SENIOR HOUSING MARKET NEWSLETTER - Avison Young SENIOR HOUSING MARKET NEWSLETTER Phoenix Metropolitan Area - First Quarter 2017 avisonyoung.com Senior Housing Proposed/Under Construction

Senior Housing Market Overview 1Q 2017 | Page 1

SENIOR HOUSING MARKET NEWSLETTERPhoenix Metropolitan Area - First Quarter 2017

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Move over multifamily, senior housing appears to be the new hot property type in 2017 in local and national commercial real

estate markets. Baby Boomers, like Millennials, are becoming more mobile and looking for upscale amenities in their housing options. And developers of senior housing communities are listening.

Reports estimate that about 10,000 Baby Boomers are retiring each day, and will continue to do so between now and 2030. The number of facilities in the U.S. devoted to seniors will grow from 26,000 to about 30,600 by 2021, an annual growth of 3.1 percent.

According to a recent survey by the National Investment Center for Seniors Housing and Care (NIC) and National Real Estate Investor, senior housing was the most attractive asset class for the second year in a row. It outpaced commercial real estate heavyweights multifamily, industrial, hospitality, o�ce, medical o�ce and retail.

The inventory growth rate in 1Q 2017 was 3.4 percent, up 0.2 percent from the prior quarter and the fastest pace since 2006. Almost 4,800 units were added to the housing stock in 31 primary markets, according to NIC data. Senior housing’s annual absorption was 2.8 percent as of 1Q 2017, up 0.1 percent from 4Q 2016 and up 0.2 percent from 4Q 2015. The expansion of the nation’s inventory has not hurt rental rates. During 1Q 2017, the average rate of senior housing’s annual asking rent growth was 3.3 percent, up from 3.1 percent in 1Q 2016. Data just released by NIC for 1Q 2017 for senior housing occupancy by major market, shows that of the twenty two markets reported on, eight had increased occupancy year-over-year. The Phoenix market was one of �ve that had more than slightly �at increase.

In the past �ve years 18 new senior housing properties have opened in Metro Phoenix, according to NIC data. This market has been strong for senior housing and has maintained an occupancy rate ranging between 83 percent and 92 percent since 2005. NIC reports the current occupancy rate is about 87 percent.

In February, Avison Young Principals Julie A. Johnson and Alexandra Loye negotiated a $2.7-million sale of a 6.87-acre land parcel for the development of a senior assisted living and memory care community in Phoenix, Mariposa Point at Algodon Center. The parcel is located within the Algodon Medical Center across from Banner Estrella Medical Center in Phoenix. The property will feature more than 80 units of assisted living and memory care and will be licensed for approximately 120 residents. True to trend, its amenities

will include landscaped interior courtyards, private dining, therapy rooms, and plans for a hair salon with spa services.

Senior housing activity has been brisk the past six months in Metro Phoenix:

• Sagewood, which opened in 2010 in the Desert Ridge area, began an expansion and upgrading project after receiving $107.7 million in �nancing. It is expanding The Estates neighborhood by adding 24 new casita and villa homes. Plans also call for an assisted living building and a 13,000 SF events center.

• Christian Care broke ground on another Arizona project, $65 million Fellowship Square Surprise, 16477 W. Bell Road. It will include 313 apartment homes on more than 14 acres in a gated community.

• Savanna House was recently completed by Prevarian Senior Living in Gilbert. It’s a 119,000-SF assisted living and memory care facility with three neighborhoods for di�erent memory care needs. Life Care Services will operate the facility and Weitz Company was the general contractor

As senior housing residents are demanding more, the industry is providing it. Home-like environments are important, and so are amenities such as spas, upgraded common areas, walking paths, and resort-style pools. Healthcare services and wellness space are just as important. Available now is the kind of equipment that used to be found only in high-end, luxury apartments, not in a senior housing facility.

Walker & Dunlop Inc. recently provided $46.87 million in �nancing for specialized healthcare facilities in Texas, Alabama, and Georgia.

It’s estimated that more than $200 million was invested in home care companies in 2016. 4Q 2016 national numbers re�ected that: occupancy, 89.5 percent; annual rent growth, 3.7 percent; annual absorption, 2.6 percent; and annual investment growth, 3.1 percent.

Still, however, developers are facing higher land and construction costs. Debt �nancing is also harder to secure as local lenders pull back. Developers must show that their project is superior and that the market demand is there.

Not your Grandparent’s Retirement Home! Developers, communities put ‘living’ back into senior living



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Senior Housing Sales First Quarter 2017

Springdale Village & Symphony of Mesa7255 Broadway Road & 3130 E. Broadway Road Mesa, AZ 85208Allegiant Realty, LLC (E & M Associates) bought these two assisted living facilities from Renaissance Village Realty, LLC. Springdale Village is a 209,177-square foot skilled nursing facility built in 1986 o�ering 122 beds. Symphony of Mesa is a 52,547-square foot skilled nursing facility built in 1984 that has 204 beds o�ering post-acute care. The properties sold on March 28, 2017 for $48,500,000 ($185.31 per square foot), assuming the debt with First American Capital, serviced by Greystone and maturing on 4/1/2052.

GenCare Sun City at The Carillons10045 Royal Oak Road, Sun City, AZThis 79-unit senior living center sold on December 1, 2016 for $10,650,000 ($157.69 per square foot). The building, built in 1979, sits on 8.12 acres and was sold by Chicago Paci�c Founders to Royal Oaks Lifecare Community.



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Senior Housing Proposed/Under Construction First Quarter, 2017Crosier VillageE/SEC 32nd Street & Baseline Road, Phoenix, AZ 850429.67 acres of vacant residential land in South Phoenix is being rezoned for a 33-unit senior facility and 39,000 square foot religious retreat facility consisting of a community center, church building and two-story priory. Keystone Homes acquired the land for $900,000 ($2.14 per square foot) from Crosier Community of Phoenix.

Emerald Bay Senior Living4102 E. Greenway Road, Phoenix, AZ 85032Local assisted living developer, Emerald Bay Senor Living, plans a boutique 28,986 square foot two-story assisted living center on 2.79 acres, which will consist of a maximum of 60 one and two-bedroom deluxe suites.

The Enclave at Anthem42015 N. Venture Drive, Anthem, AZ 85086Owned by Spectrum Retirement Communities, The Enclave at Anthem will o�er 159 comfortable maintenance free apartments, along with luxurious amenities, chef-prepared meals, and concierge services for assisted living, independent living and memory care. Expected opening is July, 2017.

Eternal Springs of GilbertE/NEC Lindsay & Williams Field Roads, Gilbert, AZ 85295Frontier Management bought 3.81 acres (166,174 square foot) of vacant commercial land, which went to zoning on January 4, 2017 for a proposed 79,869 square foot two-story senior facility with 92 beds (56 beds assisted living and 36 memory care units).

Fellowship Square16477 W. Bell Road, Surprise, AZ 85374Construction stated December 1, 2016 on 313-unit independent and assisted living housing units developed by Christian Care Management. The property will include on-site home health care and a rehabilitation clinic and is scheduled to open in January, 2018.



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Senior Housing Proposed/Under Construction First Quarter, 2017Las Palomas Senior LivingW/NWC Brown & Ellsworth Roads, Mesa, AZ 85207Spectrum Retirement Communities submitted the plans for a 167-unit one to two story assisted living and memory care facility totaling 107,144 square foot. The ALF will include 52 assisted living units, 97 independent living units, and 24 memory care units made up of freestanding 1,000 square foot casitas. Common area amenities will include a central dining room, private dining room, wellness center, beauty shop, theater, library, game room, swimming pool, etc. Expected delivery will be in 2018.Lone Mountain Memory Care7171 E. Lone Mountain Road, Scottsdale, AZ 85266Spectrum Retirement Communities started construction on this 40-unit memory care property in December, 2016 and expect delivery December 2017. The property o�ers senior living for Alzheimer’s and other dementia-related illnesses with a specialized full spectrum lifestyle activity and wellness program, outdoor memory care garden and much more.Luna Azul19730 N. 15th Street, Phoenix, AZ 85024Luna Azul Development Fund, LLC purchased a 4.41-acre parcel located on the southwest corner of Loop 101 and N. 16th Street. The price was $1,166,000 ($6.07 per square foot). The property is being developed into a 30-lot cottage home community for disabled adults. Mariposa Point of Gilbert1445 E. Willis Road, Gilbert, AZ 85297Mariposa Point of Gilbert is scheduled to open Spring 2017 and just west of Mercy Gilbert Hospital, is the �rst and only assisted living and memory care community in Gilbert o�ering a holistic approach to services and care, providing a concierge medicine program, which will serve 90 residents on a 5-acre site. Independent living is proposed for the balance of the property. McFarlin Group, LLC of Dallas is the Developer of this property and several other Mariposa Point communities in the metro area.

Mariposa Point of Mesa1248 S. Crismon Road, Mesa, AZ 85208Located on a 6-acre tract across from Mountain Vista Medical Center, the property will consist of over 80 units of assisted living and memory care and will be licensed for over 120 residents. The project is currently under construction with a planned opening in Summer 2017.



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Senior Housing Proposed/Under Construction First Quarter, 2017Mariposa Point of Surprise16650 N. Stadium Way, Surprise, AZ 85374Mariposa Point of Surprise is located on 6 acres across from Mercy Gilbert Medical Center. The property will contain 83-units and be licensed for over 120 residents. An Executive Director and Director of Sales and Marketing were hired to coordinate the hiring of an additional 40+ team members to operate the community and pre-lease the apartments. Expected opening is Spring 2017.

Mariposa Point at Algodon CenterN. 91st Avenue and W. Thomas Road, Phoenix, AZ 85037Located across from Banner Estrella Medical Center in the Algodon Medical Center, Mariposa Point of Surprise is another property of the McFarlin Group/Surpass Living of Dallas. The property will consist of over 80 units of assisted living and memory care, licensed for over 120 residents and construction completion planned for late 2017.Sold by this Avison Young TeamThe Mission at Aqua FriaSWC Olive and 107th Avenues, Peoria, AZ 85345The Mission at Agua Fria, a state-of-the-art two-story 73,865 square foot senior living and memory care facility by Lamp Incorporated and Sletten Companies, will feature 49 assisted living and 41 memory care private residences. The project is expected to be completed second quarter 2017.

Morrison Ranch Senior LivingSEC Higley & Elliot Roads, Gilbert, AZ 85296CA Senior Living Holdings (CA Ventures) submitted a site plan for 4.59 acres of vacant land zoned GC (General Commercial) to the Town of Gilbert on October 5, 2016 for a 98,832-square foot two-story congregate care facility including 32 memory care units and 83 assisted living units for an estimated value of $15 million.Reems Road Senior Care FacilityReems Road & Mountain View Boulevard, Surprise, AZ 85374Senior living builder, RJ Development, began development on a three-story, 135-unit senior housing project on 8.5 acres within the Parkview Place Senior Village. The development will consist of 10 single-story duplex cottages in a desert-style development. No healthcare services will be provided on-site, but residents will be able to make use of local home health providers as needed. RJ Development has 14 senior living facilities around the country, including memory care, assisted living and independent living.



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Senior Housing Proposed/Under Construction First Quarter, 2017

Savanna House Assisted Living and Memory Care1415 N. San Benito Drive, Gilbert, AZ 85234This new community, owned by Prevarian Senior Living, was recently completed and will o�er supportive living for seniors, with special emphasis on memory care. The facility will feature 74 assisted living and 42 memory care residences.

Solterra Senior LivingS/SWC N. 3rd Avenue & W. Indian School Road, Phoenix, AZ 85013Solterra Senior Living has leased 1.93 acres on 3rd Avenue and Indian School for a proposed 164 bed assisted living facility and memory care. The a�ordable units will be certi�ed under Health Care Cost Containment System (AHCCCS), which is Medicaid for low income individuals and the Veterans Aids and Attendants Program for military seniors.

Sycamore Station TOD (Transit Oriented Development)Dobson & Main, Mesa, AZ 85202Proposed to the City of Mesa on November 3, 2016, a projected mixed-use 350-unit senior living facility is in the planning and development stage by Sycamore Station, LLC, an entity of Miravista Properties (Bradley Wilde) on six parcels.

Westgate Village8847 W. Glendale Avenue, Glendale, AZ 85305On January 26, 2017, Sante’ Partners bought 15.87 acres (691,210 square foot) for a master-planned development comprised of 63 single family residential homes and 130-unit senior independent living facility. Latigo Land and Capital sold the property for $2,219,654 (3.21 per square foot).

Senior Housing Openings First Quarter, 2017The Center at Val Vista3744 S. Rome Street, Gilbert, AZ 85297Developed by Dr. Alexander Senko�, an internal medicine physician from Colorado Springs, The Center at Val Vista o�ers physical, occupational and speech rehabilitation and/or complex nursing care. Opened December 1, 2016, the property is comprised of 96 skilled nursing beds in 68,500 square foot with state-of-the-art equipment and unparalleled comfort and amenities designed by a physician-driven care plan.



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Julie A. Johnson, CCIM, PrincipalAs a Principal of Avison Young, Julie has been an expert in healthcare real estate for about 25 years and uses her strong analytic skills to assist clients with demographic and market studies, as well as investment and lease analyses. Her in-depth knowledge of healthcare properties, senior housing, managed care, healthcare reform issues and healthcare tenant improvements make her a valuable resource to her clients.

D 480.423.7933 M 602.684-8558 [email protected]

Alexandra Loye, PrincipalAs a Principal of Avison Young, Alexandra provides real estate solutions for owners and occupants of medical o�ce and o�ce properties. Alexandra has advised her clients in various capacities including leasing and sales of medical and o�ce buildings, tenant/buyer representation, and senior housing investment sales and site selection. Through market awareness, time-sensitive project management, prompt communication, and aggressive strategic negotiating tactics, Alexandra is able to provide her clients exemplary service while saving them time and money.

D 480.423.7922 M 602.625.4220 [email protected]

Avison Young2777 E. Camelback RoadSuite 230Phoenix, AZ 85016

For more information in Senior Housing Real Estate please contact:

Senior Housing Openings First Quarter, 2017Hacienda Del Rey, Phase II12917 W. Las Cruces Drive, Litch�eld Park, AZ 85340The �rst phase of this premier family-owned senior living facility opened in 2015, and Phase II of the project opened January, 2017. With 50 more units in three levels of care, plus memory care, the assisted living options are in a home environment featuring four 10-bedroom custom homes in a neighborhood setting.

Merrill Gardens at Anthem2800 W. Rose Canyon Circle, Anthem, AZ 85086Opened March, 2017, Merrill Gardens in Anthem includes 93 apartments, one or two bedrooms, that can cater to independent living, assisted living or memory care. The property o�ers concierge services, library, theater, bistro and anytime dining.

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SENIOR HOUSING MARKET NEWSLETTER - Avison Young SENIOR HOUSING MARKET NEWSLETTER Phoenix Metropolitan Area - First Quarter 2017 avisonyoung.com Senior Housing Proposed/Under Construction