ALFA Conference Presentations

“

How capital can help your operating results

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Outline

• Introduction Panelist Companies • Cost Saving Strategies • Case Study • Questions and Answers 2

Joseph Weisenburger

• Background VP of Senior Housing at Health Care REIT, Inc ( “ HCN ” ) • Primary Role – Origination/Business Development 14 Years at HCN with roles in Asset Management and Underwriting Served on Boards of assisted living companies Prior to HCN, worked in Private Equity Graduate of The Ohio State University with an MBA and Miami University with a BS in Business 3

Health Care REIT, INC.

• An S&P 500 company ( “ HCN ” ) traded on the NYSE WWW.HCREIT.com

• A Real Estate Investment Trust • As of 12/31/11 937 Facilities in 46 States $14.9 billion in assets $1.4 billion in Revenues 4

Relationship Based -- Investment Program

• Target Clients Best in class operating partners Regionally focused • Types of Transaction Acquisition Development Joint Venture Monetization 5

Cheryl McKenzie

• Background Management Consultant to Senior Housing since 1989 Canada and the United States • Operation Improvement – – Quality Labor Efficiency – Profit Improvement Worked with hundreds of communities – IL, AL, MC, SNF, CCRC Graduate of Trent University, Peterborough, Canada. BS in Honors BSC – Business Administration 6

Donald Thompson

• Background Keenan Business School (UNC) – BS- Business Administration Built 1 st Assisted Living in 1981 and 1 st CCRC started in 1982.

Ownership and management of 6,000 SNF beds, multi-state Long Term Care Pharmacy, Group Purchasing Organization founded, Venture Capital Company founded, NASD investment bank founded, DME and Med Supplies Company, 19 CCRC ’ s, about 3,500 ALF / ALZ beds since 1981. Involved in purchase and turnaround of about 7,500 bankruptcy turn-around beds (CCRC and SNF / ALF / ALZ).

Summary: really old guy

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WELLNESS AND CLINICAL FOCUS

Won for: CLINICAL AND WELLNESS PROGRAM

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s AT ANY AGE - AND IN ANY CONDITION - YOU CAN IMPROVE - AND LIVE A HIGHER QUALITY LIFE!

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• Key Objectives for Senior Living Communities: Develop a Performance Culture throughout our whole organization: Perform at a high level, intentionally, smartly Focus is first on maintaining / enhancing high service levels Improve consistency and operational stability 10

Cost Saving Strategies

• Real Estate Taxes • Energy Management Green Arrow • Insurance Program • Operational Review 11

Real Estate Taxes Review

• Programmatic approach to reducing real estate taxes Utilize CPAC • www.cpacusa.com

Negotiated a national contract • Operator benefits Limited time commitment Payment a percentage of savings 12

Real Estate Tax Case Study

• Senior Living Communities Identified savings at 5 campuses • • • Year 1 Savings -- $572,000 Year 2 Savings -- $156,000 Merrill Gardens Identified savings at 33 campuses • • Year one savings -- $333,000 Year two savings -- $89,000 13

Linking People To Energy

Green Arrow

• The Green Arrow program is Health Care REIT meet broader sustainability goals ’ s tool box to help tenants and operators lower operating costs, improve health care delivery, and • The program focuses on no cost / low cost opportunities - energy, water, waste, and sustainability reporting tools • The Green Arrow program begins with benchmarking historic sustainability performance metrics

Benchmarking - Energy Star Portfolio Manager

• Energy – sustainability performance benchmark scoring and reporting are valuable best practices to help reduce operating expenses • High performing facilities receive recognition as Energy Star buildings. Energy Star recognition is highly correlated to quality • It is a great differentiator for your operations

Energy Star Statement of Performance

• Example 33,000 SF Building with 47 Units • Current Energy Star Score: 85 •

Annual energy costs savings of over $1/SF compared to a comparable building with an Energy Star score of 50

Energy Star Plaque – Recognizing High Performance

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Implementing Energy Conservation Measures

Energy use reduction results

12 – 26 % monthly electricity use reduction (same month prior year) Energy conservation measures in service Example 98,740 SF medical office building 90% occupied Energy Star score: 62 Energy conservation measures implemented Energy reduction goal and reporting Lighting upgrades integrated into maintenance program Adjusted HVAC settings Monthly Energy Dashboard – Sept. 2010 to April 2012 17

On Site Energy Generation – Roof Top Solar Array

• • • • • HCN owned – no up front costs to the operator Electricity costs below grid prices Hedge against volatility in market electricity pricing Differentiate the building Incorporate roof maintenance into project • Example: 225,000 SF medical office • 112 KW array (roof top) • Reduce building electricity costs reduce by 5% • Aligns with Heath & Wellness messaging of the facility.

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Insurance Program

• Developing a national insurance program Initial Focus – Property and Casualty • Savings through bulk purchasing • • Increased competition from carriers Diversified risk pool Potential Programs- Workers compensation • Benefits to operator Reduced costs estimated >10% Geographic diversification • Greater risk modeling capabilities limits and deductibles Negative Limited ability to allocate differing category risks 19

Operational Review

• Developed a programmatic approach to evaluating operations Goal to increase operating EBITDAR for Joint Ventures and Leases Reduce risk in underwriting and asset management • Developed a program to utilize the strengths of Cheryl McKenzie Efficiency and time study expert • Benefit to Operators and Partners A free initial evaluation of operations Ongoing engagement at their discretion All savings go to the benefit the tenant 20

Background

• Lakes at Litchfield – Myrtle Beach, SC A full service CCRC with rental and entrance fee units • • • Unit Mix - 59 Cottages; 60 IL Villas; 41 AL; 24 MC; 24 SNF Overall Occupancy 92% Revenues $10.4 million Margin 25% • Brightwater – Myrtle Beach, SC A full service CCRC with rental and entrance fee units • • • Unit Mix - 17 Cottages; 96 IL Villas; 24 AL; 24 MC; 59 SNF Overall Occupancy 71% Revenues for $12.2 million Margin of 24% 21

Key Objectives

• Key Objectives by Senior Living Communities: Develop a

Performance Culture

throughout our whole organization: Perform at a high level, intentionally, smartly Focus is first on maintaining/enhancing high service levels Improve consistency and operational stability Financial results will follow 22

The Process

Report Outcomes Measure the Work Match Employee Schedules Follow Up Detail Assignments

RESIDENT CARE - Measure the Work

LAKES AT LITCHFIELD - RESIDENT PROFILES

Resident 1 Resident 2 Resident 3 Resident 4 Resident 5 Resident 6 Resident 7 Resident 8 Resident 9 Resident 10 Resident 11 Resident 12 Resident 13 Resident 14 Resident 15 Resident 16 Resident 17

CORRELATION

DAILY HOURS 0.8

0.9

1.1

1.0

0.9

3.8

0.7

0.8

1.0

3.3

1.1

0.8

0.9

0.9

1.8

2.1

0.6

CARE POINTS 2 7.5

4.75

6 2 1 13.5

1 7.25

2 1 1 3 0 0.25

2 4

43%

RESIDENT CARE - Match Employee Schedules

200 180 160 140 120 100 80 60 40 20 0

RESIDENT REQUIREMENTS & STAFFING LEVELS BY TIME OF DAY Time of Day

RESIDENT CARE - Detail Assignments

508 513 514 515 516 509 510 511 512 517 507 518 506 505 504 503 519 520 521 522 502 501 523 524 508 513 514 515 516 509 510 511 512 517 507 518 506 505 504 503 519 520 521 522 502 501 523 524

DINING SERVICES – Measure the Work

Activity

COOKS ACTIVITY LIST - BRIGHTWATER

Unit of Measure

COOKS

Minutes Per Unit Volume Frequency per Week Minutes Per Day Hours Per Week

BEFORE BREAKFAST

Open Kitchen Prepare Specials Prepare Puree Plate, deliver muffins to three side stations Prepare Soup - Easy Prepare Soup - Moderate Prepare Entrée 1 for HC Prepare Entrée 2 for HC, including Sauce Prepare Starch 1 HC (rice) Prepare Starch 2 HC potato au gratin) Prepare Vegetable for HC Prepare side salad for HC Prepare HC Specials (e.g. Gr Menu +) Prepare Garnish (parsley, flower) Prep for 'Green Menu' Prepare cold line Set up hot line (inserts) Prep for Bar Menu Task Task Task Task Task Task Task Task Task Task Task Task Task Task Task Task Task Task 5 3 2 30 20 40 45 30 20 35 20 20 5 10 30 25 15 12 1 11 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 7 7 7 7 2 5 7 7 7 7 7 7 6 6 7 7 7 4 5 33 12 30 20 40 45 30 20 35 20 20 5 10 30 25 15 12 0.5

1.0

3.5

2.9

1.8

0.8

0.6

3.9

1.4

3.5

0.7

3.3

5.3

3.5

2.3

4.1

2.3

2.3

DINING SERVICES - Measure the Work

# IL MEMBERS SLC - DINING SERVICES STAFFING MODEL - LITCHFIELD LOCATION CURRENT OCCUPANCY FIXED HOURS (WEEKLY) HOURS / MEAL (WEEKLY) HOURS REQUIRED (WEEKLY) 385

MEALS / DAY

130 # HEALTHCARE NEIGHBORHOODS # HEALTHCARE RESIDENTS 85 # HC RES SKILLED 1 24 SKILLED 1 RES SKILLED 2 RES 0 AL 2 AL RES 41 MC RES 20 HOURS REQUIRED PER WEEK ORIGINAL HOURS PER WEEK POSSIBLE HOURS PERFORMANCE 590 772 76%

668

88% 15

MIN / MEAL

DINING SERVICES - Match Employee Schedules

250 200 150 100 50 0 BREAKFAST

NUMBER OF MEALS

LUNCH DINNER 60 50 40 30 90 80 70

DAILY HOURS - BACK OF THE HOUSE

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DINING SERVICES - Match Employee Schedules

POSITION BRIGHTWATER FOOD SERVICES 4 - APRIL 27, 2012 Monday to Saturday (standard week)

10 11 TIME OF DAY 12N 1 2 3 4 5 6 5 6 7 8 9

COOKS

CHEF / SOUS SOUS

HC Bkfst & Lunch 5 9 PM COOK PM COOK

TOTAL COOKS - Monday throughSaturday

10 11 11 1 6 7 7 7 7

Sunday Brunch COOKS

HC B & L 5

BRUNCH

BRUNCH PM COOK 8 8

TOTAL COOKS - Sunday Hours only

UTILITY

DIETARY AIDE DIETARY AIDE

10:30

1 11:45 SNF C 11:45 SNF W, MC

2 2

PREP STOCK, DESSERT 6:30 SNF C 7:45 SNF 7:45 8 9 DAILY HOURS DAYS / WEEK WEEKLY HOURS 7.5

7.5

7.5

8 8 5 5 6 6 4 40 40 45 45 30

200

7.5

5.5

5.5

7.5

7.5

7.5

1 1 1 1 7.5

5.5

5.5

7.5

26

7 7 52.5

52.5

DINING SERVICES – Detail Assignments

SENIOR LIVING COMMUNITIES - PERFORM DINING SERVICES - PRODUCTION SHEET MENU COMPONENTS

MENU ITEM # SERVINGS PREPARATION STEPS (Pull, Prep, Finish, Portion) DATE: M T W TH F SA SU PREPARED BY: Assigned To (Chef, Sous, AM Cook, PM Cook 1,PM Cook 2, DA):

Total Leftovers Plan for Leftovers

Entre / Protein Veg / Fruit Starch 31

DINING SERVICES - Detail Assignments

6:30 6:50 7:20 7:30 9:00 9:30

10:30 ASSISTED LIVING BREAKFAST & HEALTHCARE LUNCH 6:30AM – 2:30PM

Clock in, wash hands Set up AL Service Area and dining room for breakfast service (See set up check list). Food should not be on steam table before 7:20 Set up Dishroom, bussing carts in Service Area Assist Utility Aide with pushing carts to skilled and memory care Ensure line is ready for service Plate food for AL Dining, prepare fresh toast, waffles as requested Cook will prepare specials – eggs, meat, other requests CNA’S will serve and clear dining room tables Break down steam table. Wrap, put away leftovers Clear dining room and re set tables with clean linen, centerpieces and menus by 9:30AM Break down continental breakfast in Charleston Dining Room Assist with dishes Complete daily cleaning assignment

Break

HOUSEKEEPING - Measure the Work

SLC - HOUSEKEEPING CALCULATOR - LAKES at LITCHFIELD

LOCATION CURRENTLY OCCUPIED MINUTES / WEEK WEEKLY HOURS REQUIRED

INDEPENDENT LIVING

Occupied Cottages Vacant Cottage Occupied Villas Vacant Villa TOTAL INDEPENDENT LIVING

HEALTHCARE

Number of Neighborhoods Assisted Living Memory Care Skilled Nursing Vacant Healthcare TOTAL HEALTHCARE

TOTAL REQUIRED ORIGINAL HOURS NEW TARGET / IMPLEMENTED 46 13 56 4 3 40 20 22 7

25 25 25 3 90 5 60 3 69 1 56 3

155

17 8 9 0.4

70 266 304 87% 295 90%

2.2

HOURS PER UNIT

HOUSEKEEPING - Detail Assignments

LAKES at LITCHFIELD HOUSEKEEPING ASSIGNMENT FLOOR TECH

11:30

DAILY ROUTINE FLOOR CARE MONDAY TUESDAY

11:45 12:15 1:45 2:45 4:15 4:45 AL Common PP Hallways AL Common PP Hallways

WED

AL Common PP Hallways BH Hallways Skilled Hallways MC Hallways Skilled & MC Dining Rooms, Kitchens Vacuum Clubhouse BH Hallways Skilled Hallways MC Hallways Skilled & MC Dining Rooms, Kitchens Vacuum Clubhouse BH Hallways Skilled Hallways MC Hallways Skilled & MC Dining Rooms, Kitchens Vacuum Clubhouse Vacuum Villas* Vacuum Villas* Vacuum Villas* BREAK BREAK BREAK

ROTATIONAL CLEANING DUTIES and WORK ORDERS

Perform work orders as assigned by supervisor and the following deep cleans according to procedures attached Deep clean common areas including floors, glass, doors, high, low, flat dusting

MONDAY TUESDAY WED

Memory Care Skilled Assisted Living Entry Pawley's Pavilion

RESULTS

Enhanced Services,

Consistency + Efficiency = Profit Improvement

Question and Answer Session

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