From: Tazia Smith < To: jeevacationggmail.com Cc: Paul Morris Vinit Sahni < Vahe Stepanian ', Nav Gupta Subject: Long Equity: Consider Slmm Brookdale Senior Living on macro/micro tailwinds (-30% upside to S42 tgt) [C] Date: Tue, 20 May 2014 13:33:19 +0000 Inline-Images: unnamed; unnamed(1); unnamed(2) Classification: Confidential Jeffrey - Focusing on listed/exchange traded opportunities: Consider buying $1-2mm position in Brookdale Senior Living (BKD) Macro Trend: Baby boomers retiring and aging population Micro: Merger tailwinds, pro-forma valuation upside and broader investor demand Brookdale Senior Living (BKD) Closed 5/19: $32.06 ($32.40 last) $3.8bn mkt cap (trades 1.3mm shs a day avg) $42 DB 12mo price target (implies —30% upside) vs. 37.71 cons (-16%) Catalyst: merger proxy filing expected this month (Brookdale bid to acquire Emeritus, ESC ($1.4bn mkt cap), in late Feb for $2.8bn in stock; est merger completion is 3Q14) Valuation: $42 = 12x proforma BKD+ESC 2015 CFFO/sh of $3.40 a. Strong Industry Fndamentals b. BKD's market leadership (10% pro forma market share and attractive national footprint + management team and corporate infrastructure lending itself to leverage/scale) c. Mid-teen's growth characteristics with organic 6-8% and accretion from the ESC acquisition adding 8-10% for the next 2- 3 years (ests = +18% in 2015 and + 27% in 2016). Q1 earnings report no 5/8, BKD posted its third consecutive quarter of double digit CFFO growth d. Current Valuation: 9.1x pro-forma 2015 CFFO/sh and just shy of 10x on a stand alone basis (8.9x pro-forma 2015 EV/EBITDA, 11.6x stand-alone) e. Market Cap — pro-forma will be greater than $5bn, expected to deliver broader investor interest Key risks include: competition, new supply, capex requirements to upgrade Emeritus' portfolio, merger approvals, housing market, interest rate sensitivity CFFO = cash flow from operations https://gergm.cib.intranet.db.com/ger/document/pdf/0900b8c0