

Subject $8,020 ??

4 $7,415

3 $21,469 $317,073

6 $21,280 $316,395

2 $17,332 $297,294

Continuum Comparable Number NOI Per Unit Sales Price Per Unit

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Brookdale Castle Hills

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$0 $5,000 $10,000 $15,000 $20,000 $25,000

P ri

ce P

er U

n it

NOI Per Unit

NOI/Unit Vs. Price/Unit

3 6 2 1 5 4

The sales exhibit a clear trend of increasing prices per unit as the NOI per unit increases. The correlation coefficient is a strong 0.978733 . The statistical forecasted value for the subject based upon the two data series is $107,759 per unit. Based upon this and the prior analysis of physical differences, the indicated value is as follows:

X = X =

X = $11,160,000

Rounded Low of Range $105,000 97 $10,185,000 $10,190,000

High of Range $115,000 97 $11,155,000

Range Price Per Unit Subject's Units Indicated Value

Effective Gross Income Multiplier The effective gross income multipliers (EGIM) for the sales are as follows:

Average of EGIM 4.66

73.0% 62.9% 64.5%

$2,413,249

$27,210,000

3.17 5.25

High of EGIM 5.27

EGIM 4.43 -

$5,160,421

5.27

Effective Gross Income $4,308,800

5.16

Expense Ratio 70.3% – 65.1%

Low of EGIM 3.17

$26,000,000 $7,650,000

- $5,042,738

Adjusted Sales Price

Item Comparable Number 1 2

Property Name Colonial Oaks

Sugar Land Orchard Park at

Katy The Oaks at Flower

Mound

$19,100,000

$37,974,684

$199,500,000

Chisholm Trail Estates

Carriage Inn/Village on the Park

Portfolio

$25,270,000

Legend at Tulsa Hills

3 4 5 6

Effective Gross Income Multipliers

The subject’s forecasted stabilized expense ratio is 76.3%, which is most similar to Sales 1 and 4; therefore, the most weight is placed in these sales.

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0.00

1.00

2.00

3.00

4.00

5.00

6.00

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0%

E G

I M u

lti p

lie r

Expense Ratio

Expense Ratio Vs. EGI Multiplier

1 2 3 4 5 6

The sales display a strong correlation between expense ratios and EGIMs. Based primarily upon this relationship and the forecasted value shown above we selected an EGIM range of 3.20 to 3.70 to apply to the subject’s pro forma EGI.

The indicated value using the EGIM unit of comparison is as follows:

X = X =

X =High of Range 3.70 $3,279,841 $12,135,412 $12,140,000

Rounded Low of Range 3.20 $3,279,841 $10,495,492 $10,500,000

Range EGI Multiplier Forecast EGI Indicated Value

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Indicated Value via Sales Comparison The value indications are as follows:

Add Excess Land

Indicated Value $10,800,000

Less Rent Loss ($40,000)

Less Unstabilized Discount ($1,070,000)

Less Repairs $0

Summary of Sales Comparison Approach Value Indications

Unit of Comparison Low of Range High of Range

Concluded Value - Stabilized Basis $10,830,000

Sales Price Per Unit $10,190,000 $11,160,000

EGIM $10,500,000 $12,140,000

Shared Range $10,500,000 $11,160,000

$1,080,000

In developing the sales price per unit analysis, we first attempted to adjust the sales based solely upon differences in physical elements of comparison, such as age, location, and quality. This is due to the fact that economics is the primary factor driving the sales prices of seniors housing properties, not physical differences. Following the physical adjustment analysis, we conducted an analysis of NOI per unit compared to sales price per unit. This comparison showed a strong correlation between the two variables. We relied heavily upon the forecasted statistical value for the subject in deriving the indicated price per unit for the subject. However, since this method relies upon NOI per unit, it is closely related to the income capitalization approach, but it is a very valid technique.

The EGIM analysis is less dependent upon the accurate estimation of NOI. An investor considering purchasing the subject might place substantial weight in an EGIM analysis as it is a commonly used tool.

Both units of comparison are well supported and appropriate. We place roughly equal weight in the two analyses and conclude an indicated value of $10,830,000 for the subject on a stabilized basis. Since the analysis is based upon stabilized operations, adjustments are made if appropriate for rent loss to stabilization, an unstabilized asset discount, repairs, and profit for lease-up risk. The indicated value after adjustments is $10,800,000 for the subject.

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Land Valuation To develop an opinion of the subject’s land value, as if vacant and available to be developed to its highest and best use, we utilize the sales comparison approach.

The sales comparison method is the most common technique for valuing land, and it is the most reliable and pertinent method when adequate sales data can be located. To use the sales comparison technique, sales of similar parcels of land are analyzed. Current contracts of sales and listings can also be considered. The comparables are analyzed, compared, and adjusted to provide a value indication for the land being appraised. This method of land valuation is utilized in this report.

Extent of the Data Search We have searched the subject’s market area for recent sales of sites with comparable size, shape, and access. The search procured four recent sales. Detailed comparable profiles are included in the addenda of this report.

Transactions Confirmed A summary of comparable land sales considered follows. Factual data regarding each comparable has been obtained from the grantor (seller), grantee (buyer), broker, or some other knowledgeable party.

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Brookdale Castle Hills: 1207 Jackson Keller Road, San Antonio, Texas 78213

Land Comparable 1: 8130 Hausman Road, San Antonio

Land Comparable 3: 7227 Lamb Road, San Antonio

Land Comparable 2: 2803 Mossrock Drive, San Antonio

Land Comparable 4: 9936 Culebra Road, San Antonio

Comparable Land Sale Location Map

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June-17 January-17 364,162 Site Size (Square Feet)

Conditions of Sale Arm's length Arm's length Arm's length

9936 Culebra Road, San Antonio

$3.43

All available Unknown

87,120

Arm's length Date of Sale January-17 June-17

$1,250,000 $478,500

180,774

Commercial

Sales Price Per Square Foot

435,600

Proposed Use

Multi-Family

Unknown $5.49

All available

$5.97 $6.91

All available All available Unknown

Multi-Family Commercial

Unknown

Summary of Land Comparables

4321 Comparable NumberElement of Comparison

Sales Price

Financing Terms Cash to seller Property Rights Conveyed

Address 8130 Hausman Road,

San Antonio 2803 Mossrock Drive,

San Antonio

Fee simple Cash to seller

7227 Lamb Road, San Antonio

$1,250,000 Fee simple Fee simple Fee simple

$2,600,000

Cash to sellerCash to seller

Zoning

Utilities

Adjustment for Non-Physical Elements of Comparison Adjustments are now made for non-physical elements of comparison. We shall then consider physical elements of comparison for the relevant units of comparison for the subject.

Property Rights Conveyed The sales all involved the conveyance of fee simple interests. No adjustment is required for property rights conveyed because the fee simple interest in the subject site is under consideration.

Financing Terms The comparables sold for cash and/or on cash equivalent terms and do not require adjustment.

Conditions of Sale This adjustment is made to account for atypical motivation of either the buyer or seller in a given sale. The comparables considered all sold under arm’s length conditions and require no adjustment.

Market Conditions The comparables are all relatively recent sales and require no adjustment for market conditions.

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Summary of Adjustments The adjusted units of comparison will require further analysis for physical characteristics. Non- physical adjustments are summarized in the following table:

Financing Terms $0 $0

Adjusted Sales Price $1,250,000

Market Conditions $0 $0

$478,500

$0 $1,250,000

$1,250,000

$478,500

$0

$0

$0

Comparable Number

435,600

Adjusted Sales Price Per Square Foot

$2,600,000 180,774

$0 $1,250,000 Sales Price

3

Site Size (Square Feet) 364,162 87,120

0.0% 0.0%

Property Rights Conveyed $0

$0 $0

$0

Conditions of Sale

$0

$3.43 $5.49 $6.91 $5.97

21

Adjustments For Non-Physical Elements of Comparison

Element of Comparison

$0

0.0% 0.0% 0.0% 0.0%

0.0% 0.0% 0.0% 0.0%

0.0% 0.0% 0.0% 0.0%

0.0% 0.0%

$2,600,000 $0

4

Adjustment for Physical Elements of Comparison The following physical elements of comparison are now analyzed. We shall analyze the sales using the sales price per square foot of comparison because the brokers and market participants we have contacted indicated that is the most common unit of comparison for land like the subject.

Site Size Comparables 1 and 4 are larger in size and are adjusted upward. Comparables 2 and 3 are smaller in size and adjusted downward in comparison.

Zoning The comparables are all zoned to permit similar development. No adjustments are needed.

Functional Utility The comparables and subject are all functionally adequate sites. No adjustments are needed.

Location The comparables are all in superior locations; therefore, a 5% downward adjustment is applied to each comparable.

Summary of Adjustments The adjustment table for physical elements of comparison follows:

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Brookdale Castle Hills

0.0% 0.0% 0.0% 0.0%

0.0% 0.0% 0.0% 0.0%

$6.27

Low of Adjusted Prices $3.43

Average of Adjusted Prices $5.15

Final Adjusted Sales Price Per Square Foot

$3.43 $4.67 $6.22

-5.0% -5.0% -5.0% -5.0%

$0.00 $0.00 $0.00

Site Size $0.17 -$0.55 -$0.35

Adjusted Sales Price Per Square Foot

Comparable Number

$0.60

$5.97

2

Zoning

3

($0.30)($0.27)

High of Adjusted Prices $6.27

Location

$5.49

($0.17)

Element of Comparison 1

5.0% -10.0% -5.0% 10.0%

$0.00 Functional Utility $0.00 $0.00 $0.00

$6.91

4

Adjustments for Physical Elements of Comparison

$3.43

($0.35)

$0.00

Indicated Value of the Site as Though Vacant Based upon these sales, a price per square foot of $5.15 is concluded to be reasonable.

294,426 X $5.15 = Indicated Value Rounded

$1,516,294 $1,520,000

Subject's Square Footage X

Indicated Price Per Square Foot =

Note that there is approximately 5 acres of excess land. The excess land is valued similar to that of the primary site as they are similar in access and visibility. However, the subject currently has a building on the site which would need to be demolished given it has no contributory value and is obsolete. Therefore, the cost of demolition is deducted to determine the as-is value. The building is 10,206 square feet with a demolition cost estimated at $3.75 per square foot based upon Marshall & Swift, which results in a cost of $38,273 or $40,000 rounded.

Subject's Square Footage X

$1,121,670 $1,120,000

Indicated Price Per Square Foot Rounded

Excess Land Valuation

Indicated Value

= $38,273 ($40,000) $1,080,000

Less Demolition of Existing Improvements Indicated Value

= 217,800 X $5.15 =

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Brookdale Castle Hills

FF&E Analysis JLL maintains a database of cost comparables. These represent either actual costs or total budgeted costs based upon construction bids. Current comparables are shown as follows.

Item Comp 1 Comp 2 Comp 3 Comp 4 Average Identification - City Dallas San Antonio San Antonio McKinney - State Texas Texas Texas Texas - Levels of Care AL, MC AL, MC AL, MC AL, MC - Units 201 105 109 73 122 Beds 229 128 137 88 146 Building Area (Square Feet) 198,000 104,185 86,668 69,702 114,639 Cost in Dollars - Items in Marshall & Swift Base Costs - Total FF&E $1,432,003 $950,000 $876,000 $900,000 $1,039,501 TOTAL COST $53,609,069 $22,085,515 $22,300,000 $14,472,898 $28,116,871 Cost Per Unit - Total FF&E $7,124 $9,048 $8,037 $12,329 $9,134 Cost Per Square Foot - Total FF&E $0.04 $0.09 $0.09 $0.18 $0.10

Construction Cost Comparables

Replacement Cost of FF&E The average cost per unit of FF&E for the cost comparables previously presented was $9,134 per unit. We will use this to estimate the subject’s FF&E cost.

X = X = $890,000$886,034

Estimated FF&E Cost

FF&E Cost New RoundedFF&E Cost NewFF&E Cost Per UnitSubject's Units

$9,13497

Analysis of Depreciation The FF&E has depreciated. FF&E depreciates more rapidly than real property, often requiring replacement several times during the life of a real estate asset. We will use an average economic life of 15 years for the subject’s FF&E, resulting in depreciation as follows:

7 / 15

Total Incurable Depreciation

Times Percent Depreciated

Rounded

-46.7%

$890,000Replacement Cost New Physical Depreciation to FF&E

($415,333)

($420,000)

7.5 / 15

Physical Depreciation to FF&E - Upon Stabilization Replacement Cost New $890,000 Times Percent Depreciated -50.0% Total Incurable Depreciation ($445,000) Rounded ($450,000)

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Absorption and Income Loss Analysis In this section, we will estimate the subject’s absorption and the corresponding income loss during the lease-up period needed for the subject to reach the forecast stabilized occupancy level.

Current Status As of the effective date of this analysis, the subject was 71.3% occupied. Occupancy at the subject property has lagged that of the market. Management noted that its location and layout are the two biggest factors impacting occupancy. The majority of incoming residents cannot live on the second floor due to evacuation restrictions; therefore, the second floor units are difficult to lease-up. In addition, the subject’s location and visibility is inferior to competing properties in the market.

Absorption The subject’s occupancy is as follows:

Resident Day Occupancy

Year Ending 12/17 36,865 25,227 68.4%

Item 12/16

Year Ending

Annual

36,865 Actual Resident Days 25,27823,638 25,116

Budget 3 Months For Year

Potential Resident Days

Occupancy Percent 64.1% 68.6% 68.1%

Ending Ending 05/18 12/18 36,865 36,865

NIC MAP tracks move-in rates for properties in the 31 largest US markets. This data will aid in the establishment of an absorption rate for the subject.

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Based upon this data and considering the prevailing market occupancy level, we are forecasting that the subject will require an additional 6 months to reach the forecasted stabilized occupancy level. The indicated lease-up pace is as follows:

Total Operating Beds 101

Times Forecasted Stabilized Occupancy 80.0%

Beds Occupied at Stabilization 81

Less Current Number Occupied 69

Beds To Be Rented to Reach Stabilization 12

Forecasted Absorption Period (Months) 6

Forecasted Net Absorption Per Month (Beds) 2.0

Lease-Up Forecast

Quarter Independent

Living Assisted

Living Memory

Care 1Q12 5.6 2.7 1.7 2Q12 5.8 3.0 1.5 3Q12 5.1 3.1 1.7 4Q12 4.5 3.3 1.6 1Q13 4.5 3.0 1.8 2Q13 5.0 2.6 1.6 3Q13 4.3 2.7 1.4 4Q13 4.2 2.4 1.3 1Q14 4.0 2.4 1.4 2Q14 4.0 2.3 1.3 3Q14 4.3 2.3 1.4 4Q14 3.6 2.3 1.3 1Q15 3.6 2.3 1.4 2Q15 3.1 2.3 1.2 3Q15 3.4 2.2 1.3 4Q15 3.5 2.0 1.1 1Q16 3.8 2.0 1.3 2Q16 3.3 2.0 1.2 3Q16 3.3 1.9 1.1 4Q16 3.6 1.9 0.9 1Q17 3.2 2.1 1.0 2Q17 2.9 2.1 1.1 3Q17 3.3 2.3 1.0 4Q17 3.4 2.2 1.0 1Q18 3.5 2.1 0.9

National Absorption Averages Units

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Income Loss Forecast NOI during the forecasted months of remaining absorption is projected in the tables that follow, based upon the preceding assumptions. The income loss is not discounted as it represents a negative, rather than positive cash flow.

$3,279,841 ($2,261,573) $1,018,268

71% 89%

6 90%

Month

Forecast % of EGI Earned

Pro Forma EGI

Projected EGI

Forecast % of

Expenses Incurred

Pro Forma Expenses

Forecast Expenses

Forecast NOI

Pro Forma

NOI

NOI Loss (Difference

Between Stabilized

and Actual) 1 89.1% $273,320 $243,553 90.0% (188,464) ($169,618) $73,935 $84,856 $10,921 2 90.9% $273,320 $248,514 91.7% (188,464) ($172,759) $75,755 $84,856 $9,101 3 92.7% $273,320 $253,475 93.3% (188,464) ($175,900) $77,575 $84,856 $7,281 4 94.6% $273,320 $258,436 95.0% (188,464) ($179,041) $79,395 $84,856 $5,461 5 96.4% $273,320 $263,398 96.7% (188,464) ($182,182) $81,215 $84,856 $3,640 6 98.2% $273,320 $268,359 98.3% (188,464) ($185,323) $83,036 $84,856 $1,820 7 100.0% $273,320 $273,320 100.0% (188,464) ($188,464) $84,856 $84,856 $0

Total $38,224 $40,000

Pro Forma Expenses at Stabilization Pro Forma NOI

Income Loss During Absorption Period Pro Forma EGI

Total Income Loss Rounded

Starting Economic Occupancy Level Total Absorption Period (Months) Expense Percentage at Beginning of Period

Starting Physical Occupancy

The total indicated income loss during absorption is $40,000.

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Conclusion

Market Value of the Specified Assets of the Business As Is The following indications of value have been developed for the subject on an as is basis:

Approach to Value Income Capitalization - Direct Capitalization Sales Comparison Cost

$10,800,000 Not Developed

As Is Value Indications

Value Indication $10,700,000

The direct capitalization method was developed for this report. The income capitalization process is well supported and highly pertinent to the appraisal of income property such as the subject. Market rent was estimated after a review of competing local properties. Total income and expenses were estimated based upon analysis of similar income and expense comparables with consideration to the subject’s historical expenses. This is the approach most utilized in the market and is considered the most relevant approach to valuing the subject.

The sales comparison approach was also developed and is relatively well supported. Market participants rely upon sales to provide general ranges for valuation purposes but generally place much more weight on the income approach.

The cost approach was not developed in this appraisal. Buyers of senior housing properties place little credence in the cost approach. The estimation of depreciation is difficult to do with any precision, especially for older buildings. Thus, the cost approach was not developed.

After consideration of the reliability and relevance of each approach, the direct capitalization approach is given primary weight, supported by the sales comparison approach. We conclude that the indicated value is $10,700,000.

Prospective Market Value of the Specified Assets of the Business upon Stabilization Using direct capitalization of the forecasted NOI on the forecasted date of stabilization, we determined that the indicated prospective future value of the subject, as of December 29, 2018, will be $11,950,000 for the subject.

Investment Value Assuming Not-For-Profit Operations and Ad Valorem Tax Exemption Using the direct capitalization of the forecasted NOI assuming not-for profit ownership and tax exempt status, we determined that the indicated value of the subject is $13,680,000.

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Value Allocation The above concluded value is on a going concern basis. In order to allocate the going concern value, several different methodologies can be used. These include the lease analysis, the management fee capitalization method, and the cost residual method. REITs and other buyers of nursing facility real estate typically determine market rent based upon a lease coverage ratio. According to Health Care REIT, HCP, Grubb and Ellis Health Care REIT, and Aviv REIT, a typical lease coverage ratio for assisted living is 1.01 or higher, and typical coverage for a nursing facility is 1.3 or higher. For purposes of this analysis, a coverage ratio of 1.20 is used.

Lease Analysis The lease analysis determines the value of the real estate and FF&E based upon facility lease data excluding intangibles. The residual is then allocated to intangibles.

For the lease analysis, we utilize our pro forma NOI. From this, we determine the value associated with the real estate based income stream. This is then capitalized at a lower rate than the going concern NOI due to the lower risk factor.

For comparison purposes, the capitalization rate used is 6.75% based upon recent REIT transactions noted below. The value of the FF&E is estimated based upon a typical cost per unit less depreciation. Examples of relevant transactions in support of our forecasts include:

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Property/Portfolio Facility Type Number of Beds/Units State (s) Date of Sale Year 1 Rent Year 1 NOI Sales Price

Lease Coverage

Ratio Cap Rate Memory Care Facilities - The LaSalle Group MC 223 TX & IL March-17 $4,326,000 - $61,800,000 - 7.00% Prestige Senior Living AL, MC 102 OR March-17 $1,834,000 - $26,200,000 - 7.00% 4 SNF/ALFs in Dallas Fort Worth SNF, AL 568 TX December-16 $8,600,000 - $95,900,000 - 8.97% Mainstreet - 3 Memory Care MC 171 AR & TX November-16 $3,477,550 - $44,300,000 - 7.85% 5 Bickfords AL 277 IA, MO, IL & NE May-16 $6,343,750 $8,564,063 $87,500,000 1.35 7.25% Care Trust AL 440 FL, IN, MD & WI March-16 $2,300,000 - $27,000,000 - 8.52% Symphony Post Acute SNF N/A IL November-15 $24,200,000 - $276,200,000 - 8.76% Old Mill Rehab SNF 44 NE October-15 $1,012,275 $1,707,028 $13,011,247 1.69 7.78% Senior Lifestyle AL, MC N/A WI October-15 $9,230,000 - $142,000,000 6.50% Pristine Portfolio SNF, AL N/A OH October-15 $17,200,000 - $175,000,000 - 9.83% 10 Texas SNFs SNF 1,142 TX July-15 $12,325,000 $15,567,134 $145,000,000 1.26 8.50% NMS Healthcare SNF 678 MD June-15 $20,475,500 $30,712,500 $234,000,000 1.50 8.75% Aviv Portfolio SNF 26520 US March-15 $201,000,000 $251,250,000 $3,000,000,000 1.25 6.70% Vista at Westover SNF 120 TX February-15 $1,500,000 $2,114,449 $20,000,000 1.41 7.50% Vista at Westover SNF 120 TX February-15 $1,500,000 $2,114,449 $20,000,000 1.41 7.50% Bethany Rehab SNF 170 CO February-15 $1,700,000 $2,251,828 $17,950,000 1.32 9.47% Sabra/Holiday IL 2,850 Various September-14 $30,300,000 - $550,000,000 - 5.51% 6 CCRCs CCRC N/A TX July-14 $14,136,000 - $186,000,000 7.60% 3 California SNFs SNF N/A CA May-14 $1,369,000 - $13,350,000 - 10.25% Oregon Portfolio SNF, AL, MC N/A OR April-14 $3,528,000 - $42,000,000 - 8.40% 4 Texas SNFs SNF N/A TX April-14 $5,100,000 - $53,700,000 - 9.50% Bridgecrest Rehab SNF 119 TX February-14 $1,444,000 $2,160,000 - 1.50 - Newcastle/Holiday Portfolio I IL 2,882 Various December-13 $32,675,813 $39,537,733 $502,704,813 1.21 6.50% Newcastle/Holiday Portfolio II IL 3,003 Various December-13 $32,867,701 $39,441,241 $505,656,938 1.20 6.50% NHI/Holiday Portfolio IL 2,841 Various December-13 $31,920,070 $38,623,285 $491,078,000 1.21 6.50% 3 Illinois SNFs SNF N/A IL November-13 $734,988 - $7,000,000 - 10.50% Covenant Dove Portfolio SNF 5,717 Various October-13 $47,000,000 $65,318,000 $525,000,000 1.39 8.95% Ventas/Holiday Portfolio IL 3,138 Various October-13 $48,980,000 $57,306,600 $790,000,000 1.17 6.20% NHI-Marysville OH AL, MC 76 OH July-13 $1,150,000 $1,164,375 $15,300,000 1.01 7.52% SNFs in NC SNF 90 NC June-13 $791,568 - $9,594,764 - 8.25% SNFs in NC SNF 90 NC June-13 $791,568 - $9,594,764 - 8.25% Aviv REIT - Advocat Acute & SNF N/A KY September-12 $1,009,800 - $9,900,000 - 10.20% Aviv REIT Safe Haven Acute & SNF N/A ID September-12 $660,000 - $6,000,000 - 11.00% LTC, Inc - Two SNFs in Ohio SNF 288 OH August-12 $4,590,000 - $54,000,000 - 8.50% LTC, Inc - SNF in TX SNF 90 TX July-12 $585,000 - $6,500,000 - 9.00% Red Oak Health & Rehab SNF 144 TX March-12 $1,612,000 $2,418,000 $18,600,000 1.50 8.67% Laurel Health Care SNF, AL 2,777 Various No Sale Date $25,925,000 $36,500,000 No Sale 1.41 No Sale Platinum Portfolio SNF, AL 937 Various No Sale Date $9,880,000 $11,790,000 No Sale 1.19 No Sale Prelude at Woodbury SNF, AL 30 MN No Sale Date $3,287,000 $4,273,100 No Sale 1.30 No Sale Bridgecrest Rehab SNF 119 TX No Sale Date $1,444,000 $2,160,000 No Sale 1.50 No Sale Village at Richardson SNF 206 TX No Sale Date $1,377,500 $1,719,071 No Sale 1.25 No Sale AVERAGE 1.34 8.16%

Leased Fee Sale Comparables

The resulting allocation is as follows:

As Is

Investment Value Assuming Not-For- Profit Ownership and Ad Valorem

Exemption Upon Stabilization Forecast NOI $777,971 $1,018,268 $787,774 Divided by Market Lease Coverage Ratio 1.20 1.20 1.20 Income Attributable to Real Estate and FF&E $648,309 $848,557 $656,478 Divided by NNN Cap Rate 6.75% 6.75% 6.75% Indicated Value of Real Estate and FF&E $9,604,583 $12,571,214 $9,725,600 Rounded $9,600,000 $12,570,000 $9,730,000 Allocated Value of FF&E $470,000 $470,000 $440,000 Allocated Value of Land $0 $0 $0 Allocated Value of Improvements $9,130,000 $12,100,000 $9,290,000 Indicated Value of Intangibles and Goodwill $1,100,000 $1,110,000 $2,220,000

Lease Coverage Method

Management Fee Capitalization Method For the management fee capitalization method, we will assume that the forecasted management fee reflects income attributable to the business value of the subject. We will then capitalize this

177

Brookdale Castle Hills

amount at a higher rate due to the increased risk associated with the business value of the subject. The management fee capitalization method is based upon the Rushmore method commonly used in the valuation of hotels/motels. The capitalization rate used is based upon property management company transactions procured from the BIZCOMPS database summarized below:

Business Description Area Date of Sale Earnings Sales Price Cap Rate Property Management Colorado December-09 $1,300 $4,500 28.89% Property Management California November-10 $590 $1,450 40.69% Property Management Florida December-08 $465 $1,350 34.44% Property Management Georgia August-07 $350 $860 40.70% Property Management Phoenix, AZ June-06 $250 $800 31.25% Property Management Phoenix, AZ June-05 $253 $750 33.73% Property Management Phoenix, AZ June-02 $164 $635 25.83% Property Management Florida October-08 $128 $600 21.33% Property Management Florida July-04 $223 $595 37.48% Property Management Florida October-09 $174 $575 30.26% Property Management Florida June-04 $230 $550 41.82%

Property Management Florida March-04 $126 $540 23.33% Property Management Colorado August-08 $143 $500 28.60% Property Management Florida January-09 $201 $475 42.32%

32.91% Amounts displayed in thousands.

Property Management Company Sale Comparables

AVERAGE

Based upon these comparables, a capitalization rate of 30.00% is deemed appropriate. This calculation is shown below:

As Is Investment Value Upon Stabilization Forecast Management Fee $163,992 $163,992 $166,058 Divided by Management Fee Cap Rate 30.00% 30.00% 30.00% Indicated Intangibles and Goodwill $546,640 $546,640 $553,528 Rounded $550,000 $550,000 $550,000

Management Capitalization Method

Cost Residual Method The cost approach was not developed within this appraisal; therefore, we have not calculated any intangible value via the cost residual method.

178

Brookdale Castle Hills

Allocation Conclusion The concluded business values, utilizing the above methods, are shown below. For any methodology resulting in negative intangible value, we have not forecasted any intangibles from this respective methodology. For this analysis, we have estimated intangible value as follows.

As Is

Investment Value Assuming Not-For- Profit Ownership and Ad Valorem

Exemption Upon Stabilization Lease Coverage Method $1,100,000 $1,110,000 $2,220,000 Management Fee Capitalization Method $550,000 $550,000 $550,000 Cost Residual Method - - - Indicated Value of Intangibles and Goodwill $830,000 $830,000 $1,390,000

Intangible Value Conclusions

The resulting allocations are as follows:

As Is

Investment Value Assuming Not-For- Profit Ownership and Ad Valorem

Exemption Upon Stabilization Real Property $9,400,000 $12,380,000 $10,120,000 FF&E $470,000 $470,000 $440,000 Intangibles and Goodwill $830,000 $830,000 $1,390,000

Market Value of the Specified Assets of the Business $10,700,000 $13,680,000 $11,950,000

Value Allocation(s)

Exposure Time Our estimate of value is based upon a typical exposure time for the property type being appraised. Exposure time is assumed to precede the effective date of value. Exposure times vary widely from property to property and are dependent upon a number of factors. These can include the motivation of the owner, the price that the property is offered for sale, the effectiveness of the marketing plan, the availability of financing, etc. We surveyed active market participants, including brokers and buyers, to determine a typical marketing time for seniors housing properties. The respondents were offered the following choices:

A. 3 months

B. 6 months

C. 9 months

D. 12 months

E. More than 12 months

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Brookdale Castle Hills

The majority, being 35.8% of total respondents, indicated selection B, while 30.2% indicated selection C. Based upon these responses, we conclude that an exposure period of 6 months would be necessary to sell the subject.

Marketing Time – JLL Seniors Housing Investor Survey (Winter 2018) Exposure time is assumed to precede the date of value while marketing time is the estimated time from the date of value that would be required to sell the property. When market conditions are stable and not expected to change, exposure time and marketing time are generally the same.

Survey respondents reported expected marketing time for seniors-only apartments to be the shortest at five months on average, an indication of the limited supply and investor appetite. Independent and assisted living were anticipated to be marketed for more than a month and a half longer on average. However, survey respondents indicated the length of the marketing period for skilled nursing could be up to 12 months, or over 7 months on average.

JLL Seniors Housing Investor Survey Marketing Time (Winter 2018)

Seniors-only Apartments Independent Living Assisted Living Skilled Nursing

Low 3.0 3.0 6.0 3.0 High 6.0 9.0 9.0 12.0 Avg 5.0 6.6 6.8 7.1

That is the case in this instance, so the estimated marketing time is also six months.

180

Brookdale Castle Hills

Final Value Estimate Our analyses and forecasts result in the value conclusion(s) below, which are based upon assumptions, limiting conditions, and definitions presented in this report.

Market Value of the Specified Assets of the Business As Is, Fee Simple Estate

Effective as of June 29, 2018

$10,700,000

Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Exemption

Effective as of June 29, 2018

$13,680,000

Prospective Market Value of the Specified Assets of the Business Upon Stabilization

Effective as of December 29, 2018

$11,950,000

Our conclusion(s) are based on terms of cash and a reasonable exposure time of six months prior to the effective date of value. The estimated marketing period is also six months.

Appendix A Legal Description

Appendix B Maps, Plats, Building Plans

brookdale.com

Dimensions are approximate. Floor plans may vary.

Brookdale Castle Hills 1207 Jackson Keller Road, San Antonio, Texas 78213 | (210) 375-8132 Facility No. 100251 & 100252

BROOKDALE® is a trademark of Brookdale Senior Living Inc., Nashville, TN, USA ® Reg. U.S. Patent and TM Office. 09/14

Floor Plans

Studio Approx. 340 – 415 sq. ft.

Studio Deluxe Approx. 435 sq. ft.

Living Area

Bath

Studio Approx. 340 - 415 sq. ft.

Living Area

Bath

Studio Deluxe Approx. 435 sq. ft.

brookdale.com

Dimensions are approximate. Floor plans may vary.

Brookdale Castle Hills 1207 Jackson Keller Road, San Antonio, Texas 78213 | (210) 375-8132 Facility No. 100251 & 100252

BROOKDALE® is a trademark of Brookdale Senior Living Inc., Nashville, TN, USA ® Reg. U.S. Patent and TM Office. 09/14

Floor Plans

Alcove Approx. 485 sq. ft.

One Bedroom Approx. 560 sq. ft.

Living Room Sleeping Alcove

Bath

Alcove Approx 485 sq. ft.

Living Room

Bedroom

Bath

One Bedroom Approx. 560 sq.ft.

Patio

brookdale.com

Dimensions are approximate. Floor plans may vary.

Brookdale Castle Hills 1207 Jackson Keller Road, San Antonio, Texas 78213 | (210) 375-8132 Facility No. 100251 & 100252

BROOKDALE® is a trademark of Brookdale Senior Living Inc., Nashville, TN, USA ® Reg. U.S. Patent and TM Office. 09/14

Floor Plans

Clare Bridge® Private Suite Approx. 315 – 350 sq. ft.

Clare Bridge® Shared Suite Approx. 570 sq. ft.

7/1/2018 InterFlood - List Flood Maps

https://www.interflood.com/listmaps.aspx?lon=-98.511501&lat=29.506623&address=1207+Jackson+Keller+Rd&City=San%20Antonio&state=TX&zip=… 2/3

Appendix C Comparable Profiles

Unit Sq. Ft. Fee Basis Base Rate Per Day/Month

400 Monthly $3,550.00 520 Monthly $4,275.00

Property Identification Name: Franklin Park Sonterra Address: 18323 Sonterra Pl

Rent Comparable

Zip Code: 78258

Municipality: San Antonio County: Bexas State: Texas

Year Opened: 2010

Physical Data Property Type IALF

Unit/Bed Mix Number of Nursing Beds: Number of AL Beds: 52

Meals Per Day: 3 per day Utilities: All but tel Housekeeping: Weekly HK

Number of IL Units: 150

Services Included In Rents

Occupancy & Census Occupancy: 92.0%

1/1 Priv AL

Rental Rates

Bed Type Studio Priv AL

Other Fees Community Fees: $2,000 Level of Care Charges: 3 LOC $400-$1200 Second Person Fees: $800

Unit Sq. Ft. Fee Basis Base Rate Per Day/Month

N/A Monthly $4,500.00

Community Fees: $2,000 Level of Care Charges: All inclusive

Other Fees

Rental Rates

Bed Type Studio P

Occupancy & Census

Meals Per Day: 3 per day Utilities: All but cable/tel Housekeeping: Weekly HK

Number of IL Units: 0

Services Included In Rents

Unit/Bed Mix Number of Nursing Beds: 0 Number of AL Beds: 36

Year Opened: 1997

Physical Data Property Type ALZ

Zip Code: 78218

Municipality: San Antonio County: Bexas State: Texas

Property Identification Name: Colonial Gardens Address: 10 Lynn Batts Ln

Rent Comparable

Unit Sq. Ft. Fee Basis Base Rate Per Day/Month

371 Monthly $4,000.00 474 Monthly $4,250.00

Monthly $5,050.00 235 Monthly $6,000.00

Community Fees: $500 Level of Care Charges: AL LOC N/A MC All inclusive Second Person Fees: $1,000

Other Fees

1/1 Priv AL 2/2 Priv AL Studio Priv MC

Rental Rates

Bed Type Studio Priv AL

Occupancy & Census Occupancy: 100.0%

Meals Per Day: 3 per day Utilities: All but tel Housekeeping: Weekly HK

Number of IL Units: 160

Services Included In Rents

Unit/Bed Mix Number of Nursing Beds: Number of AL Beds: 80

Year Opened: 2011

Physical Data Property Type IALF/MC

Zip Code: 78230

Municipality: San Antonio County: Bexas State: San Antonio

Property Identification Name: The Adante Address: 2702 Cembalo Blvd

Rent Comparable

Unit Sq. Ft. Fee Basis Base Rate Per Day/Month

340 Monthly $3,900.00 462 Monthly $4,000.00 580 Monthly $4,000.00 322 Monthly $4,400.00

Community Fees: $1,500 Level of Care Charges: 5 LOC $400 Each for AL/MC Second Person Fees: $795

Other Fees

1/1 Priv Studio SP MC Studio Priv MC

Rental Rates

Bed Type Studio Priv AL

Occupancy & Census Occupancy: 92.0%

Meals Per Day: 3 per day Utilities: All but tel Housekeeping: Weekly HK

Number of IL Units: 0

Services Included In Rents

Unit/Bed Mix Number of Nursing Beds: 0 Number of AL Beds: 109

Year Opened: 2016

Physical Data Property Type ALF/MC

Zip Code: 78248 Phone Number Contact Name:

Municipality: San Antonio County: Bexas State: Texas

Property Identification Name: Heartis San Antonio Address: 15430 Huebner Rd

Rent Comparable

Unit Sq. Ft. Fee Basis Base Rate Per Day/Month

Monthly $1,182.00

Comments: OPENING 16 UNITS THIS WEEK.

Community Fees: $2,000 Level of Care Charges: Levels Second Person Fees:

Other Fees Entrance Fees:

Rental Rates

Bed Type Studio SP

Occupancy & Census Occupancy: 100.0%

Meals Per Day: 3 per day Utilities: All but tel Housekeeping: Weekly HK

Number of IL Units: 0

Services Included In Rents

Unit/Bed Mix Number of Nursing Beds: 0 Number of AL Beds: 64

Year Opened: 1998

Physical Data Property Type ALZ

Zip Code: 78231

Municipality: San Antonio County: Bexar State: Texas

Property Identification Name: Arden Courts - San Antonio Address: 15290 Huebner Rd

Rent Comparable

Rent Comparable

Property Identification Name: Brookdale San Antonio Address: 9203 Cinnamon Hills Municipality: San Antonio County: Bexar State: Texas Zip Code: 78240 Phone Number 210-641-5046 Contact Name: Marketing Physical Data Property Type Assisted Living & Memory Care Year Opened: 1998 Number of Stories: 2 Unit/Bed Mix Number of AL Beds: 82 Number of MC Units: 30 Services Included In Rents Meals Per Day: 3 Utilities: All but phone Housekeeping: Weekly

Rent Comparable (Cont.) Occupancy & Census Occupancy: 80.0% Rental Rates

Bed Type Unit Sq. Ft. Fee Basis Base Rate Per Day/Month

Assisted Living Studio 286 Monthly $2,550 1/1 469 Monthly $3,370 1/2 600 Monthly $3,630 2/2 728 Monthly $3,830 Memory Care Companion 286 Monthly $3,500 Private 313 Monthly $4,290 Other Fees Community Fees: $2,500 Level of Care Charges: AL care is a-la-carte, up to $2,500/mo. MC is all-inclusive. Second Person Fees: $750

Seniors Housing Sale Profile

Location & Property Identification

Colonial Oaks Sugar Land

Assisted Living & Memory Care

13825 Lexington Blvd

Sugar Land, TX 77478

Fort Bend

Houston MSA

FC Colonial Oaks AL Seniors Investors II, LLC

Closed No 3/22/2016

$19,100,000 Warranty Deed 2016135758 Fee Simple Going Concern 100.00 All cash Bradley Grossa

Confirmed-Other

Pro Forma

$4,308,800 $3,028,647

$1,280,153 70.3% Yes Yes

Sale Indicators $251,316 Price per Unit:

Price per SF of GBA: $404.00 EGIM: 4.43 Cap Rate: 6.70%

Site and Improvement Data Land - SF(Gross): Care/Housing Types: Year Built: Property Condition: Construction Quality: No. of Buildings/Stories: GBA-SF: No. of Units:

189,312 Assisted Living/Memory Care 1998

Good

Good

1/1

47,277

76

Unit Summary Care Type # Units # Beds

Assisted Living Memory Care

Property Name:

Sub-Property Type:

Address:

City/State/Zip:

County:

MSA:

Sale Information Grantor: Grantee: Sale Status: Portfolio Sale: Date of Sale: Contract Sale Price: Document Type: Recording No.: Property Rights: % of Interest Conveyed: Financing: Verified By:

Verification Type:

Income Data Operating Data Type: Effective Gross Income: Expenses: Net Operating Income: Expense Ratio: Reserves Included: Management Included:

Colonial Oaks Surgar Land

The facility was reported to be 99% occupied at the time of sale. The facility operates with 76 units and 78 beds. The facility at the time of sale was considered to be of good quality and good condition.

Comments

Total Units/Beds In Operation: 76/78

76 Total Units:

53 23

55 23

Seniors Housing Sale Profile

Location & Property Identification Property Name:

Sub-Property Type:

Address:

City/State/Zip:

County:

MSA:

Orchard Park at Katy

Assisted Living & Memory Care

24802 Kingsland Blvd.

Katy, TX 77494

Harris

Houston MSA

Sale Information Grantor: Grantee: Sale Status: Portfolio Sale: Date of Sale: Contract Sale Price: Document Type: Recording No.: Property Rights: % of Interest Conveyed: Financing: Verified By:

Verification Type:

Katy Orchard Park LLC. Welltower Inc.

Closed No 05/1/2017

$25,270,000 Warranty Deed RP-2017-186019 Fee Simple Going Concern 100.00 All cash Bradley Grossa

Confirmed-Other

Income Data Operating Data Type: Trailing Actuals

n/a Effective Gross Income: Expenses: n/a Net Operating Income: $1,473,241 Expense Ratio: n/a Reserves Included: Yes Management Included: Yes

Sale Indicators $266,000 Price per Unit:

Price per SF of GBA: $390.32 EGIM: n/a Cap Rate: 5.83%

Site and Improvement Data Land - SF(Gross): Care/Housing Types: Year Built: Property Condition: Construction Quality: No. of Buildings/Stories: GBA-SF: No. of Units:

217,800 Assisted Living/Memory Care 2014 Excellent

Excellent 1/2

64,742 95

Unit Summary Care Type # Units # Beds

Assisted Living Memory Care

Orchard Park at Katy

The facility was reported to be 98% occupied at the time of sale. The facility was operated by The Orchard Company at the time of sale with Sagora Senior Living operating the facility following the sale.

Comments

Total Units/Beds In Operation: 95

95 Total Units:

75 20

Seniors Housing Sale Profile

Location & Property Identification

The Oaks at Flower Mound

Assisted Living & Memory Care

3281 Long Prairie Rd.

Flower Mound, TX 75022

Denton

Dallas-Fort Worth MSA

FM Senior Living Realty CSH Flower Mound, LLC

Closed No 12/19/2016

$26,000,000 Warranty Deed 2016-161972 Fee Simple Going Concern 100.00 All cash Bradley Grossa

Confirmed-Other

Pro Forma $5,042,738 $3,282,302

$1,760,436 65.1% Yes Yes

Sale Indicators $317,073 Price per Unit:

Price per SF of GBA: $355.62 EGIM: 5.16 Cap Rate: 6.77%

Site and Improvement Data Land - SF(Gross): Care/Housing Types: Year Built: Property Condition: Construction Quality: No. of Buildings/Stories: GBA-SF: No. of Units:

212,311 Assisted Living/Memory Care 2015

Excellent

Excellent 1/2

73,111 82

Unit Summary Care Type # Units # Beds

Assisted Living Memory Care

Property Name:

Sub-Property Type:

Address:

City/State/Zip:

County:

MSA:

Sale Information Grantor: Grantee: Sale Status: Portfolio Sale: Date of Sale: Contract Sale Price: Document Type: Recording No.: Property Rights: % of Interest Conveyed: Financing: Verified By:

Verification Type:

Income Data Operating Data Type: Effective Gross Income: Expenses: Net Operating Income: Expense Ratio: Reserves Included: Management Included:

The Oaks at Flower Mound

The facility was reported to be 95% occupied at the time of sale. The facility operates with 82 units and 92 beds. The facility at the time of sale was considered to be of excellent quality and excellent condition.

Comments

Total Units/Beds In Operation: 82/92

82 Total Units:

58 24

58 34

Seniors Housing Sale Profile

Location & Property Identification

Property Name: Chisholm Trail Estates

Sub-Property Type: Independent and Assisted Living

Address: 513 Old Betsy Rd.

City/State/Zip: Keene, TX 76059

JohnsonCounty:

MSA: Dallas-Fort Worth-Arlington, TX

1302703IRR Event ID:

Sale Information

Grantor: Local Owner/Operator Grantee: DFW Hospital Provider Sale Status: Closed

04/11/2016Date of Sale:

$7,650,000Contract Sale Price:

Document Type: Warranty Deed Assets Sold: Going concern, total assets

of the business Property Rights: Fee Simple Going Concern % of Interest Conveyed: 100.00

Financing: Cash to seller Conditions of Sale: This was an arm's length

transaction. Verified By: Carl Parker, III, MAI, PhD Verification Source: Matthew Alley Verification Type: Confirmed-Seller Broker

Income Data

Operating Data Type: In Place $2,416,673Effective Gross Income:

Expenses: $1,764,387

Net Operating Income: $652,286 Expense Ratio: 73.01%

Reserves Included: Yes Management Included: Yes

Sale Indicators

$86,932Price per Unit:

Price per SF of GBA: $104.79 EGIM: 3.17

Cap Rate: 8.53%

Site and Improvement Data

Land-SF(Gross): 1,046,746

Independent Living, AL Dementia

Care/Housing Types:

Year Built: 1988 Property Condtion: Good Construction Quality: Average No. of Buildings/Stories: 15/2 GBA-SF: 73,000 No. of Units: 88

Unit Summary Care Type # Units # Beds

Independent Living 56

AL Dementia 36 32

Total Units: 88

Total Units/Beds In Operation:

88

Chisholm Trail Estates

Seniors Housing Sale Profile

Comments

Income and expense are based on actual operations at the time of sale. The property was 99% occupied at the time of sale. The buyer is owned by funds managed by an investment adviser. The expenses include management fee and $300 per unit for reserves. NOT READY FOR USE, AWAITING ADDITIONAL VERIFICATION.

The facility has two main components: Lake Pointe at Chisholm Trail consists of the independent living apartments and The Gardens at Chisholm Trail is the Memory Care assisted living unit. The Villas are the attached IL duplex units that are single story. Built in 1988, the property was renovated in 2003. Project amenities include a pond stocked with bass and carports. Unit amenities include full kitchens, patios, washer/dryers in most units and individually controlled HVAC units. The site includes space for future development of additional duplex units.

Chisholm Trail Estates

Seniors Housing Sale Profile

Location & Property Identification

Property Name: Carriage Inn/Village on the Park Portfolio

Sub-Property Type: Independent, Assisted & Dementia

750 Longmire Rd.

Conroe, TX 77304

Montgomery

Houston-The Woodlands-Sugar Land, TX

1361526

Harrison Street & Bridgewood Property Co. Cardinal Bay Closed 05/26/2016 $210,000,000 Warranty Deed Going concern, total assets of the business Fee Simple

100.00 Cash to seller This was an arm's length transaction. Brian L. Chandler, MAI, CRE, FRICS Confirmed-Confidential

IRR Projection $37,942,770 $23,851,575

$14,091,195

62.86% Yes

Address:

City/State/Zip:

County:

MSA:

IEvent ID:

Sale Information

Grantor:

Grantee: Sale Status: Date of Sale: Contract Sale Price: Document Type: Assets Sold:

Property Rights:

% of Interest Conveyed:

Financing:

Conditions of Sale:

Verified By:

Verification Type:

Income Data

Operating Data Type: Effective Gross Income: Expenses:

Net Operating Income: Expense Ratio: Reserves Included: Management Included: Yes

Sale Indicators $202,507Price per Unit:

Price per SF of GBA: $244.69 EGIM: 5.53

Cap Rate: 6.71%

Site and Improvement Data

Land-SF(Gross): 3,200,353 Independent Living, Assisted Living, AL Dementia

Care/Housing Types:

Year Built: 1989-2014 Property Condtion: Good Construction Quality: Good No. of Buildings/Stories: 8/1 GBA-SF: 858,229 No. of Units: 1037

Unit Summary Care Type # Units # Beds

Independent Living 822

Assisted Living 154

AL Dementia 61

Total Units: 1,037

Total Units/Beds In Operation:

1,037

Carriage Inn/Village on the Park Portfolio

Seniors Housing Sale Profile

Comments

The weighted average occupancy at the time of sale was 91.1%.

The portfolio consists of 8 properties, 5 Carriage Inn facilities and 3 Village on the Park properties. Seven are located in Texas and one in Oklahoma. The Carriage Inn located at 750 Longmire Road in Conroe, Texas, built in 1998, is pictured. The other properties are: Village on the Park, 1515 Kingsridge Drive, Oklahoma City, built 1999; Carriage Inn, Bryan, 4325 Boonville Road, built 2000; Village on the Park, Friendswood, 400 East Parkwood Drive, built 1989; Village on the Park, Houston, 12102 Steepleway Blvd., built 1999; Carriage Inn, Huntsville, 2805 Lake Road, built 1998; Carriage Inn, Katy, 1400 Katy-Flewellen Road, built 1996/2014, and Carriage Inn, Lake Jackson, 130 Lake Road, built 1996. The Conroe and Friendswood properties are exclusively independent living, and the Oklahoma City, Houston, and Katy properties have a small amount of memory care.

Carriage Inn/Village on the Park Portfolio

Seniors Housing Sale Profile

Location & Property Identification

Legend at Tulsa Hills

ALF/MC

701 West 71st Street South

Tulsa, OK 74132

Tulsa

Tulsa, OK Metropolitan Statistical Area

TUL ALF2 LLC C/O Altus Group

EPC Tulsa/Greeley LLC Closed Yes

6/23/2017 $27,210,000 Public Records 2017061160

Fee Simple Going Concern 100.00 All cash Andrea Roberts

Confidential

Pro Forma $5,160,421 $3,330,311 $1,830,110 64.5% Yes Yes

Sale Indicators $316,395 Price per Unit:

Price per SF of GBA: $341.18 EGIM: 5.27 Cap Rate: 6.73%

Site and Improvement Data Land – SF (Gross): 163,786

ALF/MC Care/Housing Types: Year Built: 2014 Property Condition: Excellent Construction Quality: Excellent No. of Buildings/Stories: 1 & 2 GBA-SF: 79,752 No. of Units: 86

Unit Summary # Units

68

86

Care Type

Assisted Living

Memory Care

Total Units/Beds In Operation:

Comments Occupancy was approximately 94%. The pro forma and includes a 5% management fee and $300 per unit for reserves/replacements. The facility is licensed for 95 beds. The sale also included a 71 unit assisted living/ memory care facility in Greeley, Colorado, which is not included in the above purchase price.

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Sale Information Grantor: Grantee: Sale Status: Portfolio Sale: Date of Sale: Contract Sale Price: Document Type: Recording No.: Property Rights: % of Interest Conveyed: Financing: Verified By:

Verification Type:

Income Data Operating Data Type: Effective Gross Income: Expenses: Net Operating Income: Expense Ratio: Reserves Included: Management Included:

Legend at Tulsa Hills

18

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Appendix D Operating Data

Page: 1 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

Capacity Assisted Living 80.0 80.0 80.0 Memory Care 17.0 17.0 17.0 Total Unit Capacity 97.0 97.0 97.0

Unit Occupancy Assisted Living 47.8 50.5 51.6 Memory Care 14.4 15.8 14.5 IL / AL / MC Occupancy 62.2 66.4 66.1

Total Unit Occupancy 62.2 66.4 66.1

Occupancy % Assisted Living 59.76% 63.17% 64.51% Memory Care 84.65% 93.17% 85.17% Total Occupancy % 64.12% 68.43% 68.13%

Rates per occupied unit, except as noted: Assisted Living 3,224 3,007 2,798 Memory Care 5,380 4,591 4,350 Total Base Rent 3,723 3,385 3,138

Assisted Living (537) (422) (334) Memory Care (281) (169) (131) Total Permanent Discounts (478) (362) (290)

Assisted Living 2,686 2,585 2,464 Memory Care 5,099 4,422 4,219 Total Base Rent Less Permanent Discounts 3,245 3,023 2,848

Assisted Living (119) (52) (69) Memory Care (136) (42) (176) Total Incentives (123) (50) (93)

Assisted Living 2,567 2,533 2,394 Memory Care 4,963 4,380 4,043 Total Base Rent Less Perm Discounts and Incentives 3,121 2,974 2,755

Assisted Living 448 492 541 Memory Care 643 1,088 849 Total Care Revenue (per AL & MC occupied unit) 493 635 608

Assisted Living 3,015 3,025 2,935 Memory Care 5,605 5,468 4,892 Total Base Rent & Care less Perm Discounts and Incentives 3,614 3,608 3,364

IL/AL/MC Other Revenue per Unit 56 40 46

Base Rent Less Cash Discounts (all products) 3,121 2,974 11,022 Base Rent & Care Less Cash Discount (all products) 3,614 3,608 13,455

Page: 2 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

Resident Revenue 400200 Double Occupancy Revenue 0 0 0 400200 Double Occupancy Revenue 12,852 18,108 10,104 400300 Service Fee Rent Revenue 1,830,619 1,802,655 1,722,793 400650 Contra: Rent Revenue - BB (317) 2,607 0 450000 Respite Revenue 6,450 0 0

Rent - Assisted 1,849,604 1,823,370 1,732,897 400200 Double Occupancy Revenue 98 1,295 0 400300 Service Fee Rent Revenue 925,195 869,610 755,791 400650 Contra: Rent Revenue - BB (58) 1,803 0 450000 Respite Revenue 3,850 0 0

Rent - Memory Care 929,085 872,708 755,791 400650 Contra: Rent Revenue - BB 0 0 0

Resident Rent Revenue 2,778,690 2,696,079 2,488,688

Care Revenue 455000 Care Revenue 367,846 505,436 482,459

PVT Care Revenue 367,846 505,436 482,459 Care Revenue 367,846 505,436 482,459 Discounts

460000 Long-Term Incentives (46,140) (17,947) (41,498) 460001 Short-Term Incentives (45,665) (21,525) (32,023) 460002 Permanent Discounts (306,167) (236,178) (183,361) 460005 Travel & Save Incentive 0 0 0 460006 Flexible Mod Plan Incentive 0 0 0 460007 Resident Tenure Discount (343) 0 0 460014 Resident Retention Discount (50,731) (51,923) (46,558)

Rent Concessions (449,045) (327,572) (303,439) 460003 S-T Incentives Amortization (31,687) (37,195) (27,466) 460004 S-T Incentives Deferral 45,665 21,525 32,023

Conc-Deferral-Amort-MyChoice 13,977 (15,670) 4,557 Discounts (435,067) (343,243) (298,882) Community Fees

402802 Community Fees - BB 3,350 0 0 Community Fees - BB 3,350 0 0

402800 Admission / Community Fees 90,734 40,250 50,834 498000 Comm Fee Waived (42,873) (10,325) 0

Community Fee Revenue 47,861 29,925 50,834 Community Fees 51,211 29,925 50,834 Food Revenue

473300 Catering Revenue 0 0 0 Catering Revenue 0 0 0

473000 Meal Revenue - Resident 210 0 210 473100 Meal Revenue - Tray Delivery 4,064 2,040 1,881 473400 Meal Revenue - Guest 1,030 1,676 1,087

Meal Revenue 5,304 3,716 3,178 Food Revenue 5,304 3,716 3,178 Other Resident Revenue

475000 Department Revenue 22,722 17,204 21,797 Department Revenue 22,722 17,204 21,797

475200 Sublease Revenue 0 0 0 Sublease Revenue 0 0 0

476500 Personal Solutions Revenue 5,785 1,860 2,780 Personal Solutions Revenue 5,785 1,860 2,780

475700 Miscellaneous Revenue 3,805 7,412 6,057 476300 Room Revenue - Guest 0 309 309

Other Misc Revenue 3,805 7,721 6,366 476100 Incontinence Rev-Non Prsnl Sol 0 0 0

Non-PS Incontenance 0 0 0 475210 ISC Rent Revenue 0 0 0 476400 HH_Hospice-Other Revenue 0 0 0

ISC Rent/HH Hospice 0 0 0 Other Resident Revenue 32,312 26,785 30,944 Late Fee Revenue

475500 Late Fee Revenue 12,500 5,000 6,750 475550 Late Fee Rev Contra 1,485 (500) 0 475600 Late Fee Revenue Write-off (9,500) (3,500) (4,750)

Late Fee Revenue 4,485 1,000 2,000 Late Fee Revenue 4,485 1,000 2,000 Total Resident Revenue 2,804,781 2,919,697 2,759,221

Compensation Expenses Regular

500000 Salaries & Wages Exempt 252,734 168,463 180,471 Salaries and Wages - Exempt 252,734 168,463 180,471

501000 Salaries & Wages Nonexempt 197,953 292,922 328,882 501150 Cook Wages 95,037 95,951 95,653 501200 Utility Workers Wages 0 0 0 501350 Housekeeper Wages 37,954 36,610 38,719 501510 Res Care Coordinator Wages 0 83 0 501520 Res Care Associate Wages 281,291 293,351 313,920 501550 Drivers Wages 15,950 13,574 9,889 501600 Concierge Wages 26,375 23,557 25,516 501800 Registered Nurses (RN's) 10,408 4,655 6,724 501900 Certified Nursing Aides (CNAs) 0 25 0 501903 Med Aide 233,887 261,806 284,376

Salaries and Wages-Non Exempt 898,854 1,022,534 1,103,679 501750 Personalized Living Wages 0 0 0

Personalized Living Wages 0 0 0 502400 On Call Pay 1,600 1,210 0

On Call Pay 1,600 1,210 0 505010 Transitional Duty Wages 1,958 2,079 0

Transitional Duty Wages 1,958 2,079 0 505200 Salaries - Other 23,373 30,999 25,710

Salaries - TRN, Bylr,Ber 23,373 30,999 25,710 505800 G&A Alloc- Sales Specialists 252 705 0

G&A Alloc - Sales Specialists 252 705 0 505760 Non-Recurring Expense Labor 0 0 0

Non-Recurring Expense Labor 0 0 0 Regular 1,178,771 1,225,991 1,309,860 Overtime

Page: 3 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

502000 Salaries & Wages-OT Nonexempt 82,031 87,930 89,905 Overtime 82,031 87,930 89,905

Overtime 82,031 87,930 89,905 Bonus

506500 Bonus - Employee Referral 1,485 1,032 1,248 506800 Bonus - Signing 0 7 0 506900 Bonus - Other Recognition 0 0 0 506909 General Bonuses 8,240 10,687 11,762 507100 Sales & Marketing Bonus 0 0 0

General Bonuses 9,725 11,726 13,010 506600 Resident Referral Bonus 0 0 0

Resident Referral Bonus 0 0 0 507300 CMIP Bonus 7,257 4,061 23,136 507330 CMIP Bonus Protem 1,649 742 0

CMIP Bonus 8,906 4,803 23,136 Bonus 18,632 16,529 36,146 Commissions

507500 Commissions Wages 12,612 6,515 13,447 Commissions Wages 12,612 6,515 13,447

Commissions 12,612 6,515 13,447 Contract Labor

516009 Contract Community 0 0 0 Contract Community 0 0 0

PTO & Holiday Wages 523300 Holiday 29,665 30,875 32,964 523600 PTO Wages 50,576 45,212 47,855

PTO & Holiday 80,241 76,088 80,819 PTO & Holiday Wages 80,241 76,088 80,819 Payroll Taxes

515000 Payroll Taxes 121,161 122,367 133,091 Payroll Taxes 121,161 122,367 133,091

Payroll Taxes 121,161 122,367 133,091 Employee Benefits

521900 Life and ADD Insurance 1,500 1,518 2,125 522500 Disability Insurance 163 167 230 523100 Employee Benefits - Misc. 0 0 2,298 523200 401(K) Savings Plan 6,339 8,447 11,882 524300 Bereavement Pay 1,884 1,364 0 524500 Severance Pay 0 0 0 524800 Long Term Bank 2,196 7 0

Employee Benefits Paid 12,081 11,503 16,535 520100 Group Health Insurance 77,106 117,715 135,114

Group Health Insurance 77,106 117,715 135,114 524900 Relocation Costs - Other 0 1 0

Relocation Costs - Other 0 1 0 Employee Benefits 89,187 129,219 151,649 Workers Compensation

524700 Workers Comp Premium 1,351 1,393 1,890 524710 Workers Comp-Claim Costs 13,141 11,664 12,072 524720 Workers Comp - TPA Cost 3,007 1,876 3,622 524740 Workers Comp PY Reserve Adj (6,683) (4,979) 0

Workers Comp Totals 10,815 9,955 17,583 Workers Compensation 10,815 9,955 17,583

501520 Res Care Associate Wages 0 0 0 501750 Personalized Living Wages 0 0 0 507300 CMIP Bonus 0 0 0 515000 Payroll Taxes 0 0 0 500000 Salaries & Wages Exempt 0 0 0 501000 Salaries & Wages Nonexempt 0 0 0 501904 Rehab Aide 0 0 0 501905 ISC Business Office Wages 0 0 0 502000 Salaries & Wages-OT Nonexempt 0 0 0 504920 Physical Therapy Wages 0 0 0 504925 PRN Physical Therapy Wages 0 0 0 504930 Occupational Therapy Wages 0 0 0 504940 Speech Therapy Wages 0 0 0 504950 FIT/Premium Wages 0 0 0 515000 Payroll Taxes 0 0 0 523300 Holiday 0 0 0 523600 PTO Wages 0 0 0

Total Compensation Expenses 1,593,450 1,674,595 1,832,501

Other Controllable Expenses Food Expenses

530000 Raw Food 0 0 0 530001 Food Target Adjustments 0 0 (4,043) 530009 Raw Food 145,655 150,223 154,311 530100 Bakery 0 0 0 530200 Dairy 0 0 0 530300 Produce 0 0 0 530400 Meat & Seafood 0 0 0 530500 Groceries 0 0 0 531100 Special Event Meals 0 0 0 531200 Associate Meal Xfer-DS UseOnly 0 0 0 531500 Transfers 0 0 0 540502 Dietary Supplements, Dining 0 0 0 540660 Liquid Nutritional Supplements 0 0 0

Raw Food 145,655 150,223 150,268 531109 Food Adjustments (217) 133 23 531300 Food Rebate (13,172) (8,624) (8,104) 531301 Food Rebate Target Adj 0 0 0 550300 Res Special Events & Actv-Food 103 0 0 600700 Spcl Event-Prosp-Infl-Food 23 0 0 650100 Associate Meals 0 0 0

Food Adjustments (13,264) (8,491) (8,081) 771300 Fuel Surcharge 0 0 0

Fuel Surcharge 0 0 0 530800 Convenience Store Merchandise 0 0 0

Convenience Store Merchandise 0 0 0 Food Expenses 132,391 141,733 142,187 Supplies

540000 Kitchen and dietary Supplies 0 0 0 540009 Dietary Supplies 1,355 3,408 4,536

Page: 4 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

543000 Dishes & Utensils 0 0 0 545300 OneSource Sysco Reclass 0 0 0

Dietary Supplies 1,355 3,408 4,536 540500 General Supplies 0 0 0 540501 Supplies Target Adjustment 0 0 (239) 540509 General Supplies 24,411 25,560 25,392 541000 Office Supplies 0 0 0 541500 Paper & Forms 497 20 0 542000 Paper Goods 0 0 0 542500 Linens 0 0 0 543500 Uniforms 0 0 0

General Supplies 24,908 25,580 25,153 544000 Chemicals 0 0 0 544700 Housekeeping Supplies 0 0 0 544709 Cleaning Supplies 12,905 14,884 16,452

Cleaning Supplies 12,905 14,884 16,452 544050 Beauty Supplies & Expenses 16,517 12,467 16,284

Beauty Supplies & Expenses 16,517 12,467 16,284 544900 Postage and Courier Delivery 2,990 2,998 2,448

Postage and Courier Delivery 2,990 2,998 2,448 545000 Supplies Small & Non-Capital 5,107 2,287 3,240

Supplies Small & Non-Capital 5,107 2,287 3,240 540510 Durable Medical Equipment 420 46 300

Durable Medical Equipment 420 46 300 540615 Personal Solutions_PCP 3,951 1,199 1,971

Incontinent Supp-Personal Solu 3,951 1,199 1,971 Supplies 68,153 62,868 70,383 Healthcare Supplies

540601 Medical Supplies 0 4 0 540609 Medical Supplies 4,434 756 611 540620 Incontinent Supplies 0 0 0 540671 OTC Pharmacy 0 2 0

Medical Supplies 4,434 762 611 540650 Clinical Charting 0 0 0 540659 Other Healthcare Expenses 1,908 1,545 2,249 540670 Pharmacy MedA and Managed Care 0 34 0 543600 Hazardous Medical Waste 21 0 0

Other Healthcare Expenses 1,929 1,579 2,249 Healthcare Supplies 6,363 2,341 2,860 Resident Activities

550100 Flowers 0 0 0 550109 Resident Relations 1,192 1,272 1,032 550200 Newsletter 0 0 0 550400 Resident Relations 9 0 0

Resident Relations 1,201 1,272 1,032 550305 Res Special Events - Other 0 0 0 550500 Resident Activities-Other 5 5 0 550509 Resident Activities 8,617 12,560 11,053

Resident Activities 8,622 12,565 11,053 550510 Interactive Technology Expense 3,388 3,388 3,468

Interactive Technology Expense 3,388 3,388 3,468 Resident Activities 13,211 17,225 15,553 Travel & Entertainment

555400 Other Ground Transport 0 0 0 555409 Vehicle Transport and Rental 997 496 276 555450 Car Rental 0 0 0 555700 Mileage Expense 35 0 0

Vehicle Transport and Rental 1,032 496 276 555000 Lodging 401 1,968 2,598

Lodging 401 1,968 2,598 555200 Airfare 889 12 480

Airfare 889 12 480 555900 Meals & Entertainment 504 127 120 557100 Prospect Meals & Entertainment 0 0 0

Meals & Entertainment 504 127 120 Travel & Entertainment 2,827 2,603 3,474 Repairs & Maintenance

560100 Heating, Plumbing & Electrical 0 0 0 560109 Heatng,Plumbing,Electric,Water 35,134 33,564 40,200 560110 Electrician Repair Service 0 0 0 560120 Plumbing Repair Service 0 0 0 560130 Water Treatment 0 0 0 560150 JLL FM HVAC Maint & Repair 14,629 2,974 0 561700 Misc Maintenance Contracts 0 0 0

Heat, Plumbg, Electrical,Water 49,763 36,538 40,200 560600 Maintenance Supplies 0 0 0 560609 R&M Building_Equip_Supp 42,173 35,586 40,152 560700 Residence Decorating 0 0 0 560800 R & M - Building 0 0 0 560900 R & M - Equipment 0 0 0

R&MBuilding/Equipment/Supplies 42,173 35,586 40,152 560500 Vehicle Upkeep and Maintenance 0 0 0 561400 Community Vehicle Gas Expense 0 0 0 561409 Vehicle Upkeep 7,260 6,420 1,872

Vehicle Upkeep 7,260 6,420 1,872 561709 IT Hardware and Maintenance 576 714 588

IT Hardware and Maintenance 576 714 588 560200 Fire Safety and Security 0 0 0 570900 Alarm System Contract 0 0 0 570909 Fire, Safety, and Security 135 15,716 27,168 570950 JLL FM Fire, Safety & Security 25,382 7,735 0

Fire, Safety, and Security 25,517 23,451 27,168 Repairs & Maintenance 125,288 102,709 109,980 Ground Maint & Contract Svcs

569000 Grounds Maintenance 0 0 0 569009 Outside Grounds Contracts 1,308 20,158 33,136 569050 JLL FM Landscpng & Grnds Maint 51,767 17,788 0

Outside Grounds Contracts 53,076 37,947 33,136 570109 Inside Cleaning Contracts 0 0 0 570200 Carpet Cleaning Contract 0 0 0 571150 Common Area Maint Contracts 0 0 0

Inside Cleaning Contracts 0 0 0 570600 HVAC Contract 0 0 0

Page: 5 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

570609 Equipment Service Contracts 869 896 768 571100 Generator Maintenance 0 0 0 571110 Laundry Equipment Service 0 0 0 571120 Kitchen Equipment Service 113 0 0

Equipment Service Contracts 981 896 768 571139 Rental Contracts 0 0 0

Rental Contracts 0 0 0 570050 JLL FM Program Fees 4,219 5,628 0

Outside Dept Labor Contracts 4,219 5,628 0 570700 Elevator Contract 0 2,935 9,912 570750 JLL FM Elevator Maint & Repair 5,031 6,433 0

Elevator Contract 5,031 9,368 9,912 570500 Pest Control Contract 0 2,137 6,348 570550 JLL FM Pest Control 5,984 1,617 0

Pest Control Contract 5,984 3,754 6,348 561000 Environmental Expense 0 0 0

Environmental Expense 0 0 0 Ground Maint & Contract Svcs 69,292 57,593 50,164 Communication & Telephone

580209 Telephone 17,321 18,096 18,192 580900 Telephone 0 0 0 581100 Cellular Phone Charges 0 0 0

Telephone 17,321 18,096 18,192 580700 Internet 0 0 0 580709 Internet_Connected Living 1,646 1,629 1,668

Internet / Connected Living 1,646 1,629 1,668 581400 Cable & Satellite TV 5,742 11,075 11,328

Cable & Satellite TV 5,742 11,075 11,328 Communication & Telephone 24,708 30,800 31,188 Paid Referrals

601909 Friends for Life Referral Fees 2,013 3,630 5,124 Friends For Life 2,013 3,630 5,124

601600 Referral Mktg-Community 0 0 0 601730 Intrnet LeadAggregtr-Fee-Mv-In 0 0 0 601739 Paid Referrals 50,900 18,000 46,498 601740 Intrnet LeadAggregtr-Other 0 0 0

Paid_Referrals 50,900 18,000 46,498 Paid Referrals 52,913 21,630 51,622 Public Relations & Advertising

600100 DM-Lead Bank Prosp-Adult Infl 0 0 0 600110 DM-Purch List Prosp-Adult Infl 380 0 0 600120 Direct Mail (Corp Use Only) 0 40 7,034 600210 Advertising - Corporate Print 0 3,903 2,547 600300 Adver-Local TV (Corp Use Only) 0 0 0 600510 Multi-layer Mktg Hm of Plcmt 10,992 0 0 600805 Call Center Lead Nurturing 0 0 0 601719 Advertising Digital 5,040 14,349 9,744 601720 Advert-Social Media (Corp Use) 0 1,422 4,410

Corporate Marketing 16,412 19,714 23,736 600109 Direct Mail (Comm Use Only) 5,244 3,903 2,400 600200 Newspaper Run o Press Adv-Zone 0 0 0 600209 Advertising - Local Print 0 0 3,000 600220 Senior Publication Adv 0 0 0 600230 Magazines-Programs-Other Adv 0 0 0 600309 Advertising - Local Broadcast 0 40 0 600600 Collatrl Matls - Prospct-Infl 1,553 807 750 600610 Collatrl Matls - Professionals 0 0 0 600705 Spcl Event-Prosp-Infl-Other 0 0 0 600709 Special Events 339 770 1,544 600710 Spcl Event-M3-M2 Shared Mkt 0 0 0 600800 Mktg Membrshp-Shows-Model 0 0 0 600809 Other Marketing 3,371 4,487 791 600810 Mktg Cust-Comp Intelligence 0 0 0 600830 Move-In Gift-New Residnt-Cust 0 0 0 600840 Promotional Items 0 0 0 600850 Personal Connections 0 0 0 601605 Local Business Development 0 0 0 601609 Business Development 50 277 2,265 601800 Public Relation Fees 0 0 0

Community Marketing 10,556 10,285 10,750 Public Relations & Advertising 26,968 29,999 34,485 Staff Development

650000 Associate Appreciation 12 0 0 650009 Assoc Appreciation_Incentives 1,955 1,084 1,548

Associate Appreciatin/Incentiv 1,967 1,084 1,548 651500 Staff Training 740 0 0 651509 Staff Training Expenses 629 882 1,176 655500 Seminars & Training 0 0 0

Staff Training 1,368 882 1,176 654500 Pre Employment Expense (292) 0 0 654509 Pre-Employment Expenses 13,973 12,285 13,488

Pre-Employment Expenses 13,681 12,285 13,488 Staff Development 17,016 14,251 16,212 Professional Fees

516109 Consultants & Med Directors 0 0 0 710800 Consulting Fees 0 0 0

Consultants/Medical Director 0 0 0 700100 Collections Legal Fees 180 0 0 700109 Legal Fees 0 0 180 700400 Corporate SEC Legal Fees 0 0 0 700900 Operations Regulatory Lgl Fees 144 0 0

Legal Fees 324 0 180 710400 Other Professional Fees 3,578 0 0 710409 Other Professional Fees 3,535 3,266 4,251

Other Professional Fees 7,113 3,266 4,251 710100 Pharmacy Fees 315 934 528

Pharmacy Fees 315 934 528 Professional Fees 7,753 4,201 4,959 Bad Debt Expense

750000 Bad Debt Expense 20,643 9,434 17,888 Bad Debt Expense 20,643 9,434 17,888

Bad Debt Expense 20,643 9,434 17,888 Other Misc. Operating Expenses

Page: 6 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

771200 Miscellaneous 130 0 0 771209 Misc Expenses and Misc Taxes 1,896 543 636

Misc. Taxes and Expenses 2,026 543 636 774809 Printing Expenses Allocated 0 0 0 774900 Employee Handbook Printing 14 0 0

Printing Expenses Allocated 14 0 0 770300 Association Fees 2,134 2,426 2,484

Association Fees 2,134 2,426 2,484 770400 Survey & License Fees 1,296 3,116 3,379

Survey & License Fees 1,296 3,116 3,379 770800 Bank Charges 6 0 0

Bank Charges 6 0 0 771100 Dues and Subscriptions 1,323 881 858

Dues and Subscriptions 1,323 881 858 771600 Sales and Use Tax 191 6 154

Sales and Use Tax 191 6 154 771901 License & Annual Reports 0 0 0

License & Annual Reports 0 0 0 777100 Contra Expense - Rebates (9,386) (4,671) (2,817) 777101 Non-Food Rebate Target Adj 0 0 0

Contra Expense - Rebates (9,386) (4,671) (2,817) 771220 Uncoded P-Card 0 110 0 771900 Uncoded AP Invoices 328 (202) 0

Uncoded Expenses 328 (92) 0 Other Misc. Operating Expenses (2,068) 2,208 4,694

655500 Seminars & Training 0 0 0 Total Other Controllable Expenses 565,458 499,593 555,650

Non-Controllable Expenses Utilities

760000 Electricity 86,576 94,345 95,260 Electricity 86,576 94,345 95,260

761000 Gas 6,827 6,350 6,291 Gas 6,827 6,350 6,291

763000 Water and Sewer 44,469 54,653 46,517 Water and Sewer 44,469 54,653 46,517

765000 Waste (22) 4,846 6,564 765050 JLL FM Waste Management 7,294 1,567 0

Waste 7,272 6,413 6,564 766000 Utility Admin Expense 431 425 409

Utility Admin Expense 431 425 409 Utilities 145,575 162,186 155,041 Vehicle & Equipment Lease

550900 Vehicle Lease 11,597 11,403 11,568 Vehicle Lease 11,597 11,403 11,568

550910 Kitchen Equipment Rental 6,519 7,529 7,572 561600 Offce Equip & Furniture Rental 16,221 15,567 12,492

Office/Furniture/Kitchenrental 22,739 23,096 20,064 Vehicle & Equipment Lease 34,337 34,499 31,632 Insurance Expenses

850000 Insurance - Gen Liability Prem 8,812 8,748 9,081 850100 Insurance-Gen Liab Claim Costs 23,720 24,635 26,010 850120 GLPL Prior Year Reserve Adj 29,362 3,383 0

Insurance - Gen Liability 61,894 36,765 35,091 850600 Insurance - Property Premium 6,058 6,184 7,563 850610 Insurance - Property Claims 7,904 5,088 3,818

Insurance - Property 13,961 11,272 11,381 850700 Insurance - Auto 2,713 1,330 1,311 850710 Auto Claims-Reserve 2,983 1,305 1,530

Insurance - Auto 5,696 2,636 2,840 851700 Insurance - Other 405 508 1,050

Insurance - Other 405 508 1,050 Insurance Expenses 81,956 51,180 50,363 Real Estate Taxes

880000 Real Estate Tax Expense 211,038 217,902 222,260 880100 Real Estate Tax - Prof Serv 12,202 10,950 250

Real Estate 223,239 228,852 222,510 880010 PY Appeal Refunds (12,837) (52,760) 0 880020 PY Tax Adjustments 0 0 0

Prior Year Refunds&Adjustments (12,837) (52,760) 0 880300 Personal Property Taxes 11,649 11,539 12,362

Personal Property Taxes 11,649 11,539 12,362 Real Estate Taxes 222,051 187,631 234,872 Support Services

772400 G&A Expense Allocatio 0 0 0 772401 PC Fees-Allocation 6,744 17,999 24,606 772402 PC Fees SNF-Allocation 0 0 0 772403 Software License Fees-Allocati 0 0 0 772404 Creative Services-Allocation 2,262 2,999 3,236 772406 Digital Marketing-Allocation 1,139 1,456 2,679 772407 Assoc Engagement Survey-Alloca 500 64 132 772408 Cust Engagement Survey-Allocat 418 564 865 772414 Regional Maint Techs-Allocatio 3,048 1,788 4,278 772417 Contact Center Allocation 0 0 0 772510 G&A Alloc - PS 239 463 693

Support Services 14,349 25,334 36,489 Support Services 14,349 25,334 36,489 Total Non-Controllable Expenses 498,267 460,830 508,396

OPERATING EXPENSES 2,657,175 2,635,018 2,896,546

Page: 7 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

NET OPERATING INCOME (LOSS) 147,606 284,679 (137,325)

OPERATING MARGIN 5.26% 9.75% (4.98%)

Entrance Fee Amortization Gain on Terminations 0 0 0 Entrance Fee Amortization 0 0 0

Entrance Fee Amortization 0 0 0

NET OPERATING INCOME (LOSS) W/EF AMORT 147,606 284,679 (137,325) 2,016 2,017 BUDGET

Page: 8 of 16Brookdale Senior Living 12.00 Income Statement TB_RESTRUCT: 52360-BKD Castle Hills AL_MC (TX) Run: Feb 19, 2018 at 16:27 BSL0001_2012-2017 BY MONTH W2018 FINAL

2016 2017 2018 FINAL

Page: 1 of 7Run: Jun 12, 2018 at 13:42 By: EHILLARD BSL0030_OR

March April May 3 Month Total

Capacity Independent Living - - - - Independent Villas - - - - Assisted Living 80.0 80.0 80.0 20.0 Memory Care 17.0 17.0 17.0 4.3 Skilled Nursing - - - - No Product - - - - Total Unit Capacity 97.0 97.0 97.0 24.3

Unit Occupancy Independent Living - - - - Independent Villas - - - - Assisted Living 48.8 52.0 52.8 153.6 Memory Care 15.8 14.9 15.2 45.9 No Product - - - - IL / AL / MC Occupancy 64.6 66.9 68.0

Skilled - Private - - - - Skilled - Medicare - - - - Skilled - Medicaid - - - - Skilled - Insurance / HMO - - - - Skilled - Other Payers - - - - Skilled Occupancy - - - -

Total Unit Occupancy 64.6 66.9 68.0 -

Occupancy % Independent Living 0.00% 0.00% 0.00% 0.00% Independent Villas 0.00% 0.00% 0.00% 0.00% Assisted Living 61.01% 65.04% 65.97% 768.07% Memory Care 93.17% 87.65% 89.28% 1080.38% Skilled Nursing 0.00% 0.00% 0.00% 0.00% No Product 0.00% 0.00% 0.00% 0.00% Total Occupancy % 66.64% 69.00% 70.05% 68.57%

Page: 2 of 7Run: Jun 12, 2018 at 13:42 By: EHILLARD BSL0030_OR

March April May 3 Month Total

Resident Revenue Rent - Independent - - - - Rent - IL Villas - - - -

400200 Double Occupancy Revenue 3,308 3,308 3,308 9,924 400300 Service Fee Rent Revenue 135,987 144,403 146,561 426,951 400650 Contra: Rent Revenue - BB 0 0 (2) (2)

Rent - Assisted 139,295 147,711 149,868 436,873 400200 Double Occupancy Revenue 1,000 1,000 1,000 3,000 400300 Service Fee Rent Revenue 64,806 61,438 61,705 187,949 400650 Contra: Rent Revenue - BB 0 0 0 0

Rent - Memory Care 65,806 62,438 62,705 190,949 Rent - Skilled (R&B) - - - 0 Rent - Equity Homes - - - 0 Rent - No Product - - - 0 Resident Rent Revenue 205,101 210,148 212,573 627,8220

Care Revenue 0 455000 Care Revenue 47,423 50,340 49,796 147,559

PVT Care Revenue 47,423 50,340 49,796 147,559 Care Revenue 47,423 50,340 49,796 147,559 Discounts 0

460000 Long-Term Incentives (6,185) (8,185) (8,685) (23,055) 460001 Short-Term Incentives 0 (1,000) (3,000) (4,000) 460002 Permanent Discounts (12,474) (12,474) (12,408) (37,356) 460014 Resident Retention Discount (3,128) (3,169) (3,378) (9,675)

Rent Concessions (21,787) (24,828) (27,471) (74,086) 460003 S-T Incentives Amortization (1,500) (1,583) (1,662) (4,745) 460004 S-T Incentives Deferral 0 1,000 3,000 4,000

Conc-Deferral-Amort-MyChoice (1,500) (583) 1,338 (745) Discounts (23,287) (25,411) (26,133) (74,831) Community Fees 0

402802 Community Fees - BB 0 0 3,750 3,750 Community Fees - BB 0 0 3,750 3,750

402800 Admission / Community Fees 5,250 3,750 0 9,000 498000 Comm Fee Waived 0 0 (875) (875)

Community Fee Revenue 5,250 3,750 (875) 8,125 Community Fees 5,250 3,750 2,875 11,875

0 Food Revenue 0

473100 Meal Revenue - Tray Delivery 0 160 0 160 473400 Meal Revenue - Guest 0 24 12 36

Meal Revenue 0 184 12 196 Food Revenue 0 184 12 196

0 Other Resident Revenue 0

475000 Department Revenue 156 2,956 1,644 4,756 Department Revenue 156 2,956 1,644 4,756

476500 Personal Solutions Revenue 0 16 0 16 Personal Solutions Revenue 0 16 0 16

475700 Miscellaneous Revenue 662 853 1,560 3,075 476300 Room Revenue - Guest 0 0 436 436

Other Misc Revenue 662 853 1,996 3,511 Other Resident Revenue 818 3,824 3,640 8,283 Late Fee Revenue 0

475500 Late Fee Revenue 500 500 (500) 500 475550 Late Fee Rev Contra 0 0 250 250 475600 Late Fee Revenue Write-off (250) 0 0 (250)

Late Fee Revenue 250 500 (250) 500 Late Fee Revenue 250 500 (250) 500 Lifecare Utilization & HC Benefit 0

0 Personalized Living Revenue - - - 0 Skilled Therapy Revenue - - - 0 Total Resident Revenue 235,555 243,336 242,513 721,404

0 Compensation Expense 0

Regular 0 500000 Salaries & Wages Exempt 15,966 15,750 18,476 50,192

Salaries and Wages - Exempt 15,966 15,750 18,476 50,192 501000 Salaries & Wages Nonexempt 25,934 25,884 26,503 78,321 501150 Cook Wages 7,506 7,722 7,756 22,984 501200 Utility Workers Wages 0 0 0 0 501350 Housekeeper Wages 2,696 2,908 2,585 8,189 501520 Res Care Associate Wages 23,336 19,794 24,504 67,633 501550 Drivers Wages 1,176 1,116 776 3,068 501600 Concierge Wages 1,846 1,880 1,654 5,380 501800 Registered Nurses (RN's) 0 0 0 0 501900 Certified Nursing Aides (CNAs) 260 343 285 888 501903 Med Aide 19,377 21,864 20,214 61,455

Salaries and Wages-Non Exempt 82,130 81,511 84,277 247,918 502400 On Call Pay 150 90 175 415

On Call Pay 150 90 175 415 505010 Transitional Duty Wages 254 158 180 592

Transitional Duty Wages 254 158 180 592 505200 Salaries - Other 1,055 3,615 5,390 10,060

Salaries - TRN, Bylr,Ber 1,055 3,615 5,390 10,060 505800 G&A Alloc- Sales Specialists 0 0 0 0

G&A Alloc - Sales Specialists 0 0 0 0 Regular 99,554 101,124 108,498 309,176 Overtime 0

502000 Salaries & Wages-OT Nonexempt 7,831 5,969 5,475 19,275 Overtime 7,831 5,969 5,475 19,275

Overtime 7,831 5,969 5,475 19,275 Bonus 0

506500 Bonus - Employee Referral 116 239 166 520 506800 Bonus - Signing 0 0 0 0 506909 General Bonuses 35 35 316 386

General Bonuses 151 274 482 906

Page: 3 of 7Run: Jun 12, 2018 at 13:42 By: EHILLARD BSL0030_OR

March April May 3 Month Total

507300 CMIP Bonus 1,928 1,928 1,928 5,784 507330 CMIP Bonus Protem 3 489 8 500

CMIP Bonus 1,931 2,417 1,936 6,284 Bonus 2,082 2,691 2,418 7,190 Commissions 0

507500 Commissions Wages 700 1,950 750 3,400 Commissions Wages 700 1,950 750 3,400

Commissions 700 1,950 750 3,400 0

PTO & Holiday Wages 0 523300 Holiday 0 0 5,454 5,454 523600 PTO Wages 4,488 3,403 3,466 11,356

PTO & Holiday 4,488 3,403 8,920 16,810 PTO & Holiday Wages 4,488 3,403 8,920 16,810

501750 Personalized Living Wages 0 0 0 0 515000 Payroll Taxes 0 0 0 0

Personalized Living Compensation - - - 0 Skilled Therapy Compensation - - - 0 Payroll Taxes 0

515000 Payroll Taxes 10,310 10,071 10,551 30,932 Payroll Taxes 10,310 10,071 10,551 30,932

Payroll Taxes 10,310 10,071 10,551 30,932 Employee Benefits 0

521900 Life and ADD Insurance 130 129 119 379 522500 Disability Insurance 27 32 27 86 523200 401(K) Savings Plan (649) 1,043 (178) 216 524300 Bereavement Pay 164 8 234 406 524800 Long Term Bank 0 0 0 0

Employee Benefits Paid (328) 1,212 202 1,086 520100 Group Health Insurance 10,803 10,599 10,041 31,443

Group Health Insurance 10,803 10,599 10,041 31,443 Employee Benefits 10,475 11,811 10,243 32,529 Workers Compensation 0

524700 Workers Comp Premium 157 162 157 476 524710 Workers Comp-Claim Costs 3,051 690 (668) 3,073 524720 Workers Comp - TPA Cost 113 302 106 521 524740 Workers Comp PY Reserve Adj 517 0 0 517

Workers Comp Totals 3,838 1,154 (405) 4,587 Workers Compensation 3,838 1,154 (405) 4,587 Total Compensation Expense 139,278 138,171 146,450 423,900

0 Other Controllable Expenses 0

Food Expenses 0 530009 Raw Food 11,363 12,092 11,944 35,399

Raw Food 11,363 12,092 11,944 35,399 531109 Food Adjustments 0 0 0 0 531300 Food Rebate (775) (675) (675) (2,125)

Food Adjustments (775) (675) (675) (2,125) Food Expenses 10,589 11,417 11,268 33,274 Supplies 0

540009 Dietary Supplies 542 353 75 971 Dietary Supplies 542 353 75 971

540509 General Supplies 878 1,770 1,452 4,099 General Supplies 878 1,770 1,452 4,099

544709 Cleaning Supplies 2,066 1,558 1,319 4,943 Cleaning Supplies 2,066 1,558 1,319 4,943

544050 Beauty Supplies & Expenses 636 1,720 437 2,793 Beauty Supplies & Expenses 636 1,720 437 2,793

544900 Postage and Courier Delivery 115 357 386 858 Postage and Courier Delivery 115 357 386 858

545000 Supplies Small & Non-Capital 232 5 689 926 Supplies Small & Non-Capital 232 5 689 926

540510 Durable Medical Equipment 0 0 0 0 Durable Medical Equipment 0 0 0 0

540615 Personal Solutions_PCP 0 7 0 7 Incontinent Supp-Personal Solu 0 7 0 7

Supplies 4,468 5,771 4,358 14,597 Healthcare Supplies 0

540601 Medical Supplies 0 0 0 0 540609 Medical Supplies 9 147 (260) (104) 540671 OTC Pharmacy (10) 0 0 (10)

Medical Supplies (1) 147 (260) (114) 540659 Other Healthcare Expenses 408 552 217 1,178 540670 Pharmacy MedA and Managed Care 36 (36) 0 0 543600 Hazardous Medical Waste 0 0 0 0

Other Healthcare Expenses 444 517 217 1,178 Healthcare Supplies 443 663 (43) 1,064 Resident Activities 0

550109 Resident Relations 103 86 78 267 Resident Relations 103 86 78 267

550509 Resident Activities 1,030 667 1,117 2,814 Resident Activities 1,030 667 1,117 2,814

550510 Interactive Technology Expense 279 263 283 825 Interactive Technology Expense 279 263 283 825

Resident Activities 1,412 1,016 1,478 3,906 Travel & Entertainment 0

555409 Vehicle Transport and Rental 29 494 460 983 Vehicle Transport and Rental 29 494 460 983

555000 Lodging 7 741 1,342 2,090 Lodging 7 741 1,342 2,090

555200 Airfare 3 5 2 10 Airfare 3 5 2 10

555900 Meals & Entertainment 5 165 44 214 Meals & Entertainment 5 165 44 214

Travel & Entertainment 44 1,405 1,849 3,297 Repairs & Maintenance 0

560109 Heatng,Plumbing,Electric,Water 3,326 2,166 3,481 8,972 Heat, Plumbg, Electrical,Water 3,326 2,166 3,481 8,972

Page: 4 of 7Run: Jun 12, 2018 at 13:42 By: EHILLARD BSL0030_OR

March April May 3 Month Total

560609 R&M Building_Equip_Supp 2,334 5,226 4,700 12,260 R&MBuilding/Equipment/Supplies 2,334 5,226 4,700 12,260

561409 Vehicle Upkeep 387 406 337 1,130 Vehicle Upkeep 387 406 337 1,130

561709 IT Hardware and Maintenance 96 48 48 192 IT Hardware and Maintenance 96 48 48 192

570909 Fire, Safety, and Security 3,929 1,809 1,408 7,146 570950 JLL FM Fire, Safety & Security 0 0 0 0

Fire, Safety, and Security 3,929 1,809 1,408 7,146 Repairs & Maintenance 10,071 9,655 9,974 29,701 Ground Maint & Contract Svcs 0

569009 Outside Grounds Contracts 2,319 2,449 2,319 7,086 569050 JLL FM Landscpng & Grnds Maint 0 0 0 0

Outside Grounds Contracts 2,319 2,449 2,319 7,086 570609 Equipment Service Contracts 91 65 65 221

Equipment Service Contracts 91 65 65 221 570050 JLL FM Program Fees 0 0 0 0

Outside Dept Labor Contracts 0 0 0 0 570700 Elevator Contract 584 (456) 394 523 570750 JLL FM Elevator Maint & Repair 0 0 0 0

Elevator Contract 584 (456) 394 523 570500 Pest Control Contract 987 175 175 1,337 570550 JLL FM Pest Control 0 0 0 0

Pest Control Contract 987 175 175 1,337 Ground Maint & Contract Svcs 3,981 2,233 2,953 9,167 Communication & Telephone 0

580209 Telephone 1,413 1,425 1,777 4,615 Telephone 1,413 1,425 1,777 4,615

580709 Internet_Connected Living 431 250 250 930 Internet / Connected Living 431 250 250 930

581400 Cable & Satellite TV 945 945 945 2,836 Cable & Satellite TV 945 945 945 2,836

Communication & Telephone 2,789 2,620 2,972 8,382 Paid Referrals 0

601739 Paid Referrals 0 0 0 0 Paid_Referrals 0 0 0 0

Paid Referrals 0 0 0 0 Public Relations & Advertising 0

601719 Advertising Digital 1,311 92 554 1,956 601720 Advert-Social Media (Corp Use) 246 117 150 512

Advertising - Digital 1,556 209 703 2,468 600309 Advertising - Local Broadcast 16 8 8 32

Advertising - Local Broadcast 16 8 8 32 600210 Advertising - Corporate Print 1,108 3 51 1,162

Advertising - Local Print 1,108 3 51 1,162 600600 Collatrl Matls - Prospct-Infl 0 227 26 253

Print Collateral Materials 0 227 26 253 601609 Business Development 152 131 0 283

Business Development 152 131 0 283 600109 Direct Mail (Comm Use Only) 0 17 17 34 600120 Direct Mail (Corp Use Only) 11 508 501 1,021

Direct Mail 11 525 518 1,054 601909 Friends for Life Referral Fees 0 1,000 0 1,000

Friends For Life 0 1,000 0 1,000 600709 Special Events 78 142 96 316

Special Events 78 142 96 316 600809 Other Marketing 0 0 62 62

Other Marketing 0 0 62 62 Public Relations & Advertising 2,922 2,244 1,464 6,630 Staff Development 0

650009 Assoc Appreciation_Incentives 136 138 22 296 Associate Appreciatin/Incentiv 136 138 22 296

651509 Staff Training Expenses 377 102 (2) 477 Staff Training 377 102 (2) 477

654509 Pre-Employment Expenses 1,448 1,010 1,747 4,206 Pre-Employment Expenses 1,448 1,010 1,747 4,206

Staff Development 1,961 1,250 1,767 4,978 Professional Fees 0

700100 Collections Legal Fees 0 0 0 0 700400 Corporate SEC Legal Fees 0 0 0 0

Legal Fees 0 0 0 0 710409 Other Professional Fees 0 96 96 192

Other Professional Fees 0 96 96 192 710100 Pharmacy Fees (4) 0 0 (4)

Pharmacy Fees (4) 0 0 (4) Professional Fees (4) 96 96 188 Bad Debt Expense 0

750000 Bad Debt Expense (112) 0 0 (112) Bad Debt Expense (112) 0 0 (112)

Bad Debt Expense (112) 0 0 (112) Other Misc. Operating Expenses 0

771200 Miscellaneous 0 0 0 0 771209 Misc Expenses and Misc Taxes 0 0 0 0 772401 IT Fees and Support Allocation 1,671 1,442 1,443 4,556 772402 PC Fees SNF-Allocation 0 (75) (1) (76) 772404 Creative Services-Allocation 273 239 211 723 772406 Digital Marketing-Allocation 135 106 266 507 772408 Cust Engagement Survey-Allocat 48 81 49 178 772414 Regional Maint Techs-Allocatio 195 294 305 793 772510 G&A Alloc - PS 23 25 24 72

Misc. Taxes and Expenses 2,345 2,112 2,296 6,753 770300 Association Fees 227 226 226 679

Association Fees 227 226 226 679 770400 Survey & License Fees 89 235 320 644

Survey & License Fees 89 235 320 644 771100 Dues and Subscriptions 99 103 109 311

Dues and Subscriptions 99 103 109 311 771600 Sales and Use Tax 0 0 0 0

Sales and Use Tax 0 0 0 0

Page: 5 of 7Run: Jun 12, 2018 at 13:42 By: EHILLARD BSL0030_OR

March April May 3 Month Total

777100 Contra Expense - Rebates (160) (235) (235) (629) Contra Expense - Rebates (160) (235) (235) (629)

771220 Uncoded P-Card (149) 60 25 (64) 771900 Uncoded AP Invoices 0 342 (191) 151

Uncoded Expenses (149) 403 (166) 87 Other Misc. Operating Expenses 2,449 2,845 2,551 7,845

0 Personalized Living Other Expenses - - - 0 Skilled Therapy Other Expenses - - - 0 Total Other Controllable Expenses 41,012 41,217 40,689 122,917

0 Non-Controllable Expenses 0

Utilities 0 760000 Electricity 7,566 6,257 8,464 22,287

Electricity 7,566 6,257 8,464 22,287 761000 Gas 428 372 293 1,093

Gas 428 372 293 1,093 763000 Water and Sewer 3,159 2,430 5,635 11,225

Water and Sewer 3,159 2,430 5,635 11,225 765000 Waste 546 546 546 1,639 765050 JLL FM Waste Management 0 0 0 0

Waste 546 546 546 1,639 766000 Utility Admin Expense 37 37 37 112

AIQ Utility Admin Expense 37 37 37 112 Utilities 11,737 9,642 14,977 36,355

0 Vehicle & Equipment Lease 0

550900 Vehicle Lease 940 943 943 2,826 Vehicle Lease 940 943 943 2,826

550910 Kitchen Equipment Rental 629 664 629 1,922 561600 Offce Equip & Furniture Rental 584 898 848 2,331

Office/Furniture/Kitchenrental 1,213 1,562 1,477 4,252 Vehicle & Equipment Lease 2,153 2,505 2,420 7,078 Insurance Expenses 0

850000 Insurance - Gen Liability Prem 773 768 768 2,310 850100 Insurance-Gen Liab Claim Costs 2,168 2,168 1,783 6,119 850120 GLPL Prior Year Reserve Adj 0 0 0 0

Insurance - Gen Liability 2,941 2,936 2,552 8,428 850600 Insurance - Property Premium 624 625 625 1,875 850610 Insurance - Property Claims 532 368 407 1,307

Insurance - Property 1,157 993 1,032 3,182 850700 Insurance - Auto 103 103 103 308 850710 Auto Claims-Reserve (179) 135 135 90

Insurance - Auto (76) 237 237 398 851700 Insurance - Other 37 48 48 132

Insurance - Other 37 48 48 132 Insurance Expenses 4,058 4,213 3,869 12,140 Real Estate Taxes 0

880000 Real Estate Tax Expense 18,522 18,522 18,522 55,565 880100 Real Estate Tax - Prof Serv 0 0 0 0

Real Estate 18,522 18,522 18,522 55,565 880010 PY Appeal Refunds 0 0 0 0 880020 PY Tax Adjustments 0 0 0 0

Prior Year Refunds&Adjustments 0 0 0 0 880300 Personal Property Taxes 0 0 0 0

Personal Property Taxes 0 0 0 0 Real Estate Taxes 18,522 18,522 18,522 55,565

0 Total Non-Controllable Expenses 36,470 34,882 39,787 111,139

0 OPERATING EXPENSES 216,761 214,270 226,926 657,956

0

Page: 6 of 7Run: Jun 12, 2018 at 13:42 By: EHILLARD BSL0030_OR

March April May 3 Month Total

NET OPERATING INCOME (LOSS) 18,795 29,066 15,587 63,448 0

Page: 7 of 7Run: Jun 12, 2018 at 13:42 By: EHILLARD BSL0030_OR

March April May 3 Month Total

52360 Brookdale Castle Hills AL/MC (TX) Product Unit Style Unit Usage Config Unit # SqFt Agreement # 2nd Person

Agreement # Start Date Days

Vacant Respite Medicaid Unit

Capacity Market Rate Base Rent Rent

Discount Net Rent 2nd Person Care Fees-

1st Pers Care Fees- 2nd Pers

ST Incentives LT Incentives EF Credits Ancillary Rev Fixed Rate End Date Brookdale Move In Date Business Unit Move In Date Agreement Type Move In Date

AL Studio P AL Building/1/1101 379 1793528 05/28/2018 0 - 1.0 2,295 2,295 0 2,295 5/28/2018 5/28/2018 5/28/2018

AL Studio P AL Building/1/1102 416 980129 10/21/2013 0 - 1.0 2,375 2,810 (476) 2,334 680 12/31/2999 10/17/2013 10/17/2013 10/17/2013

AL Studio P AL Building/1/1103 403 1266819 05/29/2015 0 - 1.0 2,375 2,874 (625) 2,249 680 5/29/2015 5/29/2015 5/29/2015

AL Studio P AL Building/1/1104 441 1614565 03/31/2017 0 - 1.0 2,375 2,394 (456) 1,938 1,600 3/27/2015 3/31/2017 4/17/2015

AL Studio P AL Building/1/1105 379 1694154 09/19/2017 0 - 1.0 2,295 2,350 0 2,350 1,600 55 9/19/2017 9/19/2017 9/19/2017

AL Studio P AL Building/1/1106 414 1317443 07/31/2015 0 - 1.0 2,375 3,206 (124) 3,082 7/31/2015 7/31/2015 7/31/2015

AL Studio P AL Building/1/1109 338 1182887 10/31/2014 0 - 1.0 2,225 3,465 (1,750) 1,715 10/31/2014 10/31/2014 10/31/2014

AL Studio P AL Building/1/1110 346 1702967 10/13/2017 0 - 1.0 2,225 2,105 0 2,105 1,100 55 9/19/2017 10/13/2017 10/13/2017

AL Studio P AL Building/1/1111 413 1606174 03/03/2017 0 - 1.0 2,295 2,300 (138) 2,162 800 55 3/3/2017 3/3/2017 3/3/2017

AL Studio P AL Building/1/1112 376 1477901 05/31/2016 0 - 1.0 2,295 2,989 (705) 2,284 47 55 5/31/2016 5/31/2016 5/31/2016

AL Studio P AL Building/1/1113 441 1654121 06/07/2017 0 - 1.0 2,375 2,486 0 2,486 1,450 6/7/2017 6/7/2017 6/7/2017

AL Studio P AL Building/1/1114 408 109 1.0 2,375 0 0 0

AL Studio P AL Building/1/1115 414 938301 03/31/2013 0 - 1.0 2,375 3,695 (1,452) 2,243 113 3/31/2013 3/31/2013 3/31/2013

AL Studio P AL Building/1/1116 381 1331866 08/31/2015 0 - 1.0 2,295 2,520 (795) 1,725 1,401 55 8/31/2015 8/31/2015 8/31/2015

AL Studio P AL Building/1/1119 345 788235 09/29/2011 0 - 1.0 2,225 3,536 0 3,536 9/29/2011 9/29/2011 9/29/2011

AL Studio P AL Building/1/1120 341 1659489 06/26/2017 0 - 1.0 2,225 2,210 0 2,210 1,100 55 6/26/2017 6/26/2017 6/26/2017

AL Studio P AL Building/2/1203 407 303 1.0 2,295 0 0 0

AL Studio P AL Building/2/1204 426 283 1.0 2,375 0 0 0

AL Studio P AL Building/2/1205 384 1783729 04/28/2018 0 - 1.0 2,295 2,375 0 2,375 (2,000) 4/28/2018 4/28/2018 4/28/2018

AL Studio P AL Building/2/1206 414 534 1.0 2,375 0 0 0

AL Studio P AL Building/2/1209 334 1400 1.0 2,225 0 0 0

AL Studio P AL Building/2/1210 337 1773079 03/30/2018 0 - 1.0 2,225 2,105 0 2,105 500 (1,000) 3/30/2018 3/30/2018 3/30/2018

AL Studio P AL Building/2/1211 400 1407934 02/28/2016 0 - 1.0 2,375 3,091 (610) 2,481 57 2/28/2016 2/28/2016 2/28/2016

AL Studio P AL Building/2/1213 431 119 1.0 2,375 0 0 0

AL Studio P AL Building/2/1214 403 1095 1.0 2,375 0 0 0

AL Studio P AL Building/2/1215 407 1650343 05/31/2017 0 - 1.0 2,375 2,510 (338) 2,172 600 5/31/2017 5/31/2017 5/31/2017

AL Studio P AL Building/2/1216 388 1177 1.0 2,295 0 0 0

AL Studio P AL Building/2/1219 336 1746852 01/25/2018 0 - 1.0 2,225 2,105 0 2,105 (500) 1/25/2018 1/25/2018 1/25/2018

AL Studio P AL Building/2/1220 337 636698 03/15/2006 0 - 1.0 2,225 2,663 (230) 2,433 3/15/2006 3/15/2006 3/15/2006

AL Studio P Building 2/1/2102 407 1734427 12/18/2017 0 - 1.0 2,375 2,260 0 2,260 200 (500) 12/18/2017 12/18/2017 12/18/2017

AL Studio P Building 2/1/2103 407 885303 08/25/2012 0 - 1.0 2,375 2,830 0 2,830 737 08/27/2020 8/25/2012 8/25/2012 8/25/2012

AL Studio P Building 2/1/2104 431 1342455 09/25/2015 0 - 1.0 2,375 2,957 (237) 2,720 887 55 9/25/2015 9/25/2015 9/25/2015

AL Studio P Building 2/1/2105 384 34 1.0 2,295 0 0 0

AL Studio P Building 2/1/2106 406 1767403 03/15/2018 0 - 1.0 2,375 2,260 0 2,260 (1,000) 6/13/2015 6/13/2015 6/13/2015

AL Studio P Building 2/1/2109 341 646825 05/16/2009 0 - 1.0 2,225 2,962 (482) 2,480 12/31/2999 5/16/2009 5/16/2009 5/16/2009

AL Studio P Building 2/1/2110 342 1325192 08/15/2015 0 - 1.0 2,225 2,105 (375) 1,730 1,493 8/15/2015 8/15/2015 8/15/2015

AL Studio P Building 2/1/2112 381 1655064 06/13/2017 0 - 1.0 2,295 2,356 0 2,356 600 6/13/2017 6/13/2017 6/13/2017

AL Studio P Building 2/1/2113 428 1521134 1521150 08/30/2016 0 - 1.0 2,375 2,520 0 2,520 876 553 8/30/2016 8/30/2016 8/30/2016

AL Studio P Building 2/1/2114 407 1497270 07/08/2016 0 - 1.0 2,375 2,496 0 2,496 47 55 7/8/2016 7/8/2016 7/8/2016

AL Studio P Building 2/1/2115 407 1501147 07/20/2016 0 - 1.0 2,375 2,496 0 2,496 1,206 7/20/2016 7/20/2016 7/20/2016

AL Studio P Building 2/1/2116 385 1557022 11/11/2016 0 - 1.0 2,295 2,305 (143) 2,162 709 9/13/2016 9/13/2016 9/13/2016

AL Studio P Building 2/1/2119 342 1506170 07/30/2016 0 - 1.0 2,225 2,260 0 2,260 280 55 7/30/2016 7/30/2016 7/30/2016

AL Studio P Building 2/1/2120 339 1379997 12/23/2015 0 - 1.0 2,225 2,868 (420) 2,448 701 5/6/2013 12/23/2015 12/23/2015

AL Studio P Building 2/2/2202 411 763 1.0 2,375 0 0 0

AL Studio P Building 2/2/2203 405 434 1.0 2,295 0 0 0

AL Studio P Building 2/2/2204 437 1557 1.0 2,375 0 0 0

AL Studio P Building 2/2/2205 380 1772 1.0 2,295 0 0 0

AL Studio P Building 2/2/2206 416 598 1.0 2,375 0 0 0

AL Studio P Building 2/2/2209 332 450 1.0 2,225 0 0 0

AL Studio P Building 2/2/2210 344 1125 1.0 2,225 0 0 0

AL Studio P Building 2/2/2213 440 759325 03/31/2011 0 - 1.0 2,375 2,825 0 2,825 (685) 12/31/2999 3/31/2011 3/31/2011 3/31/2011

AL Studio P Building 2/2/2214 402 1187 1.0 2,375 0 0 0

AL Studio P Building 2/2/2215 413 1521 1.0 2,375 0 0 0

AL Studio P Building 2/2/2216 382 1187 1.0 2,295 0 0 0

AL Studio P Building 2/2/2219 349 1174 1.0 2,225 0 0 0

AL Studio P Building 2/2/2220 332 1429221 04/15/2016 0 - 1.0 2,225 2,409 0 2,409 1,026 4/15/2016 4/15/2016 4/15/2016

AL Alcove P AL Building/2/1201 478 1720985 1720987 11/22/2017 0 - 1.0 2,525 2,395 0 2,395 800 550 500 11/22/2017 11/22/2017 11/22/2017

AL Alcove P AL Building/2/1202 523 11 1.0 2,525 0 0 0

AL Alcove P AL Building/2/1212 481 1413 1.0 2,525 0 0 0

AL Alcove P Building 2/1/2101 496 922991 01/30/2013 0 - 1.0 2,525 3,714 (745) 2,969 794 1/30/2013 1/30/2013 1/30/2013

AL Alcove P Building 2/1/2111 531 1494212 06/30/2016 0 - 1.0 2,525 2,731 0 2,731 467 6/30/2016 6/30/2016 6/30/2016

AL Alcove P Building 2/2/2201 470 1773075 03/30/2018 0 - 1.0 2,525 2,395 0 2,395 (1,000) 3/30/2018 3/30/2018 3/30/2018

AL Alcove P Building 2/2/2211 536 957960 07/05/2013 0 - 1.0 2,525 2,395 (94) 2,301 1,305 7/5/2013 7/5/2013 7/5/2013

AL Alcove P Building 2/2/2212 476 265 1.0 2,525 0 0 0

AL One Bedroom P AL Building/1/1107 612 1351192 10/15/2015 0 - 1.0 2,950 3,150 0 3,150 607 10/15/2015 10/15/2015 10/15/2015

AL One Bedroom P AL Building/1/1108 582 750454 01/31/2011 0 - 1.0 2,950 3,152 (673) 2,479 510 12/31/2011 1/31/2011 1/31/2011 1/31/2011

AL One Bedroom P AL Building/1/1117 583 942577 04/29/2013 0 - 1.0 2,950 5,124 (1,235) 3,889 702 55 3/29/2012 3/29/2012 3/29/2012

AL One Bedroom P AL Building/1/1118 615 1773085 03/31/2018 0 - 1.0 2,950 2,795 0 2,795 800 55 5/31/2015 3/31/2018 3/4/2018

AL One Bedroom P AL Building/2/1207 603 1477488 05/31/2016 0 - 1.0 2,950 4,398 (1,250) 3,148 560 5/31/2016 5/31/2016 5/31/2016

AL One Bedroom P AL Building/2/1208 566 1755359 02/12/2018 0 - 1.0 2,950 2,795 0 2,795 1,250 12/5/2017 12/5/2017 2/12/2018

AL One Bedroom P AL Building/2/1217 568 1577712 12/31/2016 0 - 1.0 2,950 3,110 (688) 2,422 1,250 12/31/2016 12/31/2016 12/31/2016

AL One Bedroom P AL Building/2/1218 598 1773083 03/29/2018 0 - 1.0 2,950 2,795 0 2,795 (1,000) 55 3/29/2018 3/29/2018 3/29/2018

AL One Bedroom P Building 2/1/2107 613 1519617 08/26/2016 0 - 1.0 2,950 3,278 0 3,278 8/26/2016 8/26/2016 8/26/2016

AL One Bedroom P Building 2/1/2108 575 1536181 1638465 09/28/2016 0 - 1.0 2,950 2,907 (228) 2,679 832 2,114 750 55 9/28/2016 9/28/2016 4/29/2017

AL One Bedroom P Building 2/1/2117 576 1784066 04/30/2018 0 - 1.0 2,950 2,935 0 2,935 500 9/16/2014 4/30/2018 4/30/2018

AL One Bedroom P Building 2/1/2118 611 1746194 1746199 01/23/2018 0 - 1.0 2,950 2,795 0 2,795 800 500 (500) 1/23/2018 1/23/2018 1/23/2018

AL One Bedroom P Building 2/2/2207 592 1486 1.0 2,950 0 0 0

AL One Bedroom P Building 2/2/2208 572 141 1.0 2,950 0 0 0

Rent Roll as of 5/31/2018

AL One Bedroom P Building 2/2/2217 572 146 1.0 2,950 0 0 0

AL One Bedroom P Building 2/2/2218 601 1757 1.0 2,950 0 0 0

MC Studio P 3102 286 1794462 05/30/2018 0 - 1.0 4,125 4,125 (15) 4,110 5/30/2018 5/30/2018 5/30/2018

MC Studio P 3115 288 854153 03/29/2012 0 - 1.0 4,125 6,538 0 6,538 3/27/2012 3/29/2012 3/29/2012

MC Studio P 3117 292 1429223 04/15/2016 0 - 1.0 3,350 3,105 (300) 2,805 1,600 4/15/2016 4/15/2016 4/15/2016

MC Studio P Arbors/1/3101 293 1682986 08/25/2017 0 - 1.0 4,125 4,072 0 4,072 700 8/25/2017 8/25/2017 8/25/2017

MC Studio P Arbors/1/3103 290 37 1.0 4,125 0 0 0

MC Studio P Arbors/1/3104 267 1757958 02/21/2018 0 - 1.0 4,125 3,915 0 3,915 1,500 (1,000) 2/21/2018 2/21/2018 2/21/2018

MC Studio P Arbors/1/3105 284 1785009 04/30/2018 0 - 1.0 4,125 4,110 0 4,110 900 (500) 4/30/2018 4/30/2018 4/30/2018

MC Studio P Arbors/1/3106 274 1658539 06/21/2017 0 - 1.0 4,125 4,072 (208) 3,864 1,450 1/23/2017 1/23/2017 6/21/2017

MC Studio P Arbors/1/3107 295 1468022 05/08/2016 0 - 1.0 4,125 4,189 (880) 3,309 1,345 3/23/2015 3/23/2015 5/8/2016

MC Studio P Arbors/1/3108 280 1582484 01/11/2017 0 - 1.0 3,350 3,190 0 3,190 1,500 7/29/2014 7/29/2014 1/11/2017

MC Studio P Arbors/1/3109 283 1742377 01/03/2018 0 - 1.0 3,350 3,190 0 3,190 1,800 10/31/2016 10/31/2016 1/3/2018

MC Studio P Arbors/1/3110 286 1506188 07/31/2016 0 - 1.0 4,125 3,935 0 3,935 1,300 7/31/2016 7/31/2016 7/31/2016

MC Studio P Arbors/1/3111 288 1767401 03/15/2018 0 - 1.0 4,125 4,110 0 4,110 550 9/17/2013 3/15/2018 3/15/2018

MC Studio P Arbors/1/3112 282 1721419 1721423 11/22/2017 0 - 1.0 4,125 3,915 0 3,915 1,000 1,523 1,190 (1,000) 11/22/2017 11/22/2017 11/22/2017

MC Studio P Arbors/1/3114 279 1650397 05/31/2017 0 - 1.0 4,125 3,739 0 3,739 500 5/31/2017 5/31/2017 5/31/2017

MC Studio P Arbors/1/3116 273 905715 11/30/2012 0 - 1.0 3,350 4,440 0 4,440 11/30/2012 11/30/2012 11/30/2012

MC Studio SP Arbors/1/3113A 143 155 0.5 2,725 0 0 0

MC Studio SP Arbors/1/3113B 144 1734893 12/18/2017 0 - 0.5 2,725 2,585 0 2,585 952 (1,000) 12/18/2017 12/18/2017 12/18/2017

Grand Total 52360 97.0 265,230 210,087 (15,672) 194,415 4,308 47,086 2,993 (3,000) (8,685) 772

52360 Brookdale Castle Hills AL/MC (TX) Product Unit Style Unit Usage Config Unit Capacity Unit Occup % Unit Occup Resident

Count Mo. Market Rate Mo. Net

Rent Avg Market Rate

Avg Base Rent

Avg Rent Discount

Avg Net Rent Avg 2nd Person

Avg Net Care Avg Incentives

AL Studio P 56.0 36.0 64.29% 37 129,480 84,637 2,312 2,611 -260 2,351 24 559 -158

AL Alcove P 8.0 5.0 62.50% 6 20,200 12,791 2,525 2,726 -168 2,558 160 723 -200

AL One Bedroom P 16.0 12.0 75.00% 14 47,200 35,160 2,950 3,270 -340 2,930 136 795 -125

80.0 53.0 66.25% 57 196,880 132,588 2,461 2,771 -269 2,502 62 628 -154

MC Studio P 16.0 15.0 93.75% 16 62,900 59,242 3,931 4,043 -94 3,949 67 1,057 -167

MC Studio SP 1.0 0.5 50.00% 1 5,450 2,585 5,450 5,170 5,170 1,904 -2,000

17.0 15.5 91.18% 17 68,350 61,827 4,021 4,079 -91 3,989 65 1,085 -226

97.0 68.5 70.62% 74 265,230 194,415 2,734 3,067 -229 2,838 63 731 -171

Product Unit Style Unit Usage Config Unit Capacity Unit Occup % Unit Occup Resident Count

Mo. Market Rate Mo. Net Rent

Avg Market Rate

Avg Base Rent

Avg Rent Discount

Avg Net Rent Avg 2nd Person

Avg Net Care Avg Incentives

AL Studio P 56.0 36.0 64.29% 37 129,480 84,637 2,312 2,611 -260 2,351 24 559 -158

AL Alcove P 8.0 5.0 62.50% 6 20,200 12,791 2,525 2,726 -168 2,558 160 723 -200

AL One Bedroom P 16.0 12.0 75.00% 14 47,200 35,160 2,950 3,270 -340 2,930 136 795 -125

80.0 53.0 66.25% 57 196,880 132,588 2,461 2,771 -269 2,502 62 628 -154

MC Studio P 16.0 15.0 93.75% 16 62,900 59,242 3,931 4,043 -94 3,949 67 1,057 -167

MC Studio SP 1.0 0.5 50.00% 1 5,450 2,585 5,450 5,170 5,170 1,904 -2,000

17.0 15.5 91.18% 17 68,350 61,827 4,021 4,079 -91 3,989 65 1,085 -226

97.0 68.5 70.62% 74 265,230 194,415 2,734 3,067 -229 2,838 63 731 -171Grand Total

AL Total

MC Total

Grand Total

AL Total

MC Total

Appendix E Letter of Engagement

Dallas Area VAS Office 700 E. Campbell Road, Suite 265

Richardson, TX 75081

Valuation & Advisory Services 972 960 1222 us.jll.com/valuation-advisory

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 1

June 8, 2018

Elan Ruggill President

American Eagle Lifecare Corporation 3819 Hawk Crest Rd

Ann Arbor, MI 48103

Office: 734-222-5275

Cell: 734-707-3198

[email protected]

RE: 17 Brookdale (the “Property”)

JLL Valuation & Advisory Services, LLC (“we” or “JLL”) appreciates the opportunity to provide this

proposal for services regarding the Property to you. We agree to perform the services outlined in

Exhibit A to this letter (the “Services”) on the terms provided in this letter.

In return for JLL providing the Services, you agree to pay JLL as follows:

You will pay JLL a fee (the “Fee”) of $93,200 ($5,250 per property plus $3,950 for portfolio report). No

retainer is required for this engagement, the full Fee is due and payable when we deliver the Report(s) to you.

The Fee includes the expenses related to this engagement. There will be no added charges for travel,

delivery fees or report production costs. Our invoices will be addressed to the addressee of our report unless you request otherwise in writing. The Ethics Rule of the Uniform Standards of Professional Appraisal Practice (“USPAP”) requires us to

disclose to you any prior services (appraisal or otherwise) performed within three years prior to the date of this letter by the individual JLL appraiser who will be performing Services for the Property. In compliance with that requirement, we represent that to our knowledge, that appraiser has

provided prior services within the designated disclosure period. Further, to our knowledge, JLL has

performed a previous appraisal, appraisal review or appraisal consulting assignment for the Property.

This letter is subject to the General Terms and Conditions attached to this letter as Exhibit B, the Statement of Assumptions and Limiting Conditions attached to this letter as Exhibit C.

JLL Engagement Letter

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 2

Upon your acceptance of this Agreement, we will forward our data needs list and coordinate a

property inspection with you. Please note that delays in obtaining the data needed to completed this assignment and/or delays in accessing the property for inspection may result in delays in the date our

analysis is completed and delivered to you. We are enthusiastic about the opportunity to work with you on this project. Please sign a copy of this letter as confirmation of our agreements stated in this letter.

Very truly yours, JLL VALUATION & ADVISORY SERVICES, LLC

Brian Chandler, MAI, CRE, FRICS

Executive Vice President

READ, AGREED AND ACCEPTED BY:

American Eagle Lifecare Corporation

_____________________________ _____________________________

Signature Date

_____________________________ _____________________________ Printed Name Title

________________________

Title

Exhibit A JLL Engagement Letter

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 3

EXHIBIT A

PROPOSAL

PROPERTY IDENTIFICATION: 17 Brookdale (See list on next page)

Portfolio Report

PROPERTY TYPE: Existing Independent Living, Assisted Living & Memory Care INTEREST APPRAISED: Fee simple

INTENDED USERS: American Eagle Lifecare Corporation NOTE: NO OTHER USERS ARE INTENDED

BY JLL VALUATION & ADVISORY. JLL VALUATION & ADVISORY SHALL

CONSIDER THE INTENDED USERS WHEN DETERMINING THE LEVEL OF DETAIL

TO BE PROVIDED IN THE REPORT.

INTENDED USE: To assist Client (intended users) in obtaining bond financing

PURPOSE OF APPRAISAL:

“As Is” Market Value

Prospective Market Value “Upon Stabilization” (if applicable) Investment Value Assuming Not-For-Profit Ownership and Ad Valorem Tax

Exemption

DATE OF VALUE: Current

APPRAISAL STANDARDS:

Uniform Standards of Professional Appraisal Practice (USPAP) by the Appraisal

Foundation and the Code of Professional Ethics and Standards of Professional

Appraisal Practice of the Appraisal Institute

ANTICIPATED SCOPE OF WORK:

Site Visit

Interior and exterior observation, on-site

Valuation Approaches Sales comparison approach / Cost approach / Income approach / All applicable approaches to value to develop a credible results. Note that a Cost Approach is only provided as applicable, generally for assets under 10 years of age.

APPRAISAL REPORT OPTION: Self-Contained Appraisal Report

DELIVERY DATE: 30 days from receiving authorization to proceed for the individual reports with

portfolio report to follow

DELIVERY METHOD: Electronic delivery

Exhibit A JLL Engagement Letter

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 4

PROPOSED IMPROVEMENTS: If the property appraised consists of proposed improvements, Client will provide to

JLL all plans, specifications, or other documentation sufficient to identify the extent and character of the proposed improvements.

PROPERTIES UNDER CONTRACT FOR SALE:

If the Property is currently under contract for sale, Client will provide to JLL a copy of the contract, including all addenda.

HYPOTHETICAL CONDITIONS AND EXTRAORDINARY ASSUMPTIONS:

To be provided in report

Exhibit A JLL Engagement Letter

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 5

Valuation & Advisory Exhibit B

TERMS AND CONDITIONS

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 6

1. I N T R O D U C T I O N

1.1 These Terms and Conditions supplement the proposal, agreement, letter of engagement or email (the “engagement”)

between JLL Valuation and Advisory Services, LLC and the Client indicated in

the engagement that sets out details of the Services to be provided to the Client.

All capitalized terms in this exhibit have the meanings given to them in the

engagement unless given a different

meaning in this exhibit. These Terms and

Conditions, together with the

engagement and all other exhibits, schedules and riders to the engagement, are collectively called the “agreement”.

2. S E R V I C E S

2.1 We will provide the Services using reasonable care and skill.

2.2 We may make changes to the Services if

necessary to comply with any law or

safety requirement. We will notify you if that happens. Otherwise, JLL and the

Client must agree in writing to any

changes t o the Services, the Fees, or any

other provision of the agreement.

3. C L I E N T O B L I G AT I O N S

3.1 You agree to give us all documents and other information that we advise you are

reasonably necessary for us to provide the Services.

3.2 You will maintain adequate property and public liability insurance to reasonably insure property that you own or occupy and any activities on that property. You will obtain all necessary licenses,

permissions and consents which may be required to enable us to perform the Services (other than professional licenses

that we are required to maintain to

perform the Services). You are responsible to keep your property in a safe conditions so that we may perform

the Services in reasonable safety. 3.3 You will notify us promptly if you believe

any information you have provided is incomplete or inaccurate.

4. D E L A Y

We are not responsible for any delay in

our performance of the Services if caused

by any event beyond o u r reasonable

control, or for any delay caused by your failure to comply with the agreement.

5. F E E S , E X P E N S E S AN D PAY M E N T

5.1 You agree that your obligation to pay the

Fee is not contingent upon the results, conclusions or recommendations we

provide.

5.2 If we are asked to invoice any other party,

you agree to settle our invoice immediately if the other party does not

do so within 30 days of the date of the

invoice.

5.3 Delinquent payments under the agreement will earn interest at the rate of one and one-half percent (1-1/2%) per

month from the date due until paid, or if

lower, the maximum rate permitted by law. If the Fee or any part of it remains

unpaid 30 days after it was due, you may not use any report or work product we have

delivered to you for any reason. 5.4 If you terminate this agreement before

the Services are completed, you will pay us, no later than the termination date, a reasonable fee proportionate to the part

of the Services performed to the date of termination.

Valuation & Advisory Exhibit B

TERMS AND CONDITIONS

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 7

5.5 Our rights under Section 5.3 and 5.4 are

in addition to, and will not limit, our right to pursue any other rights and remedies under the agreement or at law or in

equity.

6. I N D E MN I T Y

You agree to indemnify and defend us

and hold us harmless from any loss, liability or expense (including attorneys’

fees) arising from a third party action,

claim or proceeding (“Loss”) that we

suffer arising out of the agreement or the

Services, other than Loss that a court of competent jurisdiction has determined was the result of our negligence or willful

misconduct. We agree to indemnify and

defend you and hold you harmless from

any Loss that you suffer arising out of our negligent performance of Services under the agreement, other than Loss that is

found by a court of competent jurisdiction to result from your

negligence or willful misconduct.

7. E X C L U S I O N S O F , AN D L I MI T AT I O N S

O N , L I AB I L I T Y

7.1 EACH OF JLL AND THE CLIENT WAIVES

ANY CLAIMS AGAINST EACH OTHER FOR

LOSS OF PROFITS, CONSEQUENTIAL,

PUNITIVE, EXEMPLARY OR SIMILAR DAMAGES IN CONNECTION WITH THE

AGREEMENT. IN NO EVENT SHALL JLL’S LIABILITY IN CONNECTION WITH THE

AGREEMENT EXCEED THE FEE PAID TO JLL HEREUNDER.

8. T E R MI N AT I O N

8.1 Either of us may terminate the agreement without reason by giving 30

days' advance written notice to the

other. 8.2 Either of us may terminate the

agreement immediately if the other

breaches the agreement and fails to remedy the breach within 10 days of

notice by the non-breaching party. 8.3 We may terminate the agreement

immediately for any of the following

reasons:

(a) We cannot provide any of the Services due to conditions beyond

our reasonable control.

(b) In our reasonable opinion, there is

insufficient information available to provide a report or other work

product that meets our standards. (c) A conflict of interest arises which

prevents us from acting for you. (d) You have asked us to provide reports

or work product that we do not

consider to be accurate.

9. AP P R AI S AL R E P O R T AS S U MP T I O N S

AN D L I MI T AT I O N S

9.1 Any report or other work product we

deliver as part of the Services will be subject to our standard Statement of Assumptions and Limiting Conditions,

provided as an exhibit and as part of the

agreement, which will be incorporated into the report or work product.

10. C O N F I D E N T I AL I T Y

10.1 We each agree to maintain the confidentiality of each other's confidential information and will not disclose any information received in confidence from each other, until two

years after termination or expiration of the agreement, except where required to do so by law.

Valuation & Advisory Exhibit B

TERMS AND CONDITIONS

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 8

10.2 Any report or other work product that we

deliver to you in connection with the Services is confidential and may be used by only you, unless we agree otherwise in

writing.

11. I N T E L L E C T U A L P R O P E R T Y R I G H T S

11.1 We retain all copyright (and other

intellectual property rights) in all materials, reports, systems and other

deliverables which we produce or

develop for the purposes of the

agreement, or which we use to provide

the Services. 11.2 You will not reproduce or copy any part

of any report or other work product we

produce as part of the Services without

our prior written consent.

12. G E N E R A L

12.1 The agreement may be modified only by

a written agreement signed by both of

us. Liability accruing before the agreement terminates or expires will

survive termination or expiration.

12.2 The agreement states the entire

agreement, and supersedes all prior agreements, between you and JLL with respect to the matters described in the

agreement.

12.3 If a court determines that any part of the agreement is unenforceable, the

remainder of the agreement will remain in effect.

12.4 The agreement is governed by the laws of the State of Illinois. Each of us irrevocably submits to the exclusive jurisdiction of the courts of that State.

12.5 The agreement may be executed in

multiple counterparts. 12.6 No director, officer, agent, employee or

representative of either of us has any

personal liability in connection with the

agreement. 12.7 Neither of us may assign or transfer any

rights or obligations under the

agreement without the prior written approval of the other. We each agree to

be reasonable in evaluating such a request for approval.

12.8 If there is any conflict between the

terms of the letter and this exhibit, the

terms of the letter will prevail. 12.9 If either of us fails to enforce any

provision or exercise any right under the

Agreement at any time, that failure will

not operate as a waiver to enforce that provision or to exercise that right at any

other time. 12.10 The agreement does not establish

any partnership or joint venture between us, or make either of us the agent of the other.

12.11 A person who is not a party to the

agreement does not have any rights to

enforce its terms unless specifically

agreed in writing. 12.12 Neither of us may publicize or issue

any specific information to the media

about the Services or the agreement without the written consent of the

other. 12.13 Each of us represents to the other

that it is not a person or entity with

whom U.S. entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”)

of the Department of the Treasury (including those named on OFAC’s

Specially Designated and Blocked Persons List) or under any statute,

executive order or other governmental

action. Each of us agrees to comply with all applicable laws, statutes, and regulations relating to anti-bribery and anti-corruption.

Valuation & Advisory Exhibit B

TERMS AND CONDITIONS

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 9

12.14 If you do not comply with your

obligations under the agreement and we commence legal action to enforce our rights, you will reimburse our

reasonable costs (including attorneys’ fees), associated with such action. THE

PARTIES HEREBY WAIVE TRIAL BY JURY.

12.15 Sections 5, 6, 7, 10, 11, 12.1, 13, 17

and 18 will survive termination of the

agreement.

13. U S E O F D AT A AN D D AT A

P R O T E C T I O N

13.1 You agree as follows: (i) The data we

collect in connection with the

agreement will remain our property. (ii)

We and our affiliates may utilize, sell

and include data you have provided (either in the aggregate or individually) in the databases of JLL and its affiliates

and for use in derivative products. (iii) We may utilize all data already in the

public domain on an unrestricted basis.

13.2 In order for us to provide the Services, we may need to record and maintain in

hard copy and/or in electronic form, information regarding the Client, its officers and any other individuals

connected with the Client (collectively

“Data Subjects”). We may also verify the identity of Data Subjects, which could include carrying out checks with third

parties such as credit reference, anti- money laundering or sanctions checking

agencies.

13.3 We may use all information that we hold regarding Data Subjects to provide the Services. We may also use and share it

with third parties for other purposes as described in our Privacy Statement available at www.jll.com.

13.4 We may use both commercially available and proprietary software

programs to perform the Services (web

based and others).

14. S P E C I AL E X P E R T S

14.1 If you request our assistance in hiring a special expert to contribute to any

assignment (such as a surveyor, environmental consultant, land planner,

architect, engineer, business, personal property, machinery and equipment

appraiser, among others), you will

perform your own due diligence to

qualify the special expert. You will be

responsible to pay for the services of the special expert.

14.2 We not responsible for the actions and

findings of any special expert. You agree

to indemnify and defend us and hold us

harmless from all damages that may arise out of your reliance on any special expert.

15. C O N F L I C T S P O L I C Y

JLL adheres to a strict conflict of interest policy.

If we learn of a conflict of interest, we

will notify you and recommend a

course of action to resolve the conflict. If we learn of a conflict that we do not believe can be resolved, we may

terminate the agreement without

penalty.

16. F I R R E A R E Q U I R E ME N T S Federal banking regulations require

banks and other lending institutions to engage appraisers where FIRREA compliant appraisals must be used in connection with mortgage loans or other transactions involving federally

regulated lending institutions. Given that requirement, any report produced by JLL under the agreement, if ordered

Valuation & Advisory Exhibit B

TERMS AND CONDITIONS

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 10

independent of a financial institution or

agent, might not be FIRREA compliant or acceptable to a federally regulated financial institution.

17. U S E O F W O RK P R O D U CT AN D R E L I AN C E

17.1 You agree that any report or other work

product we produce in connection with the Services are for your use only, and

only for the purpose indicated in the

agreement. No person or entity other

than the Client may use or rely on any

such report or work product unless we consent otherwise in writing, even if such reliance is foreseeable. Any person

who receives a copy of any report or

other work product we produce as a

consequence of disclosure requirements that apply to the Client, does not become an intended user of this report

unless the Client specifically identified them at the time of the engagement.

17.2 You will not use any such report or work

product in connection with any public documents. You will not refer to JLL in

any public documents without our prior written consent. We may give or withhold our consent in our sole

discretion for any purpose under this

Section 17.

18. L I T I G AT I O N MAT T E R S

18.1 We are not required to testify or provide

court-related consultation or to be in attendance in court unless we have agreed to do so in the agreement or otherwise in writing, or if required by law.

18.2 If we receive a subpoena or other judicial command to produce documents or to provide testimony in a

lawsuit or proceeding regarding the

agreement, we will notify you if allowed by law to do so. However, if we are not a party to these proceedings, you agree to

compensate us for our professional time at the then prevailing hourly rates of the

personnel responding to the subpoena or providing testimony, and to reimburse us for our actual expenses

incurred in responding to any such

subpoena or judicial command, including attorneys' fees, if any, as they

are incurred.

Valuation & Advisory Exhibit C

STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS

COPYRIGHT © JONES LANG LASALLE IP, INC. 2018. All Rights Reserved Page 11

1. All reports and work product we deliver to you (collectively called “report”) represents an opinion of value, based

on historical information and forecasts of market conditions. Actual results

may vary from those forecast in the report. There is no guaranty or warranty that the opinion of value

reflects the actual value of the

property. 2. The conclusions stated in our report

apply only as of the effective date of the

appraisal, and no representation is

made as to the effect of subsequent events. Assessed values may change

significantly and unexpectedly over short periods. We are not liable for any

conclusions in the report that may be different if there are subsequent changes in value. We are not liable for

loss relating to reliance upon our report

more than three months after its date.

3. There may be differences between projected and actual results because

events and circumstances frequently

do not occur as predicted, and those differences may be material. We are

not liable for any loss arising from these differences.

4. We are not obligated to predict future

political, economic or social trends. We assume no responsibility for economic factors that may affect or alter the

opinions in the report if the economic factors were not present as of the date

of the letter of transmittal accompanying the report.

5. The report reflects an appraisal of the

property free of any liens or encumbrances unless otherwise stated.

6. We assume responsible ownership and

competent property management.

7. The appraisal process requires

information from a wide variety of sources. We have assumed that all information furnished by others is

correct and complete, up to date and can be relied upon, but no

warranty is given for its accuracy. We do not accept responsibility for erroneous information provided by others. We

assume that no information that has a

material effect on our appraisal has been withheld.

8. We assume the following, unless

informed to the contrary in writing:

Each property has a good and marketable title. All documentation is

satisfactorily drawn and that there are no encumbrances, restrictions,

easements or other adverse title conditions, which would have a material effect on the value of the

interest under consideration. There is

no material litigation pending involving

the property. All information provided

by the Client, or its agents, is correct, up to date and can be relied upon. We are

not responsible for considerations

requiring expertise in other fields, including but not limited to: legal