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    Investor Presentation January 2017

  • Disclaimer.

    THIS PRESENTATION CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE

    MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER

    SECURITIES LAWS. ALSO, WHENEVER FIVE STAR USES WORDS SUCH AS "BELIEVE",

    "EXPECT", "ANTICIPATE", "INTEND", "PLAN", "ESTIMATE", "WILL", "MAY" AND

    NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, FIVE STAR IS

    MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS

    ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS. FORWARD

    LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.

    ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED

    BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. YOU

    SHOULD NOT PLACE UNDUE RELIANCE UPON ANY FORWARD LOOKING STATEMENT.

    EXCEPT AS REQUIRED BY APPLICABLE LAW, WE UNDERTAKE NO OBLIGATION TO

    UPDATE OR REVISE ANY FORWARD LOOKING STATEMENT AS A RESULT OF NEW

    INFORMATION, FUTURE EVENTS OR OTHERWISE.

    1 Note: Data throughout this presentation is based on September 30, 2016 results, unless otherwise noted.

  • Investment highlights.

    2

    One of the largest senior living operators in the U.S.

    Private pay revenues account for 79% of total senior living revenues.

    Industry demographics and supply/demand trends are favorable.

    Internal and external growth opportunities.

    Tuscany Villa of Naples Naples, FL 134 Units

    Strong and well managed balance sheet.

    Current valuation provides a compelling investment opportunity.

  • Company Overview

  • One of the largest operators of senior living communities in the U.S.

    4

    Five Star operates a total of 276 high quality senior living communities with over 31,000 units across the U.S.

    Leases 187 communities with 20,244 units. Owns 26 private pay communities with 2,703

    units.

    Manages 63 senior living communities with 8,402 units.

    CCRC 35%

    SNF 15% Other

    2%

    IL/AL 48%

    Senior Living Revenues

    Managed 27%

    Owned 9%

    Leased 64%

    Unit Breakdown

    Medicare 10%

    Medicaid 11%

    Private Pay 79%

    Private Pay Revenues

    Villa Valencia Laguna Hills, CA 366 Units

    (1)

    (1) Other senior living revenue relates primarily to rehabilitation and other specialty service revenues provided at the senior living communities owned and leased by Five Star.

  • Five Star across the senior living spectrum.

    5

    Independent Living

    - Residents have a high degree of independence in large, private units. - Daily meals, housekeeping and social activities are provided.

    Assisted Living

    - One bedroom units with small kitchenettes. - Services include laundry, medication management and daily living assistance. - Nursing care available.

    Alzheimers - Memory Care

    - A dedicated, secure wing within assisted living or a stand alone community. - Bridge to Rediscovery program.

    Skilled Nursing - CCRC

    - Nursing care offered for IL / AL residents who require additional care. - Focus on short-term private pay and Medicare patients. - Rehab to Home units.

    Skilled Nursing - Free Standing

    - One or two beds per room. - Extensive nursing care to residents 24 hours per day. - Includes post-acute care and long-term chronic care.

    Unit Type Leased Owned Managed Total

    Independent Living 6,279 845 3,539 10,663

    Assisted Living 7,212 1,511 3,615 12,338

    Alzheimers / Memory Care 2,272 347 785 3,404

    Skilled Nursing / CCRC 1,949 - 463 2,412

    Skilled Nursing / Free Standing 2,532 - - 2,532

    Total 20,244 2,703 8,402 31,349

    AL 39%

    IL 34% ALZ 11%

    SNF 8%

    SNF CCRC

    8%

  • Scale and diversification of operations.

    6

    Five Star operates across 32 states with a total unit capacity of 31,349.

    1,775 6%

    287

    2,077 7%

    1,243 4%

    657

    802

    189

    764

    204

    1,672 5%

    1,288 4%

    1,018

    934

    695 116

    899

    434

    302

    230

    187

    1,111

    982

    MA 123 310

    315

    NJ 1,037

    DE 1,000

    MD 1,281 4%

    1,625 5%

    1,921 6%

    1,252 4%

    FL 4,619 15%

    All other states where FVE operates

    Top 10 states based on units

  • Favorable industry demographics.

    7

    Fragmented industry is positioned for consolidation. In the U.S. there are approximately 22,100 senior housing properties with almost 2.85 million units.(1)

    Total capitalization of the senior housing market is estimated at $304.6 billion (implied value).(1)

    The 10 largest senior housing operators (both public and private) control 26.8% of units in the largest 100 metropolitan markets.(1)

    New supply is modest in comparison to aging population growth and overall penetration rates.

    86%

    87%

    88%

    89%

    90%

    91%

    92%

    01,0002,0003,0004,0005,0006,0007,0008,0009,000

    10,000

    Un

    its

    Senior Housing Supply-Demand Trends(1)

    Inventory Growth Absorption Occupancy

    0%

    1%

    2%

    3%

    4%

    5%

    6%

    7%

    8%

    9%

    0

    4

    8

    12

    16

    20

    Mill

    ion

    s

    Age 85 + Population(2)

    85+ Population Growth Rate (%)

    (1) Source: National Investment Center for the Seniors Housing and Care Industry (NIC), as of September 30, 2016.

    (2) Source: U.S. Census Bureau, 2014 National Population Projections.

  • Five Star continues to add private pay communities to its portfolio.

    Q4 2016: Entered into agreements to manage four additional senior living communities with a total of approximately 350 living units and to lease two senior living communities with a combined 126 living units.

    Q2 & Q3 2016: Entered into management agreements to manage three additional senior living communities: a 38 unit facility in Acworth, Georgia; an 87 unit building in Wilmington, North Carolina; and a 163 unit building in Birmingham, Alabama.

    Q4 2015: Acquired two 100% private pay senior living communities in Tennessee with 151 independent living units on our own balance sheet for $26 million.

    Growth and diversification through management agreements and acquisitions.

    8

    Morningside of Pekin Pekin, IL 61 Units

  • Managed new properties.

    9

    Park Place of Fountain City Knoxville , TN 68 IL/AL Units

    Overlook at Cedarcrest Acworth, GA 38 IL/AL Units

    Park Place of Knoxville Knoxville, TN 83 IL/AL Units

    Morningside of Wilmington Wilmington, NC 87 IL/AL Units

  • Program Driven Industry

  • Rehab to Home initiative.

    Note: Medicare revenue and NOI are based on annualized results since the project was completed compared to the prior period 11

    Impacts skilled nursing units within a CCRC. Converting semi private units into private rooms with

    updated bathrooms, flat screen TVs, high quality in-room dining services and refurbished private rehab areas.

    Utilized by short-term Medicare patients needing rehab following a procedure like a hip or knee replacement.

    Five Stars Rehab to Home Initiative. Four projects completed with more slated to start in

    2017. Current projects in Arizona, Ohio and Indiana.

    CCRC conversion case study: Myrtle Beach, SC. Units converted: 24. Open for nine months. Annualized Medicare A revenue growth: $900,000, or

    33%. Annualized community NOI: $260,000 vs. negative NOI.

  • Elevating the dining experience.

    12

    Five Star has partnered with Celebrity Chef, Brad Miller, former contestant on Hells Kitchen and current restaurant owner (two locations in Santa Monica, CA).

    Hosting community events and chef competitions around the country.

    Incorporating new signature dishes in Five Star menus.

    Dining is a major consideration for residents when selecting a community; these initiatives set an unprecedented culinary standard.

    Celebrity Chef Program awarded Best of the Best award by ALFA in May 2015.

    Referral sources attend events, creating positive buzz at the communities and ultimately improve occupancy.

    In 2015, Brad Miller helped launch Five Star Culinary Institute. Over 100 community chefs attended.

  • Lifestyle360: a new approach to resident wellness.

    13

    Lifestyle360 is a holistic approach to active community living.

    Research-based activities and wellness program predicated on Maslows Hierarchy of Needs.

    Activities and events are based on five dimensions of wellness: intellectual, social, physical, emotional and spiritual.

    Proven results and beneficial to the overall health and wellness of our residents.

    All Five Star communities will offer at least one activity or event that corresponds to each of the five dimensions.

    Programs resonate well with residents, increase referrals and further differentiate Five Star from the competition.

  • Digital strategy.

    14

    Focus on decreasing reliance on Third Parties for lead generation. Third Party sources are less profitable, have shorter length of stay and higher cost of sale.

    Five Stars Digital Strategy Boost Search Engine Optimization efforts

    Aggressive Search Engine Marketing

    Rich Content

    Video Testimonials

    13%

    8%

    13%

    17%

    0%

    5%

    10%

    15%

    20%

    25%

    30%

    Q3 2015 Q3 2016

    % Business from FVE Website % Business from 3rd Parties

  • Revenue management initiative.

    15

    Creating a more scientific and proactive approach to pricing, informed by internal sales and financial data combined

    with external market data.

    Using RevPAR (Revenue per Available Room) as a measure of

    success.

    The RevPAR Index (comparing Five Stars RevPAR to that of the competition)

    is an indication of whether or not Five Star is gaining an

    advantage in a particular market faster than the competitors.

  • Operations & Financials

  • Operating performance.

    17

    Significant opportunity to grow occupancy; third quarter senior living occupancy at 83.8% is below the companys historical high of 92% achieved prior to the Recession.

    IL/AL occupancy is 85.3%.

    83.8%

    85.3%

    82.3%

    80.2%

    78%

    80%

    82%

    84%

    86%

    88%

    90%

    Senior Living Occupancy(1)

    Total Senior Living IL/AL CCRC SNF

    $4,400

    $4,450

    $4,500

    $4,550

    $4,600

    $4,650

    $4,700

    0.0%

    1.0%

    2.0%

    3.0%

    4.0%

    5.0%

    Senior Living Average Monthly Rate

    Average Monthly Rate Year Over Year Growth

    (1) For 2016, the calculation of occupancy includes in service living units only; prior period occupancy calculations included certain living units categorized as out of service.

  • Growth in private pay revenues.

    (1) Earnings before interest, taxes, depreciation, amortization and rent expense. Excludes non-recurring items.

    (2) Includes revenues from leased and owned communities. (3) For the nine months ended September 30, 2016, annualized.

    18

    $190

    $215 $224

    $235 $233 $225 $234

    $170

    $227

    68%

    70%

    72%

    74%

    76%

    78%

    80%

    $0

    $40

    $80

    $120

    $160

    $200

    $240

    2009 2010 2011 2012 2013 2014 2015 YTD 2016

    Mill

    ion

    s

    EBITDAR(1) and Private Pay Revenues(2)

    EBITDAR Private Pay Revenues

    Act

    ual

    Ann

    ualiz

    ed

    By focusing on increasing rate and controlling costs, Five Star has maintained EBITDAR levels during the recent downturn in industry occupancy.

    79% of senior living revenues came from residents private sources, rather than Medicare and Medicaid.

    (3)

  • Culture focused on cost control.

    (1) Excludes non-recurring items. (2) Other operating expenses include utilities, food expense, property taxes, general

    maintenance and insurance expense.

    19

    49.1% 49.1% 48.6% 48.8% 48.3% 48.3% 48.9%

    23.5% 23.9% 24.4% 24.7% 26.2% 25.5% 25.4%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    2010 2011 2012 2013 2014 2015 YTD 9/30/2016

    Senior Living Expenses as a Percent of Senior Living Revenues(1)

    Wages and Benefits (%) Other Operating Expenses (%)(2)

    Morningside of Vestavia Hills Birmingham, AL

    163 Units

  • Conservative balance sheet.

    20

    As of September 30, 2016

    Assets

    Cash and cash equivalents $43,174

    Accounts receivable, net 38,040

    Property and equipment, net 352,561

    Other assets 96,901

    Total Assets $530,676

    Liabilities and Shareholders Equity

    Revolving credit facility $--

    Mortgage notes 60,856

    Total debt 60,856

    Other Liabilities 299,730

    Total Liabilities 360,586

    Shareholders Equity 170,090

    Total Liabilities and Shareholders Equity $530,676

    $100 million available under one revolving credit facility as of September 30, 2016.

    Debt as a percent of book capital is a conservative 26% as of September 30, 2016.

    Property and equipment, net is $353 million and includes 26 communities owned by Five Star.

  • $0

    $10

    $20

    $30

    $40

    $50

    $60

    $70

    2009 2010 2011 2012 2013 2014 2015 YTD 2016

    Mill

    ion

    s

    Capital Investments

    FVE Funded Landlord Funded

    Investment in communities.

    21

    Five Star has consistently invested capital into its communities to remain competitive and provide residents with high quality amenities and services.

    On a per unit basis, capital expenditures exceeded $1,000 per annum since 2011.

    2009 2010 2011 2012 2013 2014 2015 YTD 2016

    Total owned and leased units 22,066 22,176 23,765 22,972 22,972 23,101 23,227 22,947

    Gross capital investment ($M) $62.0 $54.0 $60.9 $51.8 $53.8 $49.9 $57.6 $54.4(1)

    Five Star funded capital ($M) $16.8 $22.1 $27.7 $26.9 $29.1 $24.1 $36.2 $34.2(1)

    Five Star funded capital, per unit $761 $997 $1,166 $1,171 $1,268 $1,043 $1,559 $1,490(1)

    (1) For the nine months ended September 30, 2016, annualized.

    (1)

  • Investment highlights.

    22

    One of the largest senior living operators in the U.S.

    Private pay revenues account for 79% of total senior living revenues.

    Industry demographics and supply/demand trends are favorable.

    Internal and external growth opportunities.

    Tuscany Villa of Naples Naples, FL 134 Units

    Strong and well managed balance sheet.

    Current valuation provides a compelling investment opportunity.

  • 23

    Investor Presentation January 2017

    Slide Number 1Disclaimer.Investment highlights.Company OverviewOne of the largest operators of senior living communities in the U.S.Five Star across the senior living spectrum.Scale and diversification of operations.Favorable industry demographics.Growth and diversification through management agreements and acquisitions.Managed new properties.Slide Number 11Rehab to Home initiative.Elevating the dining experience.Lifestyle360: a new approach to resident wellness.Digital strategy.Revenue management initiative.Slide Number 17Operating performance.Growth in private pay revenues.Culture focused on cost control.Conservative balance sheet.Investment in communities.Investment highlights.Slide Number 24

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