<PAGE> 1
Exhibit (c)(5)
PRESENTATION TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF:
[BROOKDALE LOGO]
REGARDING PROJECT CASTLE
June 30, 2000
[MERRILL LYNCH LOGO]
<PAGE> 2
TABLE OF CONTENTS
--------------------------------------------------------------------------------
1. Transaction Overview
2. Public Market Perspective
3. BRIDGE Valuation Analysis
MERRILL LYNCH
<PAGE> 3
---------------------------------------
TRANSACTION OVERVIEW
---------------------------------------
<PAGE> 4
TRANSACTION OVERVIEW
-------------------------------------------------------------------------------
Overview of Key Terms and Conditions
---------------------------
DESCRIPTION OF TRANSACTION: Cash merger (accomplished through a tender
offer), with BRIDGE to merge with Acquisition
Sub, a wholly-owned subsidiary of FLAG.
---------------------------
CONSIDERATION: $15.25 per share in cash, net to seller.
---------------------------
NON-SOLICITATION: Except as expressly permitted in writing by
FLAG, BRIDGE and Merrill Lynch are prohibited
from initiating, soliciting or taking any other
action designed to facilitate inquiries or the
making of any Acquisition Proposal by third
parties.
---------------------------
FIDUCIARY OUT: BRIDGE shall not be precluded from participating
in discussions or negotiations with, or
furnishing information to, any third party that
the Board determines in good faith to have made
a Superior Proposal.
---------------------------
EFFECT OF TERMINATION: No termination fee. Cost reimbursement of
$750,000 payable by BRIDGE to FLAG.
---------------------------
CAPITAL Z TREATMENT: Capital Z and FLAG have agreed to terms pursuant
to which Capital Z will rollover its
subordinated debt position into equity of
surviving entity.
---------------------------
KEY CONDITIONS: No material adverse change. No material breach
of representations and warranties. Tender
conditions are satisfied.
MERRILL LYNCH 1
<PAGE> 5
TRANSACTION OVERVIEW
--------------------------------------------------------------------------------
Transaction Valuation and Implied Multiples
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Transaction Value
<S> <C>
Offer Price $15.25
Fully Diluted Shares Outstanding (MM)(a) 9.9
------
OFFER VALUE $150.3
Plus: Net Debt(b) 192.1
------
TRANSACTION VALUE $342.4
Synthetic Lease and HRPT Related Debt 287.4
------
ADJUSTED TRANSACTION VALUE $629.8
------
</TABLE>
<TABLE>
<CAPTION>
Implied Multiples
ADJUSTED
EBITDAR EBITDAR EBITDA P/E
PERIOD MULTIPLE(c) MULTIPLE(c) MULTIPLE MULTIPLE
---------------- ------------------- ------------------- ------------------ --------------
<S> <C> <C> <C> <C>
LTM 12.8x 15.0x 14.8x 15.7x
2000E 11.3 13.0 12.3 13.3
2001E 8.7 9.9 8.3 9.2
<CAPTION>
HISTORICAL AND PROJECTED FINANCIAL RESULTS
----------------------------------------------------------------------------------------
ADJUSTED
PERIOD EBITDAR EBITDAR(d) EBITDA EPS
---------------- ------------------- ------------------- ------------------ --------------
<S> <C> <C> <C> <C>
LTM $49.2 $42.1 $23.1 $0.97
2000E 55.9 48.6 27.8 1.15
2001E 72.2 63.9 41.1 1.66
</TABLE>
---------------------
Note: Projected financial information provided by BRIDGE management.
(a) Based on the treasury share method; includes 9.9 million common shares.
Stock options of 0.9 million have a weighted average exercise price of
$15.19.
(b) As of March 31, 2000. Includes $99.0 million of short-term and long-term
debt, $100.0 million of convertible debt, less $6.9 million of cash and
cash equivalents.
(c) Based on Adjusted Transaction Value.
(d) Excludes development and management fees.
MERRILL LYNCH 2
<PAGE> 6
TRANSACTION OVERVIEW
--------------------------------------------------------------------------------
Implied Premium Analysis and Trading Range
<TABLE>
<CAPTION>
BRIDGE Implied Premium/
Time Period Shared Price (Discount) of $15.25 Offer
----------- ------------ --------------------------
<S> <C> <C>
Current (June 27, 2000) $ 14.00 8.9%
PRIOR TO ANNOUNCEMENT (A)
One Day (April 19, 2000) 10.75 41.9%
30-Day Average 11.67 30.7%
90-Day Average 12.51 21.9%
6-Month Average 12.60 21.0%
1-Year Average 13.25 15.1%
52-Week Closing High 15.56 (2.0%)
52-Week Closing Low 10.63 43.5%
</TABLE>
Post-Announcement Trading Range: 4/19/00 - 6/27/00
[LINE GRAPH]
Proposed Offer Price: $15.25
Price Prior to Offer (4/19/00): $10.75
Current Price (6/27/00): $14.00
---------------------
(a) Based on daily closing prices prior to the announcement of FLAG's initial
purchase of The Prime Group's 3.9 million shares of $15.00 per share on April
20, 2000.
MERRILL LYNCH 3
<PAGE> 7
--------------------------------------------------------------------------------
PUBLIC MARKET PERSPECTIVE
--------------------------------------------------------------------------------
<PAGE> 8
PUBLIC MARKET PERSPECTIVE
-------------------------------------------------------------------------------
Assisted Living Industry Stock Performance Analysis(a)
[LINE GRAPH]
BRIDGE S&P 500 Public Comparables Composite(b)
Total Industry Equity Value(b) Total Industry Public Float (c)
-------------
(a) Includes BRIDGE, Alterra Healthcare, American Retirement, ARV Assisted
Living, Capital Senior Living, Emeritus and Sunrise Assisted Living.
(b) Public comparables composite includes BRIDGE, Alterra Healthcare, American
Retirement, ARV Assisted Living, Capital Senior Living, Emeritus and Sunrise
Assisted Living.
(c) To calculate total industry public float, insider holdings based on
respective proxies for the selected comparable companies.
MERRILL LYNCH 4
<PAGE> 9
PUBLIC MARKET PERSPECTIVE
--------------------------------------------------------------------------------
Public Market Capitalization Summary -- Assisted Living Public Comparables
(Dollars in Millions)
Total Equity Value (a)
Median Equity
Value: $59.2 mm
[BAR GRAPH]
<TABLE>
<S> <C>
SNRZ $383.6
BLCI $137.9
ACR $ 97.6
CSU $ 59.2
ALI $ 45.6
ESC $ 30.2
SRS $ 15.8
</TABLE>
Total Market Capitalization (b)
Average Equity Value/
Market Cap. Ratio: 24.1% (d)
[BAR GRAPH]
<TABLE>
<S> <C>
ALI $1,099.6
SNRZ $1,084.8
ACR $ 582.6
BLCI $ 330.0
ESC $ 244.6
CSU $ 133.3
SRS $ 111.1
</TABLE>
Adjusted Market Capitalization (c)
Average Equity Value/
Adjusted Market Cap.
Ratio: 17.8% (e)
[BAR GRAPH]
<TABLE>
<S> <C>
ALI $1,909.5
SNRZ $1,196.6
ACR $ 723.7
BLCI $ 617.4
ESC $ 482.4
SRS $ 446.6
CSU $ 133.3
</TABLE>
--------------------
(a) Based on share prices as of June 27, 2000.
(b) Total market capitalization equals total equity value plus short-term
debt, long-term debt, minority interest and preferred stock less cash
and cash equivalents.
(c) Total market capitalization plus lease expenses for the first quarter of
2000 annualized and capped at 10.0x (excluding BRIDGE, which has
capitalized leases of $287.4 million).
(d) Calculated as the average of the individual company equity value/market
capitalization ratios.
(e) Calculated as the average of the individual company equity value/adjusted
market capitalization ratios.
MERRILL LYNCH 5
<PAGE> 10
PUBLIC MARKET PERSPECTIVE
--------------------------------------------------------------------------------
Wall Street Earnings Estimates Progression (a)
PUBLICLY TRADED ASSISTED LIVING COMPANIES HAVE DEMONSTRATED A CONSISTENT RECORD
OF EARNINGS DISAPPOINTMENTS
BRIDGE
[LINE GRAPH]
Alterra Healthcare
[LINE GRAPH]
American Retirement
[LINE GRAPH]
ARV Assisted Living
[LINE GRAPH]
Capital Senior Living
[LINE GRAPH]
Emeritus
[LINE GRAPH]
Sunrise Assisted Living
[LINE GRAPH]
Fiscal Year 1998 Fiscal Year 1999 Fiscal Year 2000
(a) Graphs show earnings per share estimates based on First Call consensus on
a monthly basis from January 1998 to June 2000. Final month for FY 1998
and FY 1999 is actual EPS.
MERRILL LYNCH 6
<PAGE> 11
PUBLIC MARKET PERSPECTIVE
-------------------------------------------------------------------------------
Historical Multiple Progression
THE UNFAVORABLE PUBLIC MARKET ENVIRONMENT FOR THE ASSISTED LIVING INDUSTRY IS
EVIDENCED BY THE SHARP MULTIPLE CONTRACTION EXPERIENCED BY THE MAJOR PUBLICLY
TRADED ENTITIES
FORWARD EBITDAR MULTIPLE
------------------------
<TABLE>
<CAPTION>
MEAN MEAN
WITH WITHOUT
BRIDGE BRIDGE BRIDGE
-------- -------- --------
<S> <C> <C> <C>
November 1998 11.1x 11.5x 8.8x
May 1999 8.5 8.6 7.6
November 1999 8.7 8.8 8.1
Current 9.6 10.0 8.6
CHANGE FROM NOVEMBER 1998:
Multiple (1.5x) (1.5x) (0.2x)
Percentage (13.5%) (13.0%) (2.3%)
</TABLE>
FORWARD P/E MULTIPLE
--------------------
<TABLE>
<CAPTION>
MEAN MEAN
WITH WITHOUT
BRIDGE BRIDGE BRIDGE
-------- -------- --------
<S> <C> <C> <C>
November 1998 19.8x 21.0x 15.0x
May 1999 12.6 13.3 9.9
November 1999 10.0 9.8 10.6
Current(a) 15.0 16.6 8.4
CHANGE FROM NOVEMBER 1998:
Multiple (4.8x) (4.4x) (6.6x)
Percentage (24.2%) (21.0%) (44.0%)
</TABLE>
-----------------
(a) The current median forward P/E multiple is 8.5x. This represents a decline
of 10.3x or 55% from the median multiple of 18.8x in November 1998.
MERRILL LYNCH 7
<PAGE> 12
PUBLIC MARKET PERSPECTIVE
--------------------------------------------------------------------------------
BRIDGE Public Market Overview
(Dollars in Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Market Capitalization
<S> <C>
Share Price (6/27/00) $ 14.00
Fully Diluted Shares Outstanding (mm)(a) 9.9
-------
MARKET VALUE OF EQUITY $ 137.9
Plus: Net Debt(b) 192.1
-------
MARKET CAPITALIZATION $330.00
Synthetic Lease and HRPT Property Debt 287.4
-------
ADJUSTED MARKET CAPITALIZATION $ 617.4
5-Year Growth Rate(c) 25.0%
2000 P/E/Growth 0.49x
</TABLE>
<TABLE>
<CAPTION>
Trading Multiples
ADJUSTED
EBITDAR EBITDAR EBITDA P/E
PERIOD MULTIPLE(d) MULTIPLE(d) MULTIPLE MULTIPLE
---------------- ------------------- ------------------- ------------------ --------------
<S> <C> <C> <C> <C>
LTM 12.6x 14.7x 14.3x 14.4x
2000E 11.0 12.7 11.9 12.2
2001E 8.6 9.7 8.0 8.4
<CAPTION>
HISTORICAL AND PROJECTED FINANCIAL RESULTS
----------------------------------------------------------------------------------------
ADJUSTED
PERIOD EBITDAR EBITDAR(e) EBITDA EPS
---------------- ------------------- ------------------- ------------------ --------------
<S> <C> <C> <C> <C>
LTM $49.2 $42.1 $23.1 $0.97
2000E 55.9 48.6 27.8 1.15
2001E 72.2 63.9 41.1 1.66
</TABLE>
---------------------
Note: Projected financial information provided by BRIDGE management.
(a) Based on the treasury share method; includes 9.9 million common shares.
Stock options of 0.9 million have a weighted average exercise price of
$15.19 and are currently out-of-the money.
(b) As of March 31, 2000. Includes $99.0 million of short-term and long-term
debt, $100.0 million of convertible debt, less $6.9 million of cash and
cash equivalents.
(c) Based on First Call Consensus as of June 27, 2000.
(d) Based on Adjusted Market Capitalization.
(e) Excludes development and management fees.
MERRILL LYNCH 8
<PAGE> 13
PUBLIC MARKET PERSPECTIVE
--------------------------------------------------------------------------------
BRIDGE One-Year Stock Price Performance
Summary Data
<TABLE>
<CAPTION>
High Low Mean
-------- -------- --------
<S> <C> <C> <C>
30 Trading Days $14.00 $13.13 $13.55
3 Months 14.00 10.63 12.60
6 Months 14.44 10.63 12.80
Prior to Offer 15.06 10.63 12.96
1 Year 15.06 10.63 13.01
</TABLE>
April 20, 2000:
BRIDGE announces that The Prime Group
and certain of its affiliates have agreed to
sell 3.9 million shares of common stock to
FLAG for $15.00 per share. BRIDGE stock
price climbs from $11.50 on April 20th to $13.25 on April 24th.
[LINE GRAPH]
MERRILL LYNCH 9
<PAGE> 14
PUBLIC MARKETING PERSPECTIVE
--------------------------------------------------------------------------------
BRIDGE Trading Volume Analysis Since IPO
[GRAPH]
PERCENT OF VOLUME WHICH TRADED IN STOCK PRICE RANGE
<TABLE>
<CAPTION>
SHARES TRADED PERCENT
<S> <C>
$10.00-$13.00 29.3%
$13.00-$16.00 29.9%
$16.00-$19.00 24.5%
$19.00-$22.00 8.3%
$22.00-$25.00 3.7%
$25.00-$28.00 3.3%
$28.00-$30.00 1.1%
</TABLE>
[GRAPH]
PERCENT OF VOLUME WHICH TRADED BELOW STOCK PRICE RANGE
<TABLE>
<CAPTION>
CUMULATIVE SHARES
TRADED PERCENT
<S> <C>
$13.00 29.3%
$16.00 59.1%
$19.00 83.6%
$22.00 91.9%
$25.00 95.6%
$28.00 98.9%
$30.00 100.0%
</TABLE>
-------------
Note: Volume traded based on daily closing stock prices.
MERRILL LYNCH 10
<PAGE> 15
--------------------------------------------------------------------------------
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
<PAGE> 16
BRIDGE VALUATION ANALYSIS
----------------------------------------------------------------------------
Summary of Consolidated Financial Information
(Dollars in Millions, Except per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31, Projected Year Ended December 31, CAGR
----------------------- --------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 (1999-2004)
---- ---- ---- ---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Resident Fees $30.1 $ 71.8 $ 98.9 $118.9 $137.8 $168.0 $210.7 $217.5 17.1%
Management Fees 0.1 0.3 0.4 0.9 1.9 2.3 2.3 2.3 42.9%
Development Fees 0.0 5.7 6.6 6.4 6.4 6.4 6.4 6.4 (0.6)%
----- ------ ------ ------ ------ ------ ------ ------ ----
Total Revenue 30.2 77.7 105.9 126.2 146.1 176.7 219.4 226.2 16.4%
Growth -- 157.0% 36.3% 19.2% 15.8% 21.0% 24.2% 3.1%
Net Operating Income 14.3 37.8 53.2 62.3 77.8 98.1 122.6 128.7 19.3%
Margin 47.4% 48.6% 50.2% 49.4% 53.2% 55.5% 55.9% 56.9%
EBITDAR 12.2 32.9 48.1 55.9 72.2 92.9 116.7 122.8 20.6%
Margin 40.2% 42.3% 45.4% 44.3% 49.4% 52.6% 53.2% 54.3%
EBITDA 5.2 15.0 22.5 27.8 41.1 53.9 61.7 65.4 23.7%
Margin 17.3% 19.3% 21.3% 22.1% 28.1% 30.5% 28.1% 28.9%
Net Income(a) 0.5 6.7 11.8 14.1 22.2 31.8 36.9 39.1 27.0%
Growth 1.7% 1172.5% 77.7% 19.3% 57.5% 43.0% 15.9% 5.9%
Diluted EPS(a) $0.07 $ 0.67 $ 0.95 $ 1.15 $ 1.66 $ 2.25 $ 2.55 $ 2.69 23.2%
Growth -- 837.7% 42.0% 20.9% 44.4% 35.7% 13.4% 5.4%
First Call Consensus
EPS -- -- -- 1.15 1.36 -- -- -- 25.0%
Adjusted EDITDAR(b) 12.0 27.0 41.1 48.6 63.9 84.2 108.0 114.0 22.7%
Margin 39.9% 37.6% 41.5% 40.9% 46.3% 50.1% 51.2% 52.4%
</TABLE>
--------------
Note: Financial projections for 2000-2002 based on BRIDGE management;
2003-2004 based on Merrill Lynch.
(a) Excludes Extraordinary Items.
(b) EDITDAR less Development Fees and Management Fees.
MERRILL LYNCH 11
<PAGE> 17
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
Valuation Methodologies
<TABLE>
<CAPTION>
- Merrill Lynch's valuation analysis is predicated upon the following principal methodologies:
------------------------------------------------------------------------------------------------------------------------------------
METHODOLOGY KEY ISSUES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Public Comparables Analysis - Analysis of relevant trading multiples and operating performance for
"comparable" companies within the assisted living universe
- Lack of a true comparable universe
------------------------------------------------------------------------------------------------------------------------------------
2. Net Asset Valuation - Performed by both investment bankers and appraisers
- Asset-by-asset approach that distinguishes between stabilized and
development assets
- Specific capitalization rate range designated to each stabilized asset
- Discounted cash flow analysis used to value development projects
------------------------------------------------------------------------------------------------------------------------------------
3. Comparable Acquisition Transaction Analysis - Analysis of relevant multiples paid in selected transactions involving
companies in the assisted living industry
- Limited universe of acquisitions of assisted living companies with a
"broad" portfolio of assets
------------------------------------------------------------------------------------------------------------------------------------
4. Corporate Discounted Cash Flow Analysis - Discounting unleveraged cash flows projected in the five-year
corporate model at the weighted average cost of capital
------------------------------------------------------------------------------------------------------------------------------------
5. Financial Sponsor Internal Rate of Return Analysis - Examination of the maximum price that can be paid by a financial buyer
based upon relevant constraints, including leverage and coverage ratios
and equity return requirements
------------------------------------------------------------------------------------------------------------------------------------
6. Premiums Paid Analysis - Examination of premiums paid in a selected number of going-private
transactions
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MERRILL LYNCH 12
<PAGE> 18
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
Summary Per Share Valuation by Methodology(a)
(Dollars in Millions, Except per Share Amounts)
[GRAPH]
Equity Value Per Share
<TABLE>
<S> <C>
52-Week Closing High/Low $15.06 - $10.63
Premiums Paid Analysis $17.25 - $14.00
Public Comparables Analysis $18.00 - $11.00
Net Asset Valuation
Merrill Lynch $15.50 - $ 9.00
Net Asset Valuation
BRIDGE Mgmt. (Stabilized Assets) $17.00 - $12.50
Comparable Acquisition Transaction Analysis $17.00 - $13.00
Discounted Cash Flow Analysis $18.50 - $12.75
Financial Sponsor IRR Analysis $16.00 - $12.00
Offer Price: $15.25
Current Price (6/27/00): $14.00
</TABLE>
------------------
(a) Projected financial information provided by BRIDGE management; assumes 9.9
million common shares, 0.9 million options at a weighted average exercise
price of $15.19, $99.0 million of short-term and long-term debt, $100.0
million of convertible debt, $6.9 million of cash and $287.4 million of debt
related to synthetic leases and the HRPT properties.
MERRILL LYNCH 13
<PAGE> 19
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
Premiums Paid Analysis in Going-Private Transactions
<TABLE>
<CAPTION>
PREMIUM TO SHARE PRICE
TRANSACTION -----------------------------------
DATE DATE TARGET VALUE OFFER 1 DAY PRIOR 1 MONTH PRIOR
ANNOUNCED EFFECTIVE NAME ($ IN MILL) PRICE TO OFFER TO OFFER
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5/8/97 11/4/97 GranCare $ 558.8 $10.00 29.0% 17.6%
5/8/97 11/4/97 Living Centers of America 1,365.1 40.50 11.0% 16.1%
7/3/97 9/26/97 Krystal Co 145.7 14.50 132.0% 176.2%
7/9/97 9/23/97 Control Data Systems Inc 176.6 20.25 29.1% 35.0%
7/21/97 2/27/98 Zilog 389.0 25.00 11.7% 22.0%
8/12/97 3/3/98 LIN Television 2,059.6 49.07 2.5% 6.7%
8/14/97 12/29/97 Tuesday Morning 337.4 25.00 22.7% 17.6%
12/22/97 5/21/98 Dynatech 762.9 47.75 29.9% 25.0%
2/11/98 6/10/98 MTL Inc 250.1 40.00 37.9% 56.5%
3/17/98 7/31/98 BET Holdings [a] 462.3 63.00 4.0% 17.5%
7/28/98 6/18/99 CompDent Corp 196.6 15.00 11.1% 3.0%
7/29/98 9/11/98 E-Z Serve 107.9 0.60 37.1% 37.1%
8/13/98 12/31/98 Envirotest Systems Corp 640.9 17.25 15.0% (4.8%)
3/24/99 11/4/99 Knoll (Warburg Pincus) [a] 490.8 25.00 63.9% 30.7%
3/25/99 5/10/99 Sheridan Healthcare 131.2 9.25 8.8% 17.5%
5/18/99 11/30/99 O'Sullivan Industries Holdings 310.7 19.25 10.8% 19.8%
5/25/99 4/7/00 TNP Enterprises Inc 1,021.1 44.00 25.9% 41.4%
6/16/99 5/30/00 TSI 157.4 12.00 17.8% 30.6%
6/28/99 12/7/99 Big Flower Holdings 1,792.8 36.75 12.0% 18.1%
7/12/99 12/17/99 Happy Kids Inc 119.5 11.50 9.5% (17.9%)
7/22/99 3/10/00 White Cap Industries 239.0 16.50 49.2% 50.0%
8/24/99 2/2/00 Aavid Thermal Technologies 252.9 25.50 29.1% 27.1%
10/6/99 3/6/00 Conso International Corp [a] 106.4 9.00 77.8% 58.2%
11/4/99 2/15/00 Cleveland Indians Baseball 115.5 22.66 9.9% 26.8%
11/22/99 2/2/00 Garden Ridge Corp 108.6 11.50 58.6% 70.4%
12/9/99 3/29/00 Gleason 245.1 23.00 27.8% 31.0%
12/14/99 3/14/00 Transportation Technologies 412.8 20.00 29.0% 39.1%
12/23/99 5/16/00 Wilmar Industries 204.1 18.25 30.4% 17.3%
1/18/00 Pending Dayton Superior Corp 292.9 27.00 46.4% 66.2%
1/19/00 Withdrawn Sun International Hotels [a] 378.7 24.00 24.3% 30.3%
1/23/00 Pending Echelon International Corp 389.0 34.00 42.0% 34.3%
1/31/00 Pending Jason Inc [a] 314.8 11.25 57.9% 55.2%
3/6/00 Pending Data Transmission Network Corp 477.7 29.00 16.0% 52.6%
3/23/00 Pending US Can 538.0 21.00 6.0% 62.3%
4/24/00 Pending Cherry Corp [a] 144.5 18.75 44.2% 22.0%
6/5/00 Pending Buffets Inc 596.8 13.85 14.2% 27.4%
</TABLE>
<TABLE>
<CAPTION>
SUMMARY DATA IMPLIED BRIDGE OFFER PRICE (b)
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum 132.0% 176.2% Maximum $24.94 $35.21
Mean 30.1% 34.4% Mean 13.99 17.14
Median 26.9% 29.0% Median 13.64 16.45
Minimum 2.5% (17.9%) Minimum 11.02 10.47
</TABLE>
---------------------------------
Note: Based on Securities Data Corporation dated 6/21/00. Includes all domestic
going private transactions since 5/1/97 with transaction values between $100
million and $2.0 billion.
(a) Represent minority squeeze-out transactions.
(b) Based on BRIDGE stock prices of $10.75 and $12.75 on April 19th and March
20th, respectively.
MERRILL LYNCH 14
<PAGE> 20
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
Public Comparables Analysis
[BAR GRAPHS]
<TABLE>
<CAPTION>
2001E P/E Multiple 2000E EBITDAR Multiple
<S> <C> <C> <C>
ACR 25.4x ACR 14.1x
SNRZ 25.0x ALI 13.9x
CSU 8.5x SNRZ 12.2x
BLCI 8.4x ESC 11.5x
SRS 7.6x BLCI 11.0x
ALI NM CSU 5.0x
ESC NM SRS NA
Mean (a) = 16.6x Mean (a) = 11.3x
<CAPTION>
2000E Adjusted EBITDAR Multiple (b) 2000E EBITDA Multiple
<S> <C> <C> <C>
ACR 16.1x ALI 20.6x
ALI 15.3x ACR 17.1x
SNRZ 14.8x ESC 14.1x
BLCI 12.7x SNRZ 12.6x
ESC 12.7x BLCI 11.9x
CSU 6.2x CSU 5.0x
SRS NA SRS NA
Mean (a) = 13.0x Mean (a) = 13.9x
</TABLE>
--------------
Note: Stock prices as of June 27, 2000. Financial projections and EPS estimates
for comparable companies based on Wall Street equity research. BRIDGE based on
projections provided by management.
(a) Mean excludes BRIDGE.
(b) EBITDAR excludes development and management fees.
MERRILL LYNCH 15
<PAGE> 21
VALUATION ANALYSIS
-------------------------------------------------------------------------------
Public Comparables Analysis Valuation Summary(a)
(Dollars in Millions, Except per Share Amounts)
[GRAPH]
<TABLE>
<CAPTION>
Equity Value Per Share
----------------------
<S> <C>
11.0x-12.0x
2000E EBITDAR of $55.9mm $19.00/$13.75
12.5x-14.0x
Adjusted 2000E EBITDAR of $48.6mm $20.00/$13.00
11.5x-14.0x
2000E EBITDA of $27.9mm $19.75/$13.00
7.0x-15.0x
2001E Street EPS of $1.36 $20.50/$9.50
7.0x-15.0x
2001E Management EPS of $1.66 $25.00/$11.50
</TABLE>
-----------
(a) Projected financial information provided by BRIDGE management; assumes 9.9
million common shares, 0.9 million options at a weighted average exercise
price of $15.19, $99.0 million of short-term and long-term debt, $100.0
million of convertible debt, $6.9 million of cash and $287.4 million of
debt related to synthetic leases and the HRPT properties.
MERRILL LYNCH 16
<PAGE> 22
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
Net Asset Valuation Overview
(Dollars in Millions, Except per Share Amounts)
<TABLE>
<CAPTION>
DEVELOPMENT AT DEVELOPMENT BASED ON DCF OF
COST THIRD PARTY APPRAISALS DEVELOPMENT
------------------- --------------------------- -----------------
HIGH LOW HIGH LOW HIGH LOW
-------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
VALUE OF STABILIZED OPERATIONS:
2000E Adjusted Net Operating Income $ 50.4 $ 50.4 $ 50.4 $ 50.4 $ 50.4 $ 50.4
Blended Capitalization Rate 9.1% 10.1% 9.1% 10.1% 9.1% 10.1%
------- ------- ------- ------- ------- -------
Implied Enterprise Value of Stabilized Properties $ 555.7 $ 500.5 $ 555.7 $ 500.5 $ 555.7 $ 500.5
Less: Debt Associated with Stabilized Properties (386.4) (386.4) (386.4) (386.4) (386.4) (386.4)
------- ------- ------- ------- ------- -------
Implied Equity Value of Stabilized Properties $ 169.3 $ 114.0 $ 169.3 $ 114.0 $ 169.3 $ 114.0
Value of Development Properties 50.6 50.6 46.4 46.4 66.1 66.1
Income Tax Positions ($6.0 mm of NOLs) 1.6 1.6 1.6 1.6 1.6 1.6
Below Market Debt ($80.0 mm) 9.4 9.4 9.4 9.4 9.4 9.4
Less: Face Value of Convertible Debt (100.0) (100.0) (100.0) (100.0) (100.0) (100.0)
Less: Short-term Debt (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)
Plus: Cash and Cash Equivalents 6.9 6.9 6.9 6.9 6.9 6.9
------- ------- ------- ------- ------- -------
Total Equity Value $ 137.7 $ 82.5 $ 133.5 $ 78.3 $ 153.2 $ 97.9
Total Common Shares in Millions(a) 9.9 9.9 9.9 9.9 9.9 9.9
------- ------- ------- ------- ------- -------
TOTAL EQUITY VALUE PER SHARE $ 13.98 $ 8.37 $ 13.55 $ 7.94 $ 15.55 $ 9.94
Total Equity Value per Share With Developments at:
Cost + 10% $ 14.49 $ 8.89 -- -- -- --
Cost + 20% $ 15.01 $ 9.40 -- -- -- --
</TABLE>
-----------------
(a) Assumes that 0.9 million of options at an exercise price of $15.19 are
out-of-the-money.
MERRILL LYNCH 17
<PAGE> 23
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
Merrill Lynch Net Asset Valuation - Stabilized Properties
(Dollars in Millions)
<TABLE>
<CAPTION>
ESTIMATED DEBT @ 3/31/00
------------------------------
CAPITALIZATION IMPLIED EST. IMPLIED
2000E RATE ENTERPRISE VALUE CONSOL. SYNTHETIC DEBT. @ EQUITY VALUE
-------------- ------------------ --------------
ADJ. LOW HIGH LOW HIGH MORTGAGE LEASE HRPT TOTAL HIGH LOW
FACILITY NOI RATE RATE RATE RATE DEBT DEBT PROPERTIES DEBT VALUE VALUE
-------------------------------- ------ ------ ------ -------- ------- --------- --------- ---------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Benchmark of Hoffman Est. $ 3.0 9.25% 10.25% $ 32.0 $ 28.9 -- $ 14.3 -- $14.3 $ 17.8 $ 14.7
Brendenwood 1.7 9.75% 10.75% 17.4 15.8 -- 11.8 -- 11.8 5.7 4.0
Classic 2.7 9.50% 10.50% 28.3 25.6 -- 20.6 -- 20.6 7.8 5.1
Devonshire 4.8 8.50% 9.50% 56.7 50.7 $ 33.0 -- -- 33.0 23.7 17.7
Edina 2.2 8.75% 9.75% 25.3 22.7 15.0 -- -- 15.0 10.2 7.6
Gables @ Brighton 1.0 10.25% 11.25% 9.7 8.8 -- -- $ 9.0 9.0 0.6 (0.2)
Gables @ Farmington 2.5 9.50% 10.50% 26.3 23.8 -- 18.5 -- 18.5 7.8 5.3
Hallmark 6.9 9.00% 10.00% 76.9 69.2 -- -- 59.9 59.9 17.0 9.3
Hawthorn 3.0 9.00% 10.00% 33.1 29.8 13.0 -- -- 13.0 20.1 16.8
Heritage 3.8 8.50% 9.50% 45.2 40.4 32.0 -- -- 32.0 13.2 8.4
Kenwood at LakeView 1.7 9.50% 10.50% 18.2 16.4 -- 16.8 -- 16.8 1.4 (0.3)
Berkshire of Castleton (Oakleaf) 0.9 9.50% 10.50% 9.0 8.1 -- 4.8 -- 4.8 4.2 3.3
Park Place 1.2 9.50% 10.50% 12.4 11.2 -- -- 11.0 11.0 1.4 0.2
Ponce de Leon 1.6 9.00% 10.00% 17.2 15.5 -- 12.1 -- 12.1 5.1 3.4
River Bay 3.2 9.50% 10.50% 33.6 30.4 -- 27.8 -- 27.8 5.9 2.7
Springs of East Mesa 1.5 9.00% 10.00% 16.8 15.1 -- -- 13.8 13.8 3.0 1.3
The Atrium 3.0 9.00% 10.00% 33.8 30.4 -- 24.2 -- 24.2 9.7 6.3
The Chatfield 1.3 10.00% 11.00% 13.0 11.8 -- 11.8 -- 11.8 1.2 (0.0)
Willows 0.6 9.00% 10.00% 6.4 5.8 6.0 -- -- 6.0 0.4 (0.2)
Woodside Terrace 3.9 8.75% 9.75% 44.4 39.8 -- 31.2 -- 31.2 13.2 8.7
----- ----- ----- ------ ------ ------ ------- ----- ------ ------ ------
Total $50.4 9.1% 10.1% $555.7 $500.5 $ 99.1 $ 193.6 $93.8 $386.4 $169.3 $114.0
</TABLE>
MERRILL LYNCH 18
<PAGE> 24
TRANSACTION OVERVIEW
--------------------------------------------------------------------------
BRIDGE Management Net Asset Valuation - Stabilized Properties
(Dollars in Millions)
<TABLE>
<CAPTION>
Variance
-------------------
Capitalization Implied Merrill Lynch less
Rate Enterprise Value BRIDGE Mgmt
2000E ----------------- ------------------ --------------------
Adj. Low High Low High Low High
Facility NOI Rate Rate Rate Rate Rate Rate
-------- ------ ------ ------- ------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Benchmark of Hoffman Est.(a) $3.0 8.50% 8.75% $34.9 $33.9 ($2.8) ($5.0)
--------------------------------------------------------------------------------------------------------------------
Brendenwood 1.7 9.75% 10.75% 17.4 15.8 $0.0 $0.0
Classic 2.7 9.75% 10.75% 27.6 25.0 $0.7 $0.6
Devonshire 4.8 8.50% 8.75% 56.7 55.1 $0.0 ($4.3)
Edina 2.2 8.50% 8.75% 26.0 25.3 ($0.7) ($2.6)
Gables @ Brighton 1.0 9.75% 10.75% 10.1 9.2 ($0.5) ($0.4)
Gables @ Farmington 2.5 9.75% 10.75% 25.6 23.3 $0.7 $0.6
--------------------------------------------------------------------------------------------------------------------
Hallmark(a) 6.9 8.00% 8.25% 86.5 83.9 ($9.6) ($14.7)
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Hawthorn(a) 3.0 8.50% 8.75% 35.1 34.1 ($1.9) ($4.3)
--------------------------------------------------------------------------------------------------------------------
Heritage 3.8 8.50% 8.75% 45.2 43.9 $0.0 ($3.5)
Kenwood at Lake View 1.7 9.75% 10.75% 17.7 16.0 $0.5 $0.4
Berkshire of Castleton (Oakleaf) 0.9 9.75% 10.75% 8.7 7.9 $0.2 $0.2
Park Place 1.2 9.75% 10.75% 12.1 10.9 $0.3 $0.3
Ponce de Leon 1.6 8.50% 8.75% 18.2 17.7 ($1.0) ($2.2)
River Bay 3.2 9.75% 10.75% 32.8 29.7 $0.9 $0.7
Springs of East Mesa 1.5 9.75% 10.75% 15.5 14.1 $1.3 $1.1
--------------------------------------------------------------------------------------------------------------------
The Atrium(a) 3.0 8.50% 8.75% 35.8 34.8 ($2.0) ($4.3)
--------------------------------------------------------------------------------------------------------------------
The Chatfield 1.3 8.50% 8.75% 15.3 14.8 ($2.3) ($3.0)
Willows 0.6 8.50% 8.75% 6.8 6.6 ($0.4) ($0.8)
--------------------------------------------------------------------------------------------------------------------
Woodside Terrace(a) 3.9 8.50% 8.75% 45.7 44.4 ($1.3) ($4.6)
--------------------------------------------------------------------------------------------------------------------
------- ------ ------- -------
Total $50.4 8.8% 9.2% $573.7 $546.4 ($18.0) ($45.9)
------- ------ ------- -------
</TABLE>
(a) Properties with the largest implied enterprise value variance between
Merrill Lynch and BRIDGE management
MERRILL LYNCH 19
<PAGE> 25
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------
Net Asset Valuation - Development Assets
(Dollars in Millions)
<TABLE>
<CAPTION>
INVESTMENT
INVESTMENT CERTIFICATE AT:
-------------------------------------------- THIRD-PARTY MERRILL LYNCH
PROPERTY COST COST + 10% COST + 20% APPRAISAL(a) DCF ANALYSIS(c)
--------------------------- -------------------------------------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Battery Park $ 8,168,958 $ 8,985,854 $ 9,802,750 $ 6,347,135 $12,980,770
Raleigh 5,550,849 6,105,934 6,661,019 3,030,940 8,116,370
Glen Ellyn 4,119,043 4,530,947 4,942,852 4,279,708 10,974,560
Columbus 1,436,390 1,580,029 1,723,668 4,835,647 2,008,645
Lisle 2,160,000 2,376,000 2,592,000 3,473,015 4,950,757
Creve Coeur 1,109,987 1,220,986 1,331,984 1,109,987(b) 1,392,409
Mt. Lebanon 9,209,130 10,130,043 11,050,956 1,660,985 4,981,736
Southfield 8,715,943 9,587,537 10,459,132 8,873,760 9,258,354
Austin 5,475,817 6,023,399 6,570,980 8,123,865 6,742,150
Huntley 3,580,078 3,938,086 4,296,094 3,580,078(b) 3,580,078(b)
Houston 1,095,617 1,205,179 1,314,740 1,095,617(b) 1,095,617(b)
------------------------------------------------ ----------- -----------
TOTAL VALUE $50,621,812 $55,683,993 $60,746,175 $46,410,735 $66,081,445
TOTAL VALUE PER SHARE (9.9 MM) $5.14 $5.65 $6.17 $4.71 $6.71
</TABLE>
--------------
(a) Present value of the implied equity value (appraised property
value less BRIDGE's projections for total debt balance at stabilization)
discounted at 15%.
(b) Based on value of investment certificate at cost.
(c) Discounted cash flow analysis assumes a pre-stabilization discount rate of
25% and a post-stabilization discount rate of 15%. Exit capitalization rates
at 2004 are equal to those given in third-party property appraisals.
MERRILL LYNCH 20
<PAGE> 26
BRIDGE VALUATION ANALYSIS
--------------------------------------------------------------------------------
Comparable Acquisition Transaction Analysis
(Dollars in Millions)
<TABLE>
<CAPTION>
NET
DATE DATE OFFER
ANNOUNCED EFFECTIVE ACQUIROR TARGET CONSIDERATION VALUE(a)
--------- --------- ---------------------------- ----------------------- ------------- --------
<S> <C> <C> <C> <C> <C>
2/7/99 PENDING Capital Senior Living ILM Senior Living (f) 100% Cash $155.0
1/4/99 10/6/99 Alterra Healthcare HCR Manor Care 100% Cash 200.0
10/19/98 5/14/99 Sunrise Assisted Living Karrington Health 100% Stock 89.7
4/20/98 9/15/98 Kapson Senior Quarters Atria Communities 100% Cash 483.0
10/2/97 4/30/98 Prometheus Asstd. Living Kapson Senior Quarters 100% Cash 113.0
7/31/97 10/23/97 Alternative Living Services Sterling House 100% Stock 122.7
5/30/97 7/3/97 Whitehall Street Real Estate Integrated Living Comm. 100% Cash 79.7
<CAPTION>
OFFER AS A
ADJUSTED FORWARD FORWARD PREMIUM
DATE DATE TRANS. TRANS. EBITDAR EBITDA TO PRICE
ANNOUNCED EFFECTIVE VALUE(b) VALUE(c) MULT.(d)(e) MULT.(d) 1 DAY PRIOR
--------- --------- -------- -------- ----------- -------- -----------
<S> <C> <S> <C> <C> <C> <C>
2/7/99 PENDING $155.6 $155.6 9.4x NA NM
1/4/99 10/6/99 200.0 200.0 NA NA NA
10/19/98 5/14/99 186.1 265.1 12.3 13.7 43.4%
4/20/98 9/15/98 597.8 637.8 15.8 16.2 2.5%
10/2/97 4/30/98 252.7 336.6 10.8 11.1 (0.9)%
7/31/97 10/23/97 151.9 344.9 11.1 12.9 30.3%
5/30/97 7/3/97 102.8 220.7 17.6 * NA 26.9%
</TABLE>
<TABLE>
<CAPTION>
SUMMARY DATA
-------------------------------------------------
<S> <C> <C> <C>
MAXIMUM 17.6x 16.2x 43.4%
MEAN 11.9 13.5 20.5%
MEDIAN 11.1 13.3 26.9%
MINIMUM 9.4 11.1 (0.9)%
</TABLE>
<TABLE>
<CAPTION>
Implied BRIDGE Offer Price(g)
-------------------------------------------------
<S> <C> <C> <C>
MAXIMUM $48.43 $25.47 $15.42
MEAN 18.47 18.28 12.95
MEDIAN 14.35 17.80 13.64
MINIMUM NM 12.06 10.66
</TABLE>
-----------------------------
* Excluded from mean and median calculations.
(a) Net Offer Value = Fully Diluted Shares Outstanding x Offer Price.
(b) Transaction Value = Net Offer Value + Short-Term Debt + Long-Term Debt +
Minority Interest + Preferred Stock - Cash.
(c) Adjusted Transaction Value = Transaction Value + (10.0 x Latest Quarter's
Annualized Lease Expense).
(d) Target's financial projections based on Wall Street equity research, except
for ILM Senior Living, which is based on projections used by Cohen & Steers
Capital Advisors in its fairness opinion delivered to the Board of ILM
Senior Living.
(e) Multiple based on Adjusted Transaction Value.
(f) Based on latest revised offer on April 18, 2000.
(g) Based on BRIDGE management 2000E EBITDAR and EBITDA of $55.9 million and
$27.8 million, respectively; also based on BRIDGE's stock price on April 29,
2000, of $10.75.
MERRILL LYNCH 21
<PAGE> 27
BRIDGE VALUATION ANALYSIS
-------------------------------------------------------------------------------
Discounted Cash Flow Analysis
(Dollars in Millions, Except per Share Amounts)
<TABLE>
<CAPTION>
A + B - C = D
Discount DCF Net Debt
Rate for Total Enterprise Value Value for (Includes Total Equity Value
Stabilized for Stabilized Assets Dvlpmnt. Option ------------------------------
Assets 10.0x 10.5x 11.0x Assets Proceeds) 10.0x 10.5x 11.0x
----------- ------------------------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12.0% $568.8 $589.5 $610.3 $66.1 $465.7 $169.1 $189.9 $210.6
12.5% 557.6 577.9 598.2 66.1 465.7 157.9 178.2 198.5
13.0% 546.7 566.5 586.4 66.1 465.7 147.0 166.9 186.7
13.5% 536.0 555.5 574.9 66.1 465.7 136.4 155.8 175.2
14.0% 525.7 544.7 563.6 66.1 465.7 126.0 145.0 164.0
<CAPTION>
Discount Total Equity Value Implied 2000E EBITDAR
Rate for per Share (a) Multiple (b)
Stabilized ------------------------- -------------------------
Assets 10.0x 10.5x 11.0x 10.0x 10.5x 11.0x
----------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
12.0% $15.73 $17.66 $19.59 11.4x 11.7x 12.1x
12.5% 14.69 16.57 18.46 11.2 11.5 11.9
13.0% 13.75 15.52 17.36 11.0 11.3 11.7
13.5% 12.68 14.49 16.29 10.8 11.1 11.5
14.0% 11.72 13.48 15.25 10.6 10.9 11.3
</TABLE>
---------------------------------
Note: BRIDGE projections discounted 5 years.
(a) Based on 10.8 total shares (9.9 million common shares and 0.9 million
common stock options). Option proceeds included in net debt.
(b) Based on $55.9 million of 2000E EBITDAR.
MERRILL LYNCH 22
<PAGE> 28
BRIDGE VALUATION ANALYSIS
-------------------------------------------------------------------------------
Transaction Overview - Equity Return and Pro Forma Credit Statistics
<TABLE>
<CAPTION>
OFFER PRICE
------------------------------------------
$13.00 $14.00 $15.00 $16.00 $17.00
------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Fortress Investment (in mm)(a)(b) $134.1 $140.8 $147.6 $154.3 $161.1
5-YEAR EQUITY RETURN @ AN EBITDAR MULTIPLE OF:
10.0x 21.4% 21.0% 20.5% 20.0% 19.5%
10.5x 23.8% 23.3% 22.8% 22.3% 21.8%
11.0x 26.0% 25.5% 25.0% 24.5% 24.0%
11.5x 28.0% 27.5% 27.0% 26.5% 26.0%
12.0x 30.0% 29.5% 28.9% 28.4% 27.9%
COVERAGE AND LEVERAGE STATISTICS:(c)
2000E EBITDAR/Fixed Charges 1.64x 1.64x 1.64x 1.64x 1.64x
Total Adjusted Debt/2000E EBITDAR 7.2x 7.2x 7.2x 7.2x 7.2x
Total Adjusted Debt/Total Adjusted Book Cap. 68.1% 68.1% 68.1% 68.1% 68.1%
</TABLE>
(a) Assumes that Fortress has spent $60 million on the initial purchase of
shares from the Prime Group and its affiliates and will pay for the purchase
of the remaining shares of BRIDGE common stock and options with equity
capital.
(b) Total Fortress investment is calculated as the price for the Prime Group's
shares ($60 million) + (offer value x 5.9 million common shares and 0.9
million options) less option proceeds ($13.8 million).
(c) Merrill Lynch's analysis assumes that no new debt is issued in order to
finance the transaction and that Capital Z converts its subordinated notes
into equity at the offer price.
MERRILL LYNCH 23
