Development of assisted living facilities in Jurmala, Latvia

Investment proposal – housing for the elderly

Executive summary

Page 2

Overview

A team of long-term care service specialists is

contemplating a development project of assisted living

facilities called “Le Quartier Senior” for 24 people in

Saliena, Pinki, Babite municipality in Latvia

The project consists of two key steps: (a) development of

real estate (assisted living facilities) and (b) setting up a

long-term care service provider

The operational team is lead by French citizen Mr Nicolai

Kobliakov and he is currently looking for investment

partners (real estate investors) who could help to develop

the necessary real estate

Financial summary per resident

Investment Year 2017 87,667 EUR

Revenue at exit Year 2026 17,040 EUR

EBITDA at exit Year 2026 9,269 EUR

EBITDA margin Year 2026 54%

Average EBITDA generated 2017-2026 7,160 EUR

Value at exit Year 2026 185,568 EUR

Investment breakdown

15% Real estate investors will be able to achieve an annual

yield of at least 15% (annual rental income over the initial

investment).

Key figures about the facilities

960 m2 960m2 of net living area needs to be developed during

the project.

18 18 living units will be developed during the project. These

18 units will be able to accommodate 24 people.

360 1 172 432 140

Land Construction Equipment & furniture Other

Total required investment: EUR 2,104 th

Location

Saliena

Beds in residential long-term care facilities, per 1,000 population aged 65 years old and over

Market opportunity

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Summary

Long-term care needs improvement in Latvia

-

10

20

30

40

50

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

LV OECD

Source: OECD

Population between different age groups and projection, figures in thousands of people

Age group of “65+” is the only one projected to grow

Source: The World Bank Group

Key figures

-

500

1 000

1 500

2 000

2014 2015 2016 2020 2030 2040 2050

65 and above 45-64 25-44 0-24

Senior Baltic team wants to take advantage of

two key developments in Latvian long-term care

(LTC) market: (a) meet the demand created by

the rapidly expanding population that is over 65

years old and (b) address the lack of

modernization in the existing residences

Currently there are 7,588 long-term beds in the

Latvian market

At present there is excess demand for social care

services and clients wait in queues for LTC

institutions for up to 30 months

0.16%

2x

Population between ages 65 and above is

projected to grow with CAGR of 0.16% till

2050, while the other age groups will

decrease with a rate of almost -1% per year.

In order to keep up with the growing number

of the elderly and converge with OECD, the

number of long-term care beds must at

least double in the foreseeable future.

A gap of 9,600 beds

Competition and positioning of Le Quartier Senior

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-50

-40

-30

-20

-10

0

10

20

30

40

50

60

- 10 20 30 40 50 60

MAX Price per day, EUR

A-score

Dzintara Melodija

Ciāna

Jūrmalas SAC

Ezerkrasti VSAC

Jugla VSAC

Sloka

Liepa SAC

Mežciems SAC

Stella Maris

Pārdaugava SAC

Dzimtene

A-score

Project team conducted a market research in which it assessed (questionnaires, interviews

and secondary data) different competitors based on such values as housing adaptation,

security, food, medical factors, operations, social life etc. The sum of those values are

represented by “A-score”. High A-score means that a certain facility is top-quality with good

value proposal to its residents.

Beds = 448

Beds = 14

Dzintara Melodija has 200 beds.

Occupancy rate is above 80%.

Segment in which Senior Baltic

will develop its business

Most of the competitors are nursing homes with low prices and

relatively low value proposal to their clients.

Development “Le Quartier Senior”

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Senior Baltic team wants to develop Le Quartier Senior, an

already worked out and tested concept of assisted living facility

(ALF) campus for the municipalities with population over

20,000

Le Quartier Senior offers a housing alternative for older adults

who may need help with dressing, bathing, eating, and toileting,

but do not require the intensive medical and nursing care

provided in nursing homes

Campus planning has been verified

A real alternative to nursing homes

Campus for independent seniors

Assisted living facility Nursing home

Medical care Minor supervision Extensive care

Privacy Private apartments Usually shared rooms

Independence More independence Less independence

Safe, comfortable and interesting life with access to medical services in one place for 24 people

Overview of the campus

Page 6

Total land plot size – 5,260 m2

Units m2 per unit Total m2

Land plot for a living unit (suited for 1 person) 12 223 2,676

Land plot for a living unit (suited for 2 persons) 6 233 1,398

Central building 1 166 166

Parking lot with 5 places 4 156 624

Recreational area 1 396 396

The campus can accommodate 24 people

Parking for 24 places (12 for drivers with limited mobility)

Le Quartier Senior campus

1 central building

6 houses for 2 people

12 individual house units

Living unit for one person

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Living unit provides elderly-friendly living

The living unit has is a private one-bedroom home one

bedroom and a kitchen combined with dining room,

patio or enclosed porch and bathroom with shower.

The home has elderly-friendly floor plan

and individual climate control system. The whole

campus has beautifully landscaped outdoor areas.

Living area: 40 m2

Land plot size for the unit: 233 m2

Central building

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Central building – a multifunctional space

In the central building of the “Le Quartier Senior”, social

events like watching movies, various discussions, board

games, dance evenings are regularly organized.

The equipped medical bureau in the central building is

used by visiting medical specialists for regular

appointments with residents of the campus.

Total area of the building: 100 m2

Land plot size for the building: 166 m2

Key features of the campus

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Mild supervision with high privacy level Elderly-friendly outdoor and indoor spaces

Rewarding social life Adaptable living spaces

Specialized concierge service

State-of-the art medical services

All elderly-friendly features are implemented in such a way that in

any case don’t cause for residents and their families a feeling of

being in a hospital. Le Quartier Senior - it’s a comfortable place to

live, not medical facility.

Some of the features: lighting systems, clear pictograms and

colours that make orientation easy at any time of the day, the

campus does not have physical thresholds, steps and different

levels of floors.

All safety measures are structured in such way that they do not

restrict the personal freedom of residents. For example, residents’

sleep is monitored with a remote system.

Panic buttons are installed in all areas of the campus with fall

detection sensors and, if necessary, wandering controls.

A Senior Baltic worker is present in the campus every day of the

week.

All spaces of the campus can be adapted to the individual needs of

residents who experience periodic problems with mobility. For

example, rail systems for horizontal lifts are installed in timely

manner, handrails can be attached both indoors and outdoors.

Le Quartier Senior aims to support from the feeling of relevance

and involvement in social life based on a specially designed method

in France and adapted to local needs.

In addition, residents are connected with nearby cultural institutions.

Each resident is stimulated to participate in regular workshops,

organised visits to theatres, museums, art exhibitions. Social

events are regularly organised in the central building of the campus.

Regular measurement of vital parameters allows doctors to take

timely decisions about treatments and prevent serious

consequences. Medical specialists are available for regular check-

ups. Resident medication needs are monitored and controlled. Trained senior concierge works every day to provide optimal

experience for every resident every day.

Pricing model

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Acquisition of clients

Living units

Marketing and sales activities

LTC services

Senior Baltic team engages in communication with the elderly and

their families. Main target audience is the elderly who have relatives

from upper-middle class.

Provide living unit and charge

EUR 800 per living unit per month

Provide long-term care services in

cooperation with highly

professional suppliers and charge

from EUR 200 to EUR 899 per

person per month

All living units are equipped with fall detection sensors, with panic

buttons and with floor lighting systems. In cases when any of the

sensors are activated, assistance to the resident is provided by an

onsite nurse or caregiver.

Category

“Standard” [ EUR 200 per month ] Emergency call systems in all private and common areas

Medication administration (including the delivery)

Administrative assistance

Organized recreational activities, social services and religious activities

“Club” [ EUR 499 per month ] All the elements of “Standard” package +

1 meal per day (lunch)

Housekeeping, maintenance and laundry services

“Premium” [ EUR 899 per month ] All the elements of “Club” package +

2 meals per day (lunch and dinner)

Assistance with daily activities (bathing, dressing, toileting, etc.) and health services

Transportation arrangements

Activities Comments

Business model

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+

-

-

-

Clients Outsourced suppliers

In-house operations

Property

Senior Baltic collects payments

from clients for the services and

rent every month in total amount

from 1,000 EUR and up to EUR

1,699 per resident.

Senior Baltic makes payments to its suppliers that provide

such key services as food, medicaments and medical

suppliers, equipment maintenance etc.

Senior Baltic makes monthly payments to the

company which owns the real estate. Senior Baltic provides a housing alternative for the elderly with

concierge services in “Le Quartier Senior” campus. Senior Baltic

acts as an operator in this business model, the real estate is owned

by some other company.

Senior Baltic has a staff of 1 caregiver, 1

nurse and 1 concierge. The administration is

also a function which provides business value

and creates in-house costs.

Alternative use of the campus – the houses can be sold

Team and track record

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Nicolai Kobliakov

The project is initiated and run by Mr Nicolai Kobliakov. Nicolai is

an experienced long-term care professional with strong academic

background.

Investments in elderly care

In 2007, Nicolai started the first private network of elderly care

facilities in Russia – Senior Group Russia. Nicolai developed the

company from scratch and by 2010 the company owned already 5

facilities in 3 different regions of Russia. He successfully exited the

investment in 2010, when he moved to France and sold the

company.

Education

Nicolai is a holder of Master’s degree in law and physics from

Lomonosov Moscow State University. He is also a graduate of

TRIUM Global Executive MBA, the 3rd best EMBA Program in the

world according to Financial Times rating.

Marc Saillon

Mr Marc Saillon was a co-founder in Senior Group Russia. He

currently oversees a network of nursing homes in France and

Belgium with around 1,000 beds. Marc is ready to participate and to

transfer his know-how to the Baltic market.

Investment structure

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RE company

LTC service operator

Real estate investor Nicolai & the team

100%

y% 1-y%

(1) Owns all fixed assets

of the project (real estate,

land, equipment). Is

exposed only to real

estate risk.

(2) Debt service

(3) Does not have any

costs related to

operations.

(1) Provides LTC services

to the residents living in

the facilities.

(2) Takes all operational

risk and incurs all

operational costs.

Rental payments providing annual yield of 15%.

Rent

Equity investment

(45% of total investment)

Debt investment

(55% of total investment) Payments from residents

Dividends

Income statement

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Income statement 2017 2018 2019 2020 2021 2022

Revenue 0 293,936 356,030 363,151 370,414 377,822

COGS 0 112,251 127,262 127,262 127,262 127,262

Gross profit 0 181,686 228,769 235,889 243,152 250,560

Sales & Marketing 19,000 6,939 3,560 3,632 3,704 3,778

Administration 0 36,000 36,720 37,454 38,203 38,968

Depreciation 0 87,200 87,200 87,200 87,200 87,200

Real estate taxes 0 11,790 11,908 12,027 12,147 12,269

Operating profit -19,000 39,756 89,380 95,576 101,897 108,346

EBITDA -19,000 126,956 176,580 182,776 189,097 195,546

Income statement shows consolidated figures for an entity which a) owns the real estate, facilities, equipment and b) provides long-term care services and concierge services in

the facilities.

Contact information

Page 15

Uldis Boldans

uldis.boldans@redgatecapital.eu

+371 29 359 216

Valeria Stulova

valeria.stulova@redgatecapital.eu

+372 55 603 332