Investment Strategy

CNL Healthcare Properties II intends to build a high-quality portfolio diversified by asset class, operator and ownership structure, although there is no assurance these objectives will be met. With a goal of delivering value for shareholders, a four-pronged strategic approach is used to acquire and develop properties. Please note that factors could cause actual results to vary materially from those expressed in forward-looking statements.

1. Focus on Seniors Housing and Healthcare

CNL Healthcare Properties II intends to invest in the following categories:

Seniors Housing

  • Active Adult Communities
  • Independent Living
  • Assisted Living
  • Memory Care
  • Continuing Care Retirement Communities

Acute Care

  • General, Acute-Care Hospitals
  • Specialty Surgical Hospitals

Medical Office

  • Medical Office Buildings
  • Specialty Medical
  • Diagnostic Service
  • Surgery Centers
  • Outpatient Rehabilitation

Post-Acute Care

  • Skilled Nursing
  • Long-Term, Acute-Care Hospitals
  • Inpatient Rehabilitation

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2. Invest in Quality Assets

To select the right mix of assets for the portfolio, the management team considers a range of factors.

Key Considerations for Seniors Housing

  • Market demographics, including the age and median income of residents in target areas
  • Limited regional competition or high barriers to entry
  • Property amenities attractive to seniors
  • Proximity to medical facilities, shopping and the arts
  • Property condition and age

Key Considerations for Healthcare

  • Proximity to medical campuses or affiliation with major healthcare providers
  • Favorable demographics
  • Limited regional competition, high barriers to entry and consumer-convenient location
  • Future lease potential
  • Property condition and age
  • Constructed specifically for healthcare services

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3. Build Value Through Development

CNL Healthcare Properties II is unique among healthcare REITs in that it plans to develop new properties in key locations with a goal of delivering enhanced asset value. Strategically investing a limited portion of capital into constructing new properties is intended to:

  • Generate greater operational income and higher asset values over the long term.1
  • Reduce the average age of the overall portfolio, which tends to make it relatively more attractive when exploring liquidity alternatives.

Additionally, CNL Healthcare Properties II seeks to leverage CNL’s relationships with proven developers and operators. The REIT intends to mitigate the significant risks associated with construction by shifting some of the responsibility to the developer for planning construction, obtaining predevelopment approvals and completing a project development plan so a project is shovel ready. The REIT typically provides incentives to complete the projects on time and on budget.

1 Development properties will initially reduce the portfolio's cash flows including funds available for distributions, increase financing expenses and be subject to greater risks for obtaining government permits and staying on schedule for construction deadlines.

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4. Select Strong Operators and Tenants

The selection process for operators and tenants is crucial and CNL Healthcare Properties II will only make a choice after a careful analysis of:

  • Current operations
  • Financial performance
  • Experience and reputation
  • Local expertise
  • Geographic reach

Above all, CNL Healthcare Properties II seeks operators and tenants who have a strong track record of:

  • Providing care
  • Retaining employees
  • Managing assets at a high level of operational and financial performance

Risks can be mitigated by thorough analysis of operators and tenants, but cannot be eliminated altogether.

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There is no assurance the stated objectives will be met. There are significant risks associated with the seniors housing and healthcare sectors, including market risks impacting demand, competition from other entities, litigation risks and the cost of being responsive to changing government regulations. The REIT’s success in these sectors is dependent, in part, on the ability to evaluate local conditions, identify appropriate opportunities and find qualified tenants or, where properties are acquired through a taxable REIT subsidiary, engage and retain qualified independent managers. CNL Healthcare Properties II may also invest in other income-producing real estate and real estate-related securities and loans.