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Edward Merrigan | Director of Municipal Research | [email protected] Mike Vitiello | Municipal Research Analyst | [email protected] SPECIAL REPORT ZIEGLER RESEARCH FINANCIAL RATIO MEDIANS FOR NOT-FOR-PROFIT ENTRANCE FEE CONTINUING CARE RETIREMENT COMMUNITIES BASED ON AUDITED FYE 2014 RESULTS Dated: September 24, 2015 EXECUTIVE SUMMARY Ziegler Research is pleased to present this annual study of 19 financial ratio median and quartile values we deem important for analyzing the credit quality of not-for-profit Continuing Care Retirement Communities (CCRCs). These ratios address profitability, liquidity, cash flow, and capital structure. The medians and quartiles discussed in this report are based on the fiscal year-ended 2014 audits of 97 nonprofit CCRC entities, of which 38 borrowers had debt rated in the investment grade categories, while the rest had non-rated debt or debt rated in non-investment grade rating categories. We did not include any FYE 2014 audits received after August 1, 2015. We were able to compute the 19 ratios for the vast majority of borrowers studied. However, for certain borrowers some ratios were not able to be computed. These instances are noted in the commentary for that particular ratio. The names of the 97 borrowers included in this Special Report can be found in Appendix A. Ziegler has underwritten bond issues for many more than the 97 borrowers included in our sample. As of August 1, 2015 we follow approximately 265 senior living borrowing entities. The rest of the borrowers were excluded from this report for the following reasons: • The borrower has no material entrance fee collection. The borrower may operate on a rental basis only or requires only a nominal entrance fee to enter the community. • The borrower does not offer a continuum of care: independent living as well as assisted living and/or skilled nursing care. • The borrower is a start-up community or in the midst of a substantial repositioning whereby large amounts of non-recurring initial entrance fees are being collected and/or the borrower is capitalizing a material amount of interest costs during the fiscal year studied. • The borrower’s only bond debt outstanding is either 100% Letter of Credit (LOC) enhanced Variable Rate Demand Bonds (VRDBs), a direct Bank Placement, or a combination of both. These CCRCs are typically not required to file audited financial statements with EMMA. • The borrower is in monetary default or is severely financially distressed. Ratios are not reflective of an operationally viable CCRC. Please refer to important analyst’s certification and disclosure at the end of this Special Report. Past performance is no guarantee of future results. This Special Report does not constitute a solicitation or an offer to purchase or sell any type of security described herein. © 2015 | B.C. Ziegler and Company | Member SIPC & FINRA A CCRC provides coordinated care and services for older persons through contractual agreements. The community provides independent residential living, in addition to assisted living and/or skilled nursing care. To provide such services, the CCRC: 1) accepts an entrance fee or other type of advance fee; and/or 2) charges a full or discounted periodic fee. Ziegler Research calculates financial ratios generally, but not fully, in accordance with the guidelines published by the Commission on Accreditation of Rehabilitation Facilities-Continuing Care Accreditation Commission (CARF-CCAC), a reputable body that accredits CCRCs. If our method for a particular ratio varies from CARF-CCAC’s method, it will be noted in the commentary for that ratio. Standard & Poor’s and Fitch Ratings annually publish financial ratio medians for rated bonds. Moody’s is not active in rating CCRC bonds. Consensus among the participants who have a stake in creating uniformity around calculating financial ratios has not fully taken place. No absolute uniform national standards exist. Because of differences related to methods and values used, simultaneous with the release of this Special Report, we published a companion Special Report entitled, “Calculating Financial Ratios for Notfor-Profit Continuing Care Retirement Communities.” Our companion report provides extensive background and detail on the analytical protocols we follow when computing ratios. All Borrower FYE 2014 Financial Ratio Median Values Net Operating Margin (NOM) 7.7% Net Operating Margin – Adjusted (NOM-A) 23.3% Operating Ratio (OR) 97.6% Operating Margin (OM) -2.5% Total Excess Margin (TEM) Change in Unrestricted Net Assets Margin (CUNAM) Days in Accounts Receivable (DAR) 0.7% 1.1% 18 days Days Cash on Hand (DCOH) 298 days Cushion Ratio (CUSH) 5.3 times Debt Service Coverage – Revenue Basis (DSC-R) 0.94 times Debt Service Coverage (DSC) 1.95 times Debt Service as a Percentage of Total Operating Revenues and Net NonOperating Gains and (Losses) (DS-TR) 14.5% Unrestricted Cash and Investments to Long-Term Debt (CTD) 43.0% Reserve Ratio (RR) 51.2% Long-Term Debt as a Percentage of Total Capital (LTDC) 95.2% Long-Term Debt as a Percentage of Total Capital – Adjusted (LTDC-A) 77.1% Long-Term Debt as a Percentage of Total Assets (LTD-TA) 49.2% Average Age of Plant (AAP) Capital Expenditures as a Percentage of Depreciation Expense (CED) 2 Ratios 11.0 years 79% Of the 97 borrowers in our analysis, 38 had investment grade rated bonds at the time of this publication (“BBB-” or greater rating from S&P or Fitch). We did not match ratings in effect during FY 2014. As expected, the ratio medians generated from the audited financial results of borrowers who have investment grade rated bonds show these borrowers are in a stronger financial state when compared to the typical non-rated borrower. This reaffirms investment grade rated status and provides further credibility regarding the creditworthiness calibration accuracy of S&P and Fitch. If both agencies rate the borrower, and one gives an investment grade rating while the other does not, we count that borrower as non-rated. Only a small percentage of new-issue bond financings are initially floated with a non-investment grade rating (“BB+” or lower from S&P or Fitch). Thus, non-rated debt forms the vast majority of the CCRC bond universe. For ease of reading, we aggregately refer to non-rated and non-investment grade rated bonds as non-rated in this report. Breakout of Borrowers FYE 2014 Financial Ratio Median Values Number of Borrowers Net Operating Margin (NOM) Investment Grade Non-Rated 38 59 6.9% 8.3% Net Operating Margin – Adjusted (NOM-A) 24.2% 23.3% Operating Ratio (OR) 95.4% 99.9% Operating Margin (OM) 1.3% -5.6% Total Excess Margin (TEM) 4.9% -1.4% Change in Unrestricted Net Assets Margin (CUNAM) 4.5% -0.9% 20 days 17 days Days Cash on Hand (DCOH) 416 days 238 days Cushion Ratio (CUSH) 8.1 times 3.8 times Debt Service Coverage – Revenue Basis (DSC-R) 1.11 times 0.79 times Debt Service Coverage (DSC) Days in Accounts Receivable (DAR) 2.60 times 1.67 times Debt Service as a Percentage of Total Operating Revenues and Net Non-Operating Gains and (Losses) (DS-TR) 11.8% 16.3% Unrestricted Cash and Investments to Long-Term Debt (CTD) 76.0% 33.0% Reserve Ratio (RR) 80.0% 38.8% Long-Term Debt as a Percentage of Total Capital (LTDC) 84.8% 122.8% Long-Term Debt as a Percentage of Total Capital – Adjusted (LTDC-A) 62.9% 89.8% Long-Term Debt as a Percentage of Total Assets (LTD-TA) 40.4% 56.3% 11.0 years 10.9 years 111% 68% Average Age of Plant (AAP) Capital Expenditures as a Percentage of Depreciation Expense (CED) 3 FISCAL YEAR TRENDS 2011, THROUGH 2014 Financial Ratios Number of Borrowers FYE 2011 Medians FYE 2012 Medians FYE 2013 Medians FYE 2014 Medians 101 97 97 97 6.8% 6.7% 9.0% 7.7% Net Operating Margin – Adjusted (NOM-A) 17.4% 19.4% 22.3% 23.3% Operating Ratio (OR) 98.9% 99.1% 98.7% 97.6% Operating Margin (OM) -0.3% -0.7% -2.1% -2.5% 1.3% 0.5% 0.5% 0.7% n/a 0.9% 2.4% 1.1% 20 days 18 days 20 days 18 days Days Cash on Hand (DCOH) 208 days 262 days 303 days 298 days Cushion Ratio (CUSH) 4.1 times 4.4 times 5.2 times 5.3 times Debt Service Coverage – Revenue Basis (DSC-R) 0.83 times 0.94 times 0.93 times 0.94 times Debt Service Coverage (DSC) 1.64 times 1.77 times 2.04 times 1.95 times Debt Service as a Percentage of Total Operating Revenues and Net NonOperating Gains and (Losses) (DS-TR) 14.6% 13.9% 13.2% 14.5% Unrestricted Cash and Investments to Long-Term Debt (CTD) 35.0% 35.0% 39.0% 43.0% Reserve Ratio (RR) 41.9% 41.5% 47.2% 51.2% Long-Term Debt as a Percentage of Total Capital (LTDC) 99.6% 100.4% 93.1% 95.2% Long-Term Debt as a Percentage of Total Capital – Adjusted (LTDC-A) 75.4% 76.6% 72.6% 77.1% Long-Term Debt as a Percentage of Total Assets (LTD-TA) 51.3% 48.1% 50.6% 49.2% 10.8 years 11.4 years 10.9 years 11.0 years 61% 70% 74% 79% Net Operating Margin (NOM) Total Excess Margin (TEM) Change in Unrestricted Net Assets Margin (CUNAM) Days in Accounts Receivable (DAR) Average Age of Plant (AAP) Capital Expenditures as a Percentage of Depreciation Expense (CED) The ratio medians we have calculated for our sample group demonstrates relatively solid credit characteristics of the studied group of borrowers. As we can see from the above chart, the medians for the ratios calculated for FYE 2011, 2012, and 2013 show consistent improvement. However, the ratios calculated for FYE 2014 show possible stabilization from FYE 2013. About half of the ratios improved and half worsened for FY 2014. However, Ziegler Research believes most of these changes, both positive and negative, to be immaterially small. The two most significant year-overyear changes were decreases in the NOM and CUNAM. The decrease in NOM likely points to operating expenses rising faster than operating revenues during the fiscal year. However, more stable results in the OR, OM and TEM show that borrowers may be making up for this shortfall in other ways. Because the intermediary profitability measures show stability, the decrease in CUNAM is likely tied to large non-cash items such as losses from bond refundings, changes in swap valuations or pension obligations. We look forward to publishing this report next year for fiscal year 2015 results. We also ask readers to comment on the utility of this report and make suggestions for improvements. 4 RATIO 1: NET OPERATING MARGIN (NOM) FYE 2014 MEDIAN: 7.7% (Resident and Healthcare Revenue) - (Operating Expenses - Interest, Depreciation & Amortization Expenses) Resident and Healthcare Revenue = NOM For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Net Operating Margin (NOM) median of 7.7%. The worst reported NOM was -22.6%, while the best was 30.6%. NOM is the only ratio in this report where nonrated borrowers performed materially better than investment grade borrowers, at 8.3% vs. 6.9%. There was a similar trend in FYE 2011, FYE 2012 and FYE 2013. Ziegler Research believes this discrepancy to be caused by exclusion of interest expense and non-resident revenues. Interest rates and relative principal amounts are generally higher for non-rated borrowers compared to those rated investment grade. Thus, interest expense for non-rated borrowers will generally be higher than investment grade rated counterparts. Subtracting interest expense as part of the numerator improves the NOM for non-rated borrowers more than it does for investment grade borrowers. Also, investment grade borrowers tend to have larger amounts of unrestricted cash and investments, leading to potentially higher investment income. Investment income is a significant source of income for many CCRCs. Excluding it in the NOM hurts investment grade borrowers more than non-rated, while including it in other ratios has the opposite effect. FYE 2014 Net Operating Margin by Quartile 40 30 20 10 0 -10 -20 -30 First Quartile Worst All Borrowers Investment Grade Non-rated -22.6 -12.0 -22.6 2.2 1.9 2.8 Second Quartile (Median) 7.7 6.9 8.3 Third Quartile 12.9 12.2 13.7 Best 30.6 24.7 30.6 The Net Operating Margin (NOM) measures the operations of a CCRC and examines the revenues and expenses related to the delivery of services to residents. The purpose of this ratio is to provide a benchmark from which borrowers can determine the margin generated by cash resident revenues after payment of cash operating expenses. This allows interested parties to gauge the operational performance of a CCRC. Amortization of Entrance Fees is not a component of Resident Revenue. The NOM is expressed as a percentage rounded to one decimal point, e.g. 2.8%. For example, if a CCRC had $20,000,000 in Resident Revenue (net of Amortization of Entrance Fees), $22,000,000 in Operating Expense, $1,000,000 in Interest, $1,550,000 in Depreciation and Amortization; NOM would be 2.8%. 5 RATIO 2: NET OPERATING MARGIN-ADJUSTED (NOM-A) FYE 2014 MEDIAN: 23.3% (Resident and Healthcare Revenue) - (Operating Expenses - Interest, Depreciation and Amortization Expenses) + Net Entrance Fees From Turnover = NOM-A Resident and Healthcare Revenue + Net Entrance Fees From Turnover For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Net Operating Margin-Adjusted (NOM-A) median of 23.3%. The worst reported NOM-A was -15.0%, while the best was 47.1%. FYE 2014 Net Operating Margin-Adjusted by Quartile 60 50 40 30 20 10 0 -10 -20 Worst All Borrowers Investment Grade Non-rated -15.0 1.0 -15.0 First Quartile 15.0 15.0 14.4 Second Quartile (Median) 23.3 24.2 23.3 Third Quartile 28.3 30.5 27.5 Best 47.1 47.1 46.2 The Net Operating Margin-Adjusted (NOM-A) measures a CCRC’s margin produced by cash operating revenues after meeting cash expenses, but is adjusted to add net entrance fee receipts from turnover in both the numerator and denominator. This means figures from the Statement of Cash Flows are needed. Net turnover-related entrance fees are the cash flows associated with residents moving into previously occupied units. By comparing the results of this ratio to the NOM, the user can determine to what extent a CCRC relies on net entrance fee receipts to enhance annual cash flows. A substantial difference in the NOM and NOM-A ratios shows a high sensitivity to, and dependence on, these fees. If NOM-A is lower than NOM, the CCRC had more entrance fee refunds than proceeds in the period. In tandem with other ratios such as Ratios #10 and #11 (Debt Service Coverage-Revenue Basis and Debt Service Coverage), users can determine the extent of a CCRC’s reliance on net entrance fees for cash flow. Ziegler Research calculates this ratio differently from CARF-CCAC. CARF-CCAC includes Initial Entrance Fees, but we do not. Amortization of Entrance Fees is not a component of Resident Revenue. The NOM-A is expressed as a percentage rounded to one decimal point, e.g. 11.6%. For example, if a CCRC had $20,000,000 in Resident Revenue (net of Amortization of Entrance Fees), $22,000,000 in Operating Expense, $1,000,000 in Interest, $1,550,000 in Depreciation and Amortization, and $2,000,000 in Net Proceeds from Entrance fees; NOM-A would be 11.6%. 6 RATIO 3: OPERATING RATIO (OR) FYE 2014 MEDIAN: 97.6% Operating Expenses - (Depreciation, Amortization, Bad Debt Expenses) Operating Revenue - Amortization of Entrance Fees = OR For this ratio, a lower value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had an Operating Ratio (OR) median of 97.6%. The worst reported OR was 120.5%, while the best was 76.9%. FYE 2014 Operating Ratio by Quartile 130 120 110 100 90 80 70 60 Worst All Borrowers Investment Grade Non-rated 120.5 109.8 120.5 First Quartile 102.7 100.6 105.7 Second Quartile (Median) 97.6 95.4 99.9 Third Quartile 94.0 92.0 94.8 Best 76.9 84.7 76.9 The Operating Ratio (OR) measures cash operating revenues against cash operating expenses. The OR differs from the Net Operating Margin because: a) Interest Expense is included within operating expenses, b) Investment Interest/Dividends and Net Assets Released for Operations are included within revenues, and c) no revenues are included in the numerator. Although an OR of less than 100 percent is desired, this ratio often pushes above the 100 percent mark, resulting from cash operating expenses exceeding cash operating revenues. The reason is the historical dependence of many CCRCs on cash from entrance fees collected to offset operating expenses, particularly interest expense. New CCRCs in particular will often experience an OR in excess of 100 percent if structured to rely on initial entrance fees to subsidize operating losses during the early fill-up years. The OR of a mature CCRC is generally expected to drop below 100 percent. The OR is expressed as a percentage rounded to one decimal point, e.g. 100.3%. For example, if a CCRC has Operating Expenses of $22,000,000, $1,500,000 in Depreciation Expense, $50,000 in Amortization Expense, $22,400,000 of Operating Revenue and $2,000,000 of Amortization of Entrance Fees; OR would be 100.3%. 7 RATIO 4: OPERATING MARGIN (OM) FYE 2014 MEDIAN: -2.5% Income (Loss) from Operations Operating Revenue = OM For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had an Operating Margin (OM) median of -2.5%. The worst reported OM was -27.4%, while the best was 14.3%. FYE 2014 Operating Margin by Quartile 20 15 10 5 0 -5 -10 -15 -20 -25 -30 Worst All Borrowers Investment Grade Non-rated -27.4 -9.3 -27.4 First Quartile -7.9 -3.2 -10.6 Second Quartile (Median) -2.5 1.3 -5.6 Third Quartile Best 2.5 5.6 0.1 14.3 14.3 12.9 The Operating Margin (OM) measures the total portion of “operating” revenues remaining after operating expenses have been satisfied. It is considered to be a strong measure of the borrower’s ability to generate surpluses for future requirements. The OM is expressed as a percentage rounded to one decimal point, e.g. 1.8%. For example, if a CCRC had an Income from Operations of $400,000 and Operating Revenue of $22,500,000; OM would be 1.8%. 8 RATIO 5: TOTAL EXCESS MARGIN (TEM) FYE 2014 MEDIAN: 0.7% Total Excess of Revenues over Expenses Operating Revenue + Net Nonoperating Gains and (Losses) = TEM For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Total Excess Margin (TEM) median of 0.7%. The worst reported TEM was -27.7% while the best was 17.2%. FYE 2014 Total Excess Margin by Quartile 20 15 10 5 0 -5 -10 -15 -20 -25 -30 Worst All Borrowers Investment Grade Non-rated -27.7 -4.9 -27.7 First Quartile -5.1 0.5 -9.5 Second Quartile (Median) 0.7 4.9 -1.4 Third Quartile Best 5.9 9.7 2.3 17.2 17.2 15.7 The Total Excess Margin (TEM) includes both operating and non-operating revenues and gains. In contrast to the Operating Margin, unrestricted contributions are included, as are realized gains or losses on investments or derivatives. The TEM is expressed as a percentage rounded to one decimal point, e.g. 1.8%. For example, if a CCRC had an Excess of Revenues over Expenses of $400,000, Operating Revenue of $22,400,000, and Net Nonoperating Gains of $100,000; the TEM would be 1.8%. 9 RATIO 6: CHANGE IN UNRESTRICTED NET ASSETS MARGIN (CUNAM) FYE 2014 MEDIAN: 1.1% Increase (Decrease) in Unrestricted Net Assets All Revenues = CUNAM For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Change in Unrestricted Net Assets Margin (CUNAM) median of 1.1%. The worst reported CUNAM was -85.5%, while the highest was 26.9%. Please note that in the chart below, the worst bar has been cut off in order to better illustrate the differences in the quartiles. FYE 2014 Change in Unrestricted Net Assets Margin by Quartile 30 25 20 15 10 5 0 -5 -10 -15 -20 Worst All Borrowers Investment Grade Non-rated -85.5 -8.4 -85.5 First Quartile -5.6 -0.1 -9.4 Second Quartile (Median) 1.1 4.5 -0.9 Third Quartile Best 7.6 9.9 3.1 26.9 26.9 15.8 This ratio is not computed by CARF-CCAC, Fitch, or S&P. The CUNAM calculation includes all items listed on the Income Statement. Any net changes in the donor restricted Net Asset accounts for Temporarily or Permanently Restricted Net Assets are excluded from this ratio. We believe this ratio is the most comprehensive measure of the unrestricted “margin” a CCRC can produce. It incorporates all activities and financial line items that make up the accumulation of Unrestricted Net Assets. It also measures a fiscal year’s deficit. This ratio captures all measurable financial activities a CCRC participates in that must run through the Income Statement. CUNAM is expressed as a percentage rounded to one decimal point, e.g. 0.4%. For example, if a borrower had a Change in Unrestricted Net Assets of $100,000 and Revenues of $22,800,000; CUNAM would be 0.4%. 10 RATIO 7: DAYS IN ACCOUNTS RECEIVABLE (DAR) FYE 2014 MEDIAN: 18 DAYS Net Accounts Receivable Resident and Healthcare Revenue/365 = DAR For this ratio, a lower value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Days in Accounts Receivable median of 18 days. The worst reported Days in Accounts Receivable was 56 days, while the best was 1 day. FYE 2014 Days in Accounts Receivable by Quartile 60 DAR (DAYS) 50 40 30 20 10 0 First Quartile Worst All Borrowers Investment Grade Non-rated 56 56 41 Second Quartile (Median) 24 25 24 18 20 17 Third Quartile Best 13 13 13 1 3 1 The Days in Accounts Receivable (DAR) ratio measures how much revenue is tied up in uncollected billings. The calculation compares the total amount in accounts receivable (net of allowances for uncollectible accounts) to average daily operating revenues associated with net charges to residents of independent living, assisted living, and nursing units. Generally, ILUs and ALUs in a CCRC are private pay. Typically, ILU charges are monthly, and paid in advance. For CCRCs with a high percentage of private pay residents in nursing care beds (NCBs), this number should be low because typically residents pay quickly. On the other hand, CCRCs with a high percentage of revenues from third-party payors (i.e. Medicaid and Medicare) will generally have a higher DAR because of systemic reasons that are out of management’s control. This issue is more prevalent in some states than others. Before being able to judge a CCRC based on this ratio, we must understand the payor mix and billing/collection environment. It should be noted that a strong collection rate for private pay residents could mask potential issues with collections from third party payors. DAR is expressed as a whole number of days, e.g. 12 days. For example, if a CCRC had $750,000 in Net Accounts Receivable and $60,300 in Daily Residential and Healthcare Revenues; DAR would be 12 days. 11 RATIO 8: DAYS CASH ON HAND (DCOH) FYE 2014 MEDIAN: 298 DAYS Unrestricted Cash and Investments Daily Operating Expenses = DCOH For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Days Cash on Hand (DCOH) median of 298 days. The worst reported DCOH was 74 days, while the best was 1375 days. Due to the collection of advance fees and the insurance nature of certain CCRC contracts, entrance-fee CCRCs typically carry significantly more cash and investments than rental CCRCs, freestanding assisted living facilities or skilled nursing facilities. FYE 2014 Days Cash on Hand by Quartile 1600 DCOH (DAYS) 1400 1200 1000 800 600 400 200 0 First Quartile Worst All Borrowers Investment Grade Non-rated 74 157 74 203 279 174 Second Quartile (Median) 298 416 238 Third Quartile 454 626 335 Best 1,375 1,375 972 The purpose of this ratio is to measure the number of days of cash the borrower has available for cash operating expenses, assuming no new revenue is received. A high DCOH indicates financial health in the event of an emergency or an immediate need for cash. With high liquidity, a borrower can hedge against potentially volatile annual cash flows and can internally fund routine capital expenditures. In addition, a CCRC offering entrance fee deposit refunds needs to build cash reserves to offset any long-term nursing care liability while keeping sufficient reserves to fund promised refunds, regardless of whether the refund is contingent upon resale of the unit. DCOH is expressed as a whole number of days, e.g. 179 days. Some put a possessive apostrophe (days’) indicating a statement of the denominator’s daily expenses. Ziegler Research chooses to make it simply a plural expression of days. For example, if a CCRC had Operating Expenses of $22,000,000 and Depreciation, Amortization, and Bad Debt Expenses of $1,550,000, the net annual cash operating expenses would be $20,450,000. This amount is divided by 365 to arrive at the daily operating expense value, $56,000. If the CCRC had Unrestricted Cash and Investments of $10,000,000, we divide the daily operating expenses into the Unrestricted Cash and Investments to arrive at 179 days. 12 RATIO 9: CUSHION RATIO (CUSH) FYE 2014 MEDIAN: 5.3 TIMES Unrestricted Cash and Investments Maximum Annual Debt Service (MADS) = CUSH For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Cushion Ratio median of 5.3 times. The worst reported CUSH was 1.3 times, while the best was 39.8 times. We were unable to calculate MADS for six borrowers, either because a complete debt service schedule did not exist, or we knew of material non-bond related debt but could not compute the costs associated with it because of inadequate disclosure. Please note that in the chart below, the best bar has been cut off in order to better illustrate the differences in the quartiles. CUSH (TIMES) FYE 2014 Cushion Ratio by Quartile First Quartile Worst All Borrowers Investment Grade Non-rated 1.3 3.0 1.3 Second Quartile (Median) 3.3 5.5 2.9 5.3 8.1 3.8 Third Quartile 8.7 12.9 5.6 Best 39.8 39.8 16.7 The Cushion Ratio (CUSH) measures the borrower’s cash position in relation to its annual debt service obligation. Ziegler Research uses Maximum Annual Debt Service (MADS) while CARFCCAC uses historical Annual Debt Service (ADS) taken straight from the audited financial statements. A CUSH ratio of 1.0 times signifies that a CCRC has enough liquidity to cover MADS. If a CCRC’s debt service has not been structured to be level, a low CUSH ratio using MADS may signal an inability to meet escalating or balloon principal payments. The CUSH ratio is expressed to one decimal point, followed by the word “times,” e.g. 6.7 times. Some use an “x” to represent the word times, however Ziegler Research chooses to write the word out. For example, if a CCRC had $10,000,000 in Unrestricted Cash and Investments and Maximum Annual Debt Service of $1,500,000; CUSH would be 6.7 times. 13 RATIO 10: DEBT SERVICE COVERAGE-REVENUE BASIS (DSC-R) FYE 2014 MEDIAN: 0.94 TIMES Net Available for Debt Service Maximum Annual Debt Service (MADS) = DSC-R For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Debt Service Coverage - Revenue Basis (DSC-R) ratio median of 0.94 times. The worst reported DSC-R was -0.22 times, while the highest was 2.84 times. Of the 91 borrowers whose DSC-R we were able to calculate, 50 or 55% had a DSC-R of over 1.00 times. Stated differently, over half our sample generated sufficient revenues to cover MADS without reliance on entrance fees, an improvement over FY 2013’s 41%. We were unable to calculate MADS for six borrowers, either because a complete debt service schedule did not exist, or we knew of material non-bond related debt but could not compute the costs associated with it because of inadequate disclosure. DSC-R (TIMES) FYE 2014 Debt Service Coverage - Revenue Basis by Quartile 4 3.5 3 2.5 2 1.5 1 0.5 0 -0.5 Worst All Borrowers Investment Grade Non-rated -0.22 0.17 -0.22 First Quartile 0.68 0.87 0.59 Second Quartile (Median) 0.94 1.11 0.79 Third Quartile 1.40 1.64 1.22 Best 2.84 2.84 2.26 Debt Service Coverage-Revenue Basis (DSC-R) shows how well a borrower can cover MADS without the benefit of cash flow from turnover-related net entrance fees. Covering debt service solely through operations and not relying on entrance fees is a much more stringent and difficult goal to achieve. Ziegler Research uses Maximum Annual Debt Service (MADS) while CARFCCAC uses historical Annual Debt Service (ADS) taken straight from the audited financial statements. DSC-R is expressed to two decimal points, followed by the word “times”, e.g. 0.77 times. Some use an “x” to represent the word times, however Ziegler Research chooses write the word out. For example, if a borrower had Net Available for Debt Service of $1,150,000 and Maximum Annual Debt Service of $1,500,000; DSC-R would be 0.77 times. 14 RATIO 11: DEBT SERVICE COVERAGE (DSC) FYE 2014 MEDIAN: 1.95 TIMES Net Available for Debt Service + Net Entrance Fees From Turnover Maximum Annual Debt Service (MADS) = DSC For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Debt Service Coverage (DSC) median of 1.95 times. The worst reported DSC was 0.40 times, while the highest was 8.09 times. Of the 91 borrowers whose DSC we were able to calculate, 88 or 97% had a DSC greater than 1.00 times, identical to last year’s proportionally. Stated differently, almost all of our sample generated sufficient revenues to cover MADS. We were unable to calculate MADS for six borrowers, either because a complete debt service schedule did not exist, or we knew of material non-bond related debt but could not compute the costs associated with it due to inadequate disclosure. DSC (TIMES) FYE 2014 Debt Service Coverage by Quartile 9 8 7 6 5 4 3 2 1 0 Worst All Borrowers Investment Grade Non-rated 0.40 1.49 0.40 First Quartile 1.59 1.83 1.42 Second Quartile (Median) 1.95 2.60 1.67 Third Quartile 2.68 3.27 2.23 Best 8.09 5.44 8.09 Debt Service Coverage (DSC) shows how well a borrower can cover MADS with the inclusion of cash flow from turnover-related net entrance fees. DSC should be considered in tandem with Ratio #10, Debt Service Coverage-Revenue Basis (DSC-R), discussed earlier. Again, Ziegler Research uses Maximum Annual Debt Service (MADS) while CARF-CCAC uses historical Annual Debt Service (ADS) taken straight from the audited financial statements. DSC is expressed to two decimal points, followed by the word “times,” e.g. 2.10 times. Some use an “x” to represent the word times, however Ziegler Research chooses write the word out. For example, if a CCRC had Net Available for Debt Service of $1,150,000, plus Net Entrance Fees of $2,000,000 the Net Available for Debt Service would equal $3,150,000. If Maximum Annual Debt Service was $1,500,000; DSC would be 2.10 times. 15 RATIO 12: MADS AS A PERCENTAGE OF TOTAL OPERATING REVENUES AND NET NONOPERATING GAINS AND (LOSSES) (DS-TR) FYE 2014 MEDIAN: 14.5% Maximum Annual Debt Service (MADS) Operating Revenues + Net Nonoperating Gains and (Losses) - Net Assets Released from Restrictions for PP&E = DS-TR For this ratio, a lower value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Debt Service as a Percentage of Total Operating Revenues and Net Non-Operating Gains and (Losses) (DS-TR) ratio median of 14.5%. The worst reported DS-TR was 31.8%, while the best was 3.9%. We were unable to calculate MADS for six borrowers, either because a complete debt service schedule did not exist, or we knew of material non-bond related debt but could not compute the costs associated with it. FYE 2014 Debt Service as a Percentage of Total Operating Revenues and Net Non-Operating Gains and (Losses) by Quartile Worst All Borrowers Investment Grade Non-rated 31.8 22.5 31.8 First Quartile 19.6 14.6 20.7 Second Quartile (Median) 14.5 11.8 16.3 Third Quartile 10.7 9.7 12.5 Best 3.9 4.4 3.9 The purpose of this ratio is to indicate the percentage of operating revenues and non-operating gains and losses taken up by MADS. Year-to-year, the DS-TR ratio will be affected by changes in maximum annual debt service and market conditions that enable favorable gains. Again, Ziegler Research uses Maximum Annual Debt Service (MADS) while CARF-CCAC uses historical Annual Debt Service (ADS) taken straight from the audited financial statements. DS-TR is expressed as a percentage rounded to one decimal point, e.g. 6.7%. For example, if a CCRC had MADS of $1,500,000, Operating Revenue of $22,400,000, and Net Nonoperating Gains of $100,000; DS-TR would be 6.7%. 16 RATIO 13: UNRESTRICTED CASH & INVESTMENTS TO LONG-TERM DEBT (CTD) FYE 2014 MEDIAN: 43.0% Unrestricted Cash and Investments = CTD Long-Term Debt For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had an Unrestricted Cash and Investments to Long-Term Debt (CTD) ratio median of 43.0%. The worst reported CTD was 8.0%, while the best was 377.0%. Please note that in the chart below, the best bar has been cut off in order to better illustrate the differences in the quartiles. FYE 2014 Unrestricted Cash and Investments to Long-Term Debt by Quartile 160 140 120 100 80 60 40 20 0 Worst All Borrowers Investment Grade Non-rated 8.0 28.0 8.0 First Quartile 28.0 41.3 22.0 Second Quartile (Median) 43.0 76.0 33.0 Third Quartile 81.0 109.0 54.0 Best 377.0 377.0 213.0 The Unrestricted Cash and Investments to Long-Term Debt ratio (CTD) measures a CCRC’s easily available cash and marketable securities (liquid and unencumbered cash and investments) in relation to its Long-Term Debt. This ratio is a measure of the borrower’s ability to withstand annual fluctuations in cash flow, either from weakened operating results or negligible resident entrance fee receipts due to low turnover or a high amount of refunds. CTD is expressed as a percentage rounded to one decimal point, e.g. 40.0%. For example, if a borrower had Unrestricted Cash and Investments of $10,000,000 and Long-term Debt of $25,000,000, CTD would be 40.0%. 17 RATIO 14: RESERVE RATIO (RR) FYE 2014 MEDIAN: 51.2% Unrestricted Cash and Investments + Debt Service Reserve Fund Long-Term Debt = RR For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Reserve Ratio median of 51.2%. The lowest reported Reserve Ratio was 12.8%, while the highest was 390.5%. We were unable to compute a Reserve Ratio for 28 borrowers because the amount of the Debt Service Reserve Fund was not disclosed. Please note that in the chart below, the best bar has been cut off in order to better illustrate the differences in the quartiles. FYE 2014 Reserve Ratio by Quartile 160 140 120 RR (%) 100 80 60 40 20 0 Worst All Borrowers Investment Grade Non-rated 12.8 33.8 12.8 First Quartile 36.1 51.9 27.3 Second Quartile (Median) 51.2 80.0 38.8 Third Quartile 75.8 120.9 55.4 Best 390.5 390.5 225.7 This ratio is not computed by CARF-CCAC, Fitch, or S&P. We compute it for several reasons. Many CCRC bond issues impose operational covenants associated with cash and investments. One common covenant allows a start-up CCRC the option of converting an initial Reserve Ratio into a DCOH ratio after certain milestones are reached in the start-up’s development. With longer fill-up time periods occurring with regularity, the Reserve Ratio has stayed in place longer than most would have anticipated. Without the conversion, CCRCs that self-report ratios include any Debt Service Reserve Funds to report Reserve Ratio covenant compliance figures. As such, we include this ratio in our normal analysis. The RR is expressed as a percentage rounded to one decimal point, e.g. 46.0%. For example, if a CCRC had Unrestricted Cash and Investments of $10,000,000, a Debt Service Reserve Fund of $1,500,000, and Long-term Debt of $25,000,000; the Reserve Ratio would be 46.0%. 18 RATIO 15: LONG-TERM DEBT AS A PERCENTAGE OF TOTAL CAPITAL (LTDC) FYE 2014 MEDIAN: 95.2% Long-Term Debt Long-Term Debt + Unrestricted Net Assets = LTDC For this ratio, a lower value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Long-Term Debt-to-Capitalization Percentage (LTDC) ratio median of 95.2%. The worst reported LTDC was 1735.3%, while the best was 21.4%. Three borrowers were excluded from this ratio. They had larger negative Unrestricted Net Assets than Long-Term Debt, rendering the result unusable. Please note that in the chart below, the worst bar has been cut off in order to better illustrate the differences in the quartiles. FYE 2014 Long-Term Debt-to-Capitalization Percentage by Quartile 250 200 150 100 50 0 Worst All Borrowers Investment Grade Non-rated 1,735.3 902.7 1,735.3 First Quartile 181.3 95.8 203.1 Second Quartile (Median) 95.2 84.8 122.8 Third Quartile 73.9 67.9 88.4 Best 21.4 21.4 29.2 The purpose of this ratio is to measure the borrower’s debt compared to total capital. LTDC is expressed as a percentage rounded to one decimal place, e.g. 92.6%. For example, if a CCRC had $25,000,000 in Long-Term Debt and $2,000,000 in Unrestricted Net Assets; LTDC would be 92.6%. 19 RATIO 16: LONG-TERM DEBT AS A PERCENTAGE OF TOTAL CAPITALADJUSTED (LTDC-A) FYE 2014 MEDIAN: 77.1% Long-Term Debt = LTDC-A Long-Term Debt + Unrestricted Net Assets + Unearned Entrance Fees (Non-Refundable) For this ratio, a lower value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Long-Term Debt-to-Capitalization Percentage-Adjusted (LTDC-A) ratio median of 77.1%. The worst reported LTDC-A was 660.5%, while the best was 12.2%. Two borrowers were excluded from this ratio. They had larger negative Unrestricted Net Assets than Long-Term Debt and Unearned Entrance Fees, rendering the results unusable. Please note that in the chart below, the worst bar has been cut off in order to better illustrate the differences in the quartiles. FYE 2014 Long-Term Debt-to-Capitalization Percentage - Adjusted by Quartile 250 200 150 100 50 0 Worst All Borrowers Investment Grade Non-rated 660.5 401.6 660.5 First Quartile 123.4 82.2 150.3 Second Quartile (Median) 77.1 62.9 89.8 Third Quartile 53.4 48.2 66.6 Best 12.2 19.6 12.2 Similar to the Long-Term Debt to Capitalization Percentage, the purpose of this ratio is to measure the borrower’s debt compared to total capital. Unearned revenue from entrance fees is added in recognition that this account balance represents cash paid to the community that is often used for capital improvements and/or retained as cash reserves. LTDC-A is expressed as a percentage rounded to one decimal place, e.g. 59.5% For example, if a CCRC had $25,000,000 in Long-Term Debt, $2,000,000 in Unrestricted Net Assets, and $15,000,000 in Non-Refundable Unearned Entrance Fees; LTDC-A would be 59.5%. 20 RATIO 17: LONG-TERM DEBT AS PERCENTAGE OF TOTAL ASSETS (LTD-TA) FYE 2014 MEDIAN: 49.2% Long-Term Debt = LTD-TA Total Assets For this ratio, a lower value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Long-Term Debt as a Percentage of Total Assets (LTD-TA) ratio median of 49.2%. The worst reported LTD-TA was 108.7%, while the best was 9.9%. FYE 2014 Long-Term Debt as a Percentage of Total Assets by Quartile Worst All Borrowers Investment Grade Non-rated 108.7 70.7 108.7 First Quartile 61.1 52.0 67.4 Second Quartile (Median) 49.2 40.4 56.3 Third Quartile 34.9 31.9 42.7 Best 9.9 11.0 9.9 The Long-Term Debt to Total Assets (LTD-TA) ratio relates an organization’s indebtedness to total assets. This ratio has some attributes of a liquidity ratio, as its value is sensitive to the market values of the borrower’s investments. A borrower with a higher percentage for this ratio is considered to have a weaker capital structure than a borrower with a lower percentage. LTD-TA is expressed as a percentage rounded to one decimal place, e.g. 41.7 % For example, if a borrower had $25,000,000 in Long-Term Debt and $60,000,000 in Total Assets; LTD-TA would be 41.7%. 21 RATIO 18: AVERAGE AGE OF PLANT (AAP) FYE 2014 MEDIAN: 11.0 YEARS Accumulated Depreciation = AAP Depreciation Expense For this ratio, a lower value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had an Average Age of Plant (AAP) median of 11.0 years. The best reported AAP was 2.4 years, while the worst was 24.0 years. We were unable to calculate AAP for six borrowers because material non obligated entities were included in the audited Accumulated Depreciation figure. FYE 2014 Average Age of Plant/Facility by Quartile 30 AAP (YEARS) 25 20 15 10 5 0 Worst All Borrowers Investment Grade Non-rated 24.0 16.8 24.0 First Quartile 13.5 13.5 13.7 Second Quartile (Median) 11.0 11.0 10.9 Third Quartile 9.2 10.1 8.2 Best 2.4 7.2 2.4 The Average Age of Plant ratio (AAP) measures the historical commitment of a CCRC to facility upkeep and renewal. A lower Average Age of Plant is desired, as with older facilities there is a greater chance that a large expenditure will be required to keep the CCRC relevant. However, AAP is not a perfect measure of a CCRC’s renewal because a low AAP could be a result of an expansion rather than renovation of existing facilities. AAP is expressed as a number of years rounded to one decimal place, i.e. 10.0 years. For example, if the borrower had $15,000,000 in Accumulated Depreciation and $1,500,000 in Depreciation Expense; Average Age of Plant would be displayed as 10.0 years. 22 RATIO 19: CAPITAL EXPENDITURES AS A PERCENTAGE OF DEPRECIATION EXPENSE (CED) FYE 2014 MEDIAN: 79% Acquisition of PP&E = CED Depreciation Expense For this ratio, a higher value represents a more favorable result. For FYE 2014, the CCRC borrowers in our study had a Capital Expenditure as a Percentage of Depreciation (CED) ratio median of 79%. The worst reported CED was 4%, while the highest was 589%. Please note that in the chart below, the best bar has been cut off in order to better illustrate the differences in the quartiles. We were unable to calculate CED for two borrowers because material non obligated entities were included in the audited Acquisition of PP&E figure. FYE 2014 Capital Expenditures as a Percentage of Depreciation by Quartile Worst All Borrowers Investment Grade Non-rated 4.0 17.0 4.0 First Quartile 49.0 89.0 38.0 Second Quartile (Median) 79.0 111.0 67.5 Third Quartile 121.0 165.0 91.8 Best 589.0 589.0 482.0 The CED ratio is a tool for understanding the sufficiency of a CCRC’s annual reinvestment in physical plant. CED is expressed as a percentage rounded to the nearest whole number, e.g. 67%. For example, if Acquisition of PP&E was $1,000,000 and Depreciation Expense was $1,500,000; CED would be 67%. 23 ZIEGLER RESEARCH ASSOCIATES Edward Merrigan Managing Director, Director of Municipal Research 212-284-5451 [email protected] Lavinia Criswell Director, Senior Municipal Research Analyst 727-542-5755 [email protected] Rebecca Greive AVP, Municipal Research Analyst 312-596-1502 [email protected] Jenny Dachowski Municipal Research Analyst 414-978-6453 [email protected] Mike Vitiello Municipal Research Analyst 212-284-5419 [email protected] Victoria Neitzel Senior Research Website Administrator / Research Associate 414-978-6464 [email protected] Jill Kuehn Research Assistant 414-978-6461 [email protected] ZIEGLER RESEARCH Ziegler Research is an assembly of financial and credit analysts committed to providing investors with research on a selected sub-set of securities consisting of Ziegler-underwritten municipal bonds issued to finance senior living and hospital capital projects, as well as the education and housing sectors. Ziegler Research is separate from Ziegler’s investment banking and capital markets businesses. The analysts rely only on publicly available information to generate opinions and reports. The team’s published research carries an analyst certification as to the objectivity of the opinions rendered. Analyst-certified research reports are accessible through ZieglerResearch.com (a limited access, semi-public website), or through a Ziegler financial advisor. ABOUT THE AUTHORS Ed Merrigan, Managing Director of Ziegler Research, has provided analysis of the municipal bond field since 1983 and was repeatedly voted for inclusion on Institutional Investors annual All-American research team, being praised as one of the most helpful and effective rating agency analysts in the industry. He has more recently been annually voted the number one all-star in the senior living field as ranked by Smith’s Research and Gradings. In May, 2010, the National Federation of Municipal Analysts bestowed an Award of Excellence on Ed for his efforts in research and disclosure. Mike Vitiello joined Ziegler in April of 2013. He is primarily responsible for continuously monitoring a portfolio of Ziegler and non-Ziegler underwritten senior living and healthcare securities. Mike regularly authors borrower-specific, analyst-certified, research reports, commenting on each borrower’s financial condition and highlighting any significant changes for the benefit of investors and Ziegler’s internal business groups. His responsibilities also include the Ziegler Research annual CCRC Financial Ratio Median Analysis and the Default Study, as well as maintaining certain aspects of the Continuing Disclosure Call Program. Mike received a B.S.B.A. from Boston University in 2009, and holds a Series 7 license from FINRA. ZIEGLER 1185 Sixth Avenue, 32nd Floor New York, NY 10036 800 366 8899 www.Ziegler.com ANALYSTS CERTIFICATION We, Edward Merrigan, and Mike Vitiello hereby certify that the views expressed in this research report accurately reflect our personal views about the subject securities, issuers and borrowers. We also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendation or view expressed in this research report. The opinions expressed here reflect our judgment and are subject to change. This is not a complete analysis of every material fact regarding any company, industry or security. Information has been obtained from sources considered reliable, but Ziegler cannot guarantee the accuracy. Additional information is available upon request. Other departments of Ziegler may have information, which is not available to Ziegler Research, about companies mentioned in the report. Ziegler may execute transactions in the securities mentioned in the report, which may not be consistent with the report conclusions. Past performance should not be taken as an indication or guarantee of future performance. Ziegler may perform investment banking or other services for, or solicit investment banking business from, any company mentioned in this report. This document may not be reprinted without permission. 24 APPENDIX A CCRC Borrower Audits Used in Ratio Calculations Below is a listing of the borrowing entities whose financial results are part of this overall median study. In many instances, these borrowers have multiple bond issues outstanding. ACTS (Adult Communities Total Services) Retirement-Life Communities, Inc. West Point PA Aldersly Garden Retirement Community (CA) San Rafael CA American Baptist Homes of the West (ABHOW) (subsidiary of Cornerstone Affiliates) Pleasanton CA Appalachian Christian Village Obligated Group (aka Christian Home for the Aged, Inc.) Johnson City TN Asbury Maryland Obligated Group (composed of Asbury Atlantic, Inc. and Asbury-Solomons, Inc.) (subsidiary of Asbury Communities, Inc.) Gaithersburg MD Asbury Pennsylvania Obligated Group (composed solely of Asbury Atlantic, Inc.) (subsidiary of Asbury Communities, Inc.) Gaithersburg MD Bartels Lutheran Retirement Community Obligated Group Waverly IA Bayleigh Chase fka William Hill Manor (subsidiary of Integrace (fka Episcopal Ministries to the Aging, Inc. - EMA)) Easton MD be.group (fka Southern California Presbyterian Homes Inc. (SCPH)) Glendale CA Bishop Spencer Place, Inc. Kansas City MO Blakeford at Green Hills Corporation (Subsidiary of Blakeford, Inc.) Nashville TN Blue Skies of Texas Obligated Group (fka Air Force Village Obligated Group) San Antonio TX Bohemian Home for the Aged, Tabor Hills Health Care Facility, and Tabor Hills Supportive Living Community LLC Obligated Group Naperville IL Brethren Hillcrest Homes (CA) LaVerne CA Brewster Place (aka The Congregational Home) Topeka KS Buckingham Senior Living Community (aka The Buckingham) (subsidiary of Senior Quality Lifestyles Corporation (SQLC)) Houston TX C.C. Young Memorial Home Obligated Group Dallas TX Capital Manor, Inc. Salem OR Carleton-Willard Village Bedford MA Charlestown Community, Inc. (An Erickson Living Community fka An Erickson Retirement Community) Catonsville MD Christian Care Centers Obligated Group (TX) Mesquite TX Christian Homes, Inc. Obligated Group Saint Louis MO Christian Living Communities, Inc. Obligated Group Greenwood Village CO Christwood (LA) Covington LA Clark Retirement Community Grand Rapids MI Concordia Life Care Community (OK) (aka Lutheran Senior Citizens, Inc.) Oklahoma City OK Covenant Retirement Communities, Inc. Skokie IL Crestview Retirement Community (aka MRC Crestview) (subsidiary of Methodist Retirement Communities (MRC)) Bryan TX Deerfield Episcopal Retirement Community, Inc. (NC) Asheville NC Diakon Lutheran Social Ministries Allentown PA 25 26 Edgewater, A Wesley Active Life Community, LLC (subsidiary of Wesley Retirement Services, Inc.) West Des Moines IA Eliza Jennings Obligated Group (Devon Oaks & The Renaissance) (fka Eliza Jennings Senior Care Network) Lakewood OH Emerald Heights (aka Eastside Retirement Association) Redmond WA Episcopal Communities & Services For Seniors (fka Episcopal Home Communities) Alhambra CA Fleet Landing (aka Naval Continuing Care Retirement Foundation, Inc.) Atlantic Beach FL Forest at Duke, The Durham NC Fox Run at Orchard Park (Subsidiary of United Church Home Society, Inc.) (aka Orchard Park CCRC, Inc.) Orchard Park NY Franciscan Communities, Inc. Obligated Group (subsidiary of Franciscan Sisters of Chicago Service Corporation) Homewood IL Friendship Village of Columbus Columbus OH Friendship Village of Schaumburg (aka Evangelical Retirement Homes of Greater Chicago, Inc.) (subsidiary of Friendship Senior Options, Inc.) Schaumburg IL Friendship Village of Tempe (aka Tempe Life Care Village, Inc.) Tempe AZ Front Porch Communities and Services (fka Internext Group) Anaheim CA Goodwin House Incorporated Alexandria VA Greencroft Obligated Group (IN) (sponsored by Greencroft Retirement Communities, Inc.) Goshen IN Greenspring Village, Inc. (An Erickson Living Community fka An Erickson Retirement Community) (Subsidiary of National Senior Campuses, Inc.) Springfield VA Harrogate, Inc. Lakewood NJ Harwood Place, Inc. (subsidiary of LutheranLiving Services) Wauwatosa WI Heritage Community of Kalamazoo Kalamazoo MI Holland Home Obligated Group (MI) Grand Rapids MI Holy Cross Village at Notre Dame Notre Dame IN Inverness Village (subsidiary of Asbury Communities, Inc.) Tulsa OK Kahala Nui (aka Kahala Senior Living Community, Inc.) Honolulu HI Kendal at Hanover (sponsored by The Kendal Corporation) Hanover NH Kendal at Lexington Obligated Group (aka Lexington Retirement Community, Lexington Inc. and Lexington Health Investors, LLC) (sponsored by The Kendal Corporation) VA Kendal at Oberlin (sponsored by The Kendal Corporation) OH Kendal Kirby Pines Retirement Community (aka Psalms, Inc.) Memphis TN Lakeview Village, Inc. Lenexa KS Legacy at Willow Bend Retirement Community, Inc. Plano TX Lifespace Communities, Inc. (fka Life Care Retirement Communities (LCRC)) Des Moines (Affiliate of Deerfield Retirement Community) IA Linden Ponds Inc. (An Erickson Living Community fka An Erickson Retirement Community) (Subsidiary of National Senior Campuses, Inc.) Hingham MA Lutheran Community at Telford Telford PA Lutheran Senior Services (LSS) Obligated Group St. Louis MO Lutheran Social Services of the South, Inc. (LSSS) Austin TX Meadowlark Hills Retirement Community (aka Manhattan Retirement Foundation, Inc.) Manhattan KS Milwaukee Protestant Home, Inc. & Eastcastle Place, Inc. Obligated Group Milwaukee WI Montgomery Place Chicago IL Nazareth Living Center (50/50 subsidiary of Benedictine Health System & Sisters of St. Joseph of Carondelet) St. Louis MO Oak Crest Village, Inc. (An Erickson Living Community fka An Erickson Retirement Community) (Subsidiary of National Senior Campuses, Inc.) Baltimore MD Ohio Presbyterian Retirement Services - OPRS (aka Midwest Presbyterian Senior Services) Columbus OH Peace Village & Circle Inn (fka Peace Memorial Ministries) Palos Park IL Penney Retirement Community, Inc. Penney Farms FL Pennybyrn at Maryfield (NC) (aka Maryfield, Inc.) (sponsored by the Congregation of the Poor Servants of the Mother of God) High Point NC Plymouth Place, Inc. LaGrange Park IL Presbyterian Retirement Communities Northwest (PRCN) Seattle WA Presbyterian Retirement Communities Obligated Group (FL) Orlando FL Querencia at Barton Creek (aka Barton Creek Senior Living Community, Inc.) (subsidiary of Senior Quality Lifestyles Corporation (SQLC)) Austin TX Redstone Village (subsidiary of Redstone Military Retirement Residence Association) Huntsville AL Ridgecrest Village (aka Christian Retirement Homes, Inc.) Davenport IA Saint Johns Communities, Inc. (aka Saint Johns on the Lake) Milwaukee WI Santa Marta (aka Catholic Care Campus) (sponsored by the Archdiocese of Kansas City) Overland Park KS Seabrook Village, Inc. (An Erickson Living Community fka An Erickson Retirement Community) (Subsidiary of National Senior Campuses, Inc.) Tinton Falls NJ Senior Quality Lifestyles Corporation (SQLC) and Edgemere (aka Northwest Dallas Senior Housing Corporation) Obligated Group TX Shell Point/Alliance Obligated Group (aka The Christian and Missionary Alliance Foundation, Inc., and The Alliance Community for Retirement Living, Inc.) FL Ft. Myers Sierra Winds (aka Arizona Retirement Centers, Inc.) Peoria AZ Smith Village (aka Washington and Jane Smith Community-Beverly) (subsidiary of Smith Senior Living) Chicago IL Southminster, Inc. Charlotte NC Spring Harbor at Green Island Columbus GA St. James Place of Baton Rouge Baton Rouge LA Terwilliger Plaza Portland OR Three Crowns Park (subsidiary of Three Crowns Foundation) Evanston IL United Methodist Retirement Homes (UMRH) (NC) Durham NC Vantage House (aka Columbia Vantage House Corporation) Columbia MD Village on the Isle (aka Southwest Florida Retirement Center, Inc.) Venice FL Wake Robin Corporation (VT) Shelburne VT Well-Spring Retirement Community Greensboro NC Wesley Enhanced Living Obligated Group Philadelphia PA Wesley Homes Des Moines WA 27 28