SOUTHMINSTER, INC. DISCLOSURE STATEMENT

SOUTHMINSTER, INC.

DISCLOSURE STATEMENT

March 1, 2024

In accordance with Chapter 58, Article 64 of the North Carolina General

Statutes of the State of North Carolina:

* This Disclosure Statement may be delivered

until revised, but not after July 30, 2025.

* Delivery of the Disclosure Statement to a

contracting party before execution of a

contract for continuing care is required.

* This Disclosure Statement has not been

reviewed or approved by any government

agency or representative to ensure accuracy

or completeness of the information set out.

Southminster, Inc.

8919 Park Road

Charlotte, North Carolina 28210

SOUTHMINSTER, INC.

DISCLOSURE STATEMENT

March 1, 2024

TABLE OF CONTENTS

I. Introduction and Information 2-8

List of Officers and Directors 4-6

II. Policies Relating to Admissions, Cancellations, and Transfers 8-14

Admissions 8-9

Rescissions/Cancellations/Termination/Refunds 9-12

Moves/Transfers 12-13

Marriages 14

Inability to Pay 14

III. Services Provided Under the Residence and Services Agreement 15-18

IV. Information Relating to Fees 18-24

Ten Percent Deposit 18

Entrance Fees 18-20

Monthly Service Fees 20-21

Health Center Fees and Charges 21-22

Historic Changes in Monthly Fees for the Previous Five Years 23-24

V. Financial Information Relating to Southminster 25-27

VI. Other Material Information 27-28

Attachments

Audited Financial Statements 1

Five Year Forecast 2

Comparison of Financial Results 3

Residence and Services Agreement 4

Southminster’s Mission Statement 5

Acknowledgement of Receipt of Disclosure Statement 6

Interim Financial Statements (unaudited) 7

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DISCLOSURE STATEMENT

SOUTHMINSTER, INC.

I. INTRODUCTION AND INFORMATION

A. Narrative Description of the Organization and its Operations

Southminster, Inc. (“Southminster”) is a corporation established to construct and

operate a continuing care retirement community (the “community”) located at 8919

Park Road, Charlotte, North Carolina 28210, with mailing address and additional

contact information as follows:

Southminster, Inc. Telephone Number: (704) 551-6800

8919 Park Road Fax Number: (704) 551-6868

Charlotte, NC 28210 Marketing Office: (704) 554-0141

B. Facilities of Southminster, Inc.

Southminster is a single-site facility located on a 27-acre tract at 8919 Park Road,

Charlotte, NC 28210. Independent Living residences at Southminster consist of 29

one-story duplex/triplex cottages, a main building housing 229 apartments (two of

which are used as guest rooms), the 30-unit South Terraces and 36-unit North

Terraces. The main building also includes dining rooms, the main kitchen, common

rooms for activities and social interactions, a library, wellness and aquatic center,

administrative offices, underground parking, and all the necessary support service

areas for the normal functioning of the community (e.g., maintenance, housekeeping,

resident storage spaces). Southminster has combined some residences in its original

building to make larger residences and continues to look for opportunities to do so.

Southminster’s replacement Health Center is housed in its main building and includes

25 assisted living licensed beds (all private, one-bedroom suites) and 60 nursing

licensed beds (all private studios). Southminster has completed construction of its

replacement health center, both phases of independent living “Terraces”, and most

recently, completed renovating its previous health center space to house 20 more

independent living apartments. See further discussion of this project in Section VI.C.,

Campus Expansion.

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C. Affiliations

1. Sponsors of Southminster, Inc.

Southminster was founded by and continues to have an affiliation with:

Christ Episcopal Church Myers Park Baptist Church

1412 Providence Road 1900 Queens Road

Charlotte, NC 28207 Charlotte, NC 28207

Southminster is the direct product of the interest of these two churches and

their concern for providing a retirement alternative for members of their

congregations and other seniors in the Charlotte area. The initial funds used

for start-up related costs were raised primarily from the membership of these

two churches.

One associate minister from each of the two sponsoring churches serve on

Southminster’s Board of Directors as ex officio members, with full voting

rights. Although the Directors need not be members of one of the sponsoring

churches, the Board’s intention is to have not more than three non-members

serving on the board, and the governing bodies of the two churches must ratify

those individuals nominated to serve as Directors.

The sponsoring churches have no responsibility for the financial and

contractual obligations of Southminster, Inc.

2. Trade Associations

Southminster is a member in good standing of LeadingAge and its state

chapter, LeadingAge NC.

D. Accreditation and Licensure Authority

Southminster is fully authorized to operate in North Carolina. The independent living

component of the community is regulated by the North Carolina Department of

Insurance in accordance with Chapter 58, Article 64 of the General Statutes of the

State of North Carolina.

The Assisted Living part of the community consists of 25 Adult Care Beds. The

Skilled Nursing part of the community consists of 60 Skilled Nursing Beds. The

Department of Health and Human Services issues an annual combined license

through the Division of Health Service Regulation. Southminster operates a licensed

Homecare Agency through the Division of Health and Human Services. The

Division of Health Service Regulation annually renews Homecare Services, Nursing

Care and In-home Aide services.

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Southminster is fully licensed and authorized to operate under the full continuum of

care services as published in this Disclosure Statement (refer to Section III below).

E. Legal Description

Southminster, Inc. is a non-profit corporation organized under the laws of the state of

North Carolina. Directors serve on a non-paid basis and have no ownership

relationship with the Corporation. There are no stockholders. The Corporation is

exempt from the payment of federal income tax under the provisions of Section

501(c)(3) of the Internal Revenue Code and is classified as a public charity under

Section 509a(1) of the Internal Revenue Code.

F. Identification and Background of Officers and Directors of Southminster

The names, business addresses, and professional occupations of the Officers and

Directors of Southminster, Inc. (as of February 26, 2024) are listed as follows:

OFFICERS OF THE CORPORATION

OFFICE

NAME AND ADDRESS

PROFESSIONAL AFFILIATION

Chairman of the

Board

Board Member

The Reverend Robin Coira

6928 Chatford Lane

Charlotte, NC 28210

704-552-2652

Retired Executive Minister

Myers Park Baptist Church

Vice Chair,

Treasurer

Board Member

Mr. Charles H. Conner, Jr.

1546 High Street

Charlotte, NC 28211

704-577-2682

Retired Investment Banker

Vice Chair, Secretary

Board Member

Mrs. Susan R. Salvin

1819 Queens Road

Charlotte, NC 28207

704-516-5497

Retired, Former Owner of Salvin

Dental Specialties, Inc.

Vice Chair

Board Member

Ms. MaryAnn Largen

125 Huntley Place

Charlotte, NC 28207

704-564-8017

Retired Business Owner &

Pharmacist

Vice Chair

Board Member

Mr. Frank L. Horne, Jr.

4115 Silver Bell Drive

Charlotte, NC 28236

704-661-8785

President

Gas-Fired Products, Inc.

President and

Chief Executive

Officer

Staff Member

Mr. Benjamin A. Gilchrist

8919 Park Road

Charlotte, NC 28210

704-551-7101

President and Chief Executive

Officer, Southminster, Inc.

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Assistant Secretary

Staff Member

Mr. Arnoldo Marquez

8919 Park Road

Charlotte, NC 28210

704-551-7115

Chief Operating Officer

Southminster, Inc.

Assistant Treasurer

Staff Member

Mrs. Kenda M. Laughey

8919 Park Road

Charlotte, NC 28210

704-930-7105

Chief Financial Officer

Southminster, Inc.

BOARD OF DIRECTORS ROSTER

CLASS

NAME AND ADDRESS

PROFESSIONAL AFFILIATION

Ex Officio

Rev. Carrie Veal

Myers Park Baptist Church

1900 Queens Road

Charlotte, NC 28207

704-334-7232

Executive Minister

Myers Park Baptist Church

2025

Mrs. Suzanne G. Bledsoe

1437 Myers Park Drive

Charlotte, NC 28207

704-517-3654

Retired, Merrill Lynch Private

Wealth Management

Chair

Emeritus

(Non-voting)

Mr. H. Tate Bowers

8919 Park Road, Apt. 3021

Charlotte, NC 28210

980-201-5931

Former Chief Executive Officer

Bowers Fibers, Inc.

Chair

Emeritus

(Non-voting)

Mr. Richard N. Brigden

8919 Park Road, Apt. 277

Charlotte, NC 28210

704-551-6977

Retired Chief Financial Officer

Ruddick Corporation

Founding

Director

(Non-voting)

Mr. R. Stuart Dickson

8919 Park Road, Apt. 7011

Charlotte, NC 28210

704-930-7241

Retired Chairman of the Board

Ruddick Corporation; Chairman of

the Board, Dickson Foundation

Ex Officio

The Rev. Lisa Saunders

Christ Episcopal Church

1412 Providence Road

Charlotte, NC 28207

704-714-6952

Associate Rector

Christ Episcopal Church

Chair

Emeritus

(Non-voting)

Mr. Robert D. Thomason

2129 Queens Road West

Charlotte, NC 28207

704-904-2900

Pilot, Retired Former Owner of

Advantage Aviation Aircraft

Services

2024

The Reverend Robin Coira

6928 Chatford Lane

Charlotte, NC 28210

704-552-2652

Retired Executive Minister

Myers Park Baptist Church

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2025

Mr. Charles H. Conner, Jr.

1546 High Street

Charlotte, NC 28211

704-577-2682

Retired Investment Banker

2026

Mr. Larry J. Dagenhart

8919 Park Road, Apt. 177

Charlotte, NC 28210

704-551-6877

Retired Managing Partner

McGuire Woods

2026

Mr. Frank L. Horne, Jr.

4115 Silver Bell Drive

Charlotte, NC 28236

704-661-8785

President

Gas-Fired Products, Inc.

Chair

Emeritus

(Non-voting)

Mr. Joseph B. C. Kluttz

2900 Saint Andrews Lane

Charlotte, NC 28205

704-277-8470

Retired Partner

K&L Gates, LLP

Chair

Emeritus

(Non-voting)

Mrs. Hope Parrott

2207 I’On Avenue

Sullivans Island, SC 29482

704-641-2610

Community Volunteer

2025

Mr. Edward T. Hinson, Jr.

525 N. Tryon St. Suite 700

Charlotte, NC 28202

704-372-9870

Attorney

James, McElroy & Diehl

2024

Mrs. Susan R. Salvin

1819 Queens Road

Charlotte, NC 28207

704-516-5497

Retired, Former Owner of Salvin

Dental Specialties, Inc.

2024

Ms. Gloria Gibson

3115 Ingelow Lane

Charlotte, NC 28226

704-231-3452

Retired Human Resources

Professional

2025

Mr. Jack Cook

8919 Park Road, Apt. 2035

Charlotte, NC 28210

980-201-5955

Retired President and CEO

The Health Alliance, Cincinnati,

Ohio

2026

Ms. MaryAnn Largen

125 Huntley Place

Charlotte, NC 28207

704-564-8017

Retired Business Owner &

Pharmacist

2024

Mr. Roy L. Smart, III

2039 Queens Rd. East

Charlotte, NC 28207

704-335-9031

Partner

Parker Poe Adams & Bernstein

LLP

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NOTES RELATING TO “BOARD OF DIRECTORS ROSTER”

• The “Ex Officio” Directors are voting members serving on the Southminster, Inc. Board by

virtue of their leadership positions as Clergy of Myers Park Baptist Church and Christ

Episcopal Church.

• The “Founding Director” continues to serve on the Board as a non-voting member by

virtue of the Board’s desire to show its respect and sincere appreciation for the leadership

given by this individual at the inception and during the critical early years of South-

minster’s existence.

• The “Chair Emeritus” Directors continue to serve on the Board as non-voting members in

recognition of their years of service as members of the Board of Directors.

G. President and Chief Executive Officer

It is the intent of the Board of Directors of Southminster to have an experienced and

professionally qualified Chief Executive Officer to be responsible for the daily

operation of the facility. On May 1, 2019, Benjamin A. Gilchrist was appointed

President and CEO by Southminster’s Board of Directors. This followed an

extensive national search process managed by an executive recruitment firm, due to

the retirement of the previous CEO. Mr. Gilchrist has extensive experience working

with non-profit retirement communities, as well as for-profit skilled nursing

providers. Prior to being appointed as CEO at Southminster, Mr. Gilchrist served for

seven years as Vice President of Operations at Friendship Senior Options, a non-

profit provider of senior services and housing in Illinois. Prior to that Mr. Gilchrist

served as President of Springfield Masonic Home, a non-profit CCRC in Springfield,

Ohio and Vice President of Operations for Vrable Health Care Company in

Columbus, Ohio, a for-profit provider of skilled nursing. Before that, Mr. Gilchrist

served as Vice President of Health Care and Community Based Services at Maple

Knoll Communities in Springdale, Ohio, a non-profit provider of senior services and

housing. Mr. Gilchrist is a licensed Nursing Home Administrator in Ohio and served

on the board of LeadingAge Illinois.

H. Conflict of Interest Clarifications

Southminster is not aware of any conflict of interest item relating to any of its officers

or directors. There are no members of the Board of Directors that have, nor which

have in these persons, a ten percent (10%) or greater interest in companies with which

Southminster conducts business. The business associations that do exist between the

Board’s officers and directors and Southminster are fully disclosed and do not

adversely impact the Corporation.

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I. Criminal Violation Statement

No officer or director has been involved in civil or criminal proceedings involving

fraud, embezzlement, fraudulent conversion or misappropriation of property; none is

subject to a currently effective injunction or restrictive court order or within the past

five years had any State or federal license or permit suspended or revoked as a result

of matters arising out of the business of health care. There have been no actions

affecting licenses to operate a foster care facility, nursing home, retirement home,

home for aged, or facility subject to Article 64 or a similar law in another state, within

the past five years.

J. Location and Description of Physical Property

(Refer to Section I.B. above for this information.)

K. Occupancy Data

As of January 31, 2024, there were 489 residents residing at Southminster.

II. POLICIES RELATING TO ADMISSIONS, CANCELLATIONS, & TRANSFERS

A. Admissions Requirements and Procedures

1. The Admissions Process

Upon entering into a Residence and Services Agreement with Southminster,

paying a reservation deposit equal to ten percent (10%) of the Entrance fee for

the Residence selected and refund plan type selected, (please see Section IV

below for a schedule of entrance fees), the future Resident will receive an

Application for Admission. Once the completed Application (which includes

Medical Release forms, a Personal Health History and a Confidential

Financial Statement or other evidence of sufficient financial means) is

submitted, Southminster will begin the official review process for approval.

Final acceptance by Southminster and the right of the future Resident to

receive services and to occupy a residence is contingent on the future Resident

being finally approved by Southminster. The balance of the Entrance Fee is

due when the resident is finally approved and takes financial responsibility for

a residence.

As part of the admission process, all persons applying are interviewed by a

representative from Southminster to ascertain the applicant's ability to live

independently and to determine the level of support services that may be

needed. The Chief Operating Officer and/or their designee will always be a

part of this interview process. Upon review of the information outlined above,

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Southminster may request additional personal interviews and/or

documentation on items not satisfactorily covered in the application forms or

on prior interviews.

2. Health Criteria

Southminster reserves the right to require the future Resident to have, at their

expense, mental and physical examinations and tests, the purpose of which is

to determine that the Resident is able to live independently within South-

minster.

3. Financial and Insurance Criteria

As part of the application process, prospective residents will be asked to

furnish information concerning net worth, income, and expenses. Full

disclosure may not be required if other appropriate documentation of financial

resources is supplied. In cases where the family may be providing support,

financial disclosure by the family members may also be required.

As additional protection against future health care costs and as a condition for

consideration for admission, the Resident will be expected to maintain

Medicare Parts A and B and one supplemental health insurance policy or

equivalent insurance coverage acceptable to Southminster.

Southminster also requires that each Resident maintain an insurance policy

covering personal property and liability (including all motor vehicles kept on

Southminster property) in minimum amounts recommended by Southminster

policy. Each Resident is strongly encouraged to carefully consider his/her

personal circumstances in deciding if limits higher than the minimum required

by Southminster are appropriate.

4. Age Requirements

The requirements for admission to Southminster are non-discriminatory

except as to age. Admission is restricted to persons sixty-two (62) years of

age or older.

B. Rescission/Cancellation/Termination of Contract and Refund Provisions

1. Rescission

The Resident may rescind the Residence and Services Agreement within thirty

(30) days of the later of the execution of this Agreement or receipt of the

disclosure statement required by N.C.G.S. 58-64-20, and the Resident to

whom the Agreement pertains will not be required to move to Southminster

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before the expiration of the 30-day period. The Resident will receive a full

refund of the Entrance Fee paid by the Resident within thirty (30) days of

notice of rescission less any nonstandard charges and cancellation fees as set

forth in the executed Residence and Services Agreement.

2. Cancellation

Prior to occupancy of a residence, the Residence and Services Agreement may

be cancelled if Southminster denies admission to the Resident; if the Resident

dies; if, on account of illness, injury, or incapacity the Resident is precluded

from occupying a residence; or if Southminster notifies the Resident that the

residence he or she reserved will not be available for occupancy. The

Resident will receive a full refund of the Entrance Fee paid by the Resident

within thirty (30) days of date of cancellation less any nonstandard charges as

set forth in the executed Residence and Services Agreement.

3. Termination Prior to Occupancy

In addition to the rights for rescission and cancellation as described above, the

Resident or Southminster may terminate the Residence and Services

Agreement prior to occupancy of a residence. The Resident may terminate

with thirty (30) days’ notice for any reason other than those described for

rescission or cancellation. Southminster may terminate with thirty (30) days’

notice for just cause as described in the Residence and Services Agreement.

Southminster may decide not to give thirty (30) days’ notice if the Resident is

determined to be a danger to him or herself or to others. In the case of a

termination by the Resident or Southminster before occupancy that is not a

rescission or cancellation, the Resident will receive a full refund of the

Entrance Fee paid by the Resident within thirty (30) days of notice of

termination, less a non-refundable fee (currently $10,500, with the exception

of new construction that carries a $21,000 fee), and less any nonstandard

charges as set forth in the executed Residence and Services Agreement.

4. Termination After Occupancy

The Residence and Services Agreement will terminate upon the death of the

last surviving Resident that was a party to the Residence and Services

Agreement. The Resident may also terminate with thirty (30) days’ notice for

any reason. Southminster may terminate with thirty (30) days’ notice for just

cause as described in the Residence and Services Agreement. Southminster

may decide not to give thirty (30) days’ notice if the Resident is determined to

be a danger to him or herself or to others.

The refund of the Entrance Fee will be an amount equal to (a) 50% of the full

Entrance Fee if the Resident elected the Fifty Percent Refund Plan; or (b) 90%

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of the full Entrance Fee if the Resident elected the Ninety Percent Refund

Plan; or (c) the full Entrance Fee less 5% of the Entrance Fee for each full

calendar month or portion thereof that has elapsed from the date of occupancy

to the effective date of termination if the Resident elected the Standard Plan.

After twenty (20) full or partial months of occupancy, no refund of the

Entrance Fee will be available to the Resident who elected the Standard Plan.

Under the Ninety Percent and Fifty Percent Refund Plans, the refund will

amortize at the rate of 5% monthly until either the 90% or 50% level is

reached, after which the 90% or 50% refund will be allowed.

Refunds are made only upon the total withdrawal or move-out by the Resident

from Southminster, whether voluntarily, forced, or by death. There is no

refund upon the permanent transfer of the Resident to the Health Center.

Similarly, there is no partial refund upon the move or transfer to a Residence

with a lesser entrance fee. The refund in the case of couples will only be

triggered by the death or withdrawal of the surviving spouse.

Any refund due the Resident will be made only after the Resident’s

accommodation becomes reserved by a substitute Resident and the substitute

Resident has made the full Entrance Fee payment to Southminster.

Any refund due the Resident shall be offset by the amount of any accrued but

unpaid Monthly Service Fees or other charges, including accrued interest

thereon, due from the Resident.

5. Other Conditions Relating to Termination

At the effective date of termination of the Residence and Services Agreement,

the Resident, appropriate family member, or person possessing documented

power of attorney status shall vacate the Residence and leave it in good

condition, normal wear and tear excepted. The Monthly Service Fee will

continue to be billed until the Residence is totally vacated. If the Residence is

vacated for any reason other than by death or the permanent transfer of the

resident to the Health Center, an advance notice of thirty (30) days is required.

Without such advance notice, an additional thirty (30) days' billing will

automatically be due, regardless of the date the Residence is completely

vacated. On-site storage is not available. The Resident will be liable to

Southminster for any costs incurred to restore the Residence and its

furnishings to good condition, normal wear and tear excepted or for removal

or storage of items in a vacated Residence that have not been removed as

required.

6. "Occupancy" Defined

For purposes of the above sections, "occupancy" is the mutually agreed-upon

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date when Southminster’s obligation to provide services begins, when

Southminster provides an accommodation to the Resident, and when the

resident’s obligation to pay for services begins.

7. Continuation of Payments

Except as described in the Residence and Services Agreement or by

Southminster policy, residents are required to continue to pay Monthly

Service Fees related to the residence until such residence is vacated. Monthly

Service Fees are also payable even though the resident may be away from the

residence for any reason, including a temporary stay in a different

accommodation at or outside Southminster.

C. Policies and Procedures Relating to Moves and Transfers

1. Transfers between Independent Living Residences

Transfers between independent living Residences are generally allowed subject to

Southminster approval, subject to availability of the desired accommodation, and

subject to the priority of the request as determined by Southminster. Where transfers

are allowed, the following restrictions and conditions apply (these restrictions and

conditions may be changed with future changes in policy):

(a) All requests for transfer must be submitted in writing and dated. The

request must also include the specific type of Residence desired.

(b) Transfer requests due to acute physical, mental, financial and mobility

problems may be given priority over all other requests for transfer regardless

of date of the request. Determination of the severity of the conditions, which

give rise to the transfer request, will be made by the management of

Southminster.

(c) There may be a charge for all voluntary in-house transfers. Such charge may

include the full costs to prepare the Residence being vacated and the new

Residence to move-in condition. The exact amount may vary depending on

the circumstances of the move and the amount of refurbishing necessary.

Southminster reserves the right to waive or modify such transfer charges.

(d) When transferring to a same or “lesser priced accommodation”, entrance fees

and refund provisions relating thereto will not be affected. If requesting

transfer to a residence with a lower entrance fee, no refund will be given.

“Lesser priced accommodation” shall be defined as a residence with a lower

current Entrance Fee than the original Entrance Fee paid for the residence

being vacated.

(e) When transferring to a “higher priced accommodation”, an additional entrance

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fee will be required to be paid prior to move-in to the new residence. Current

policy states that for residents requesting a transfer after 60 months of

occupancy, a “Higher priced accommodation” shall be defined as a residence

with a higher current Entrance Fee than the current Entrance fee of the

residence being vacated, and the amount due of this extra entrance fee will be

the difference between the current published entrance fee of the new

accommodation less the current published entrance fee of the residence being

vacated. For residents requesting a transfer within the first 60 months of

occupancy, a “Higher priced accommodation” shall be defined as a residence

with a higher current Entrance Fee than the original Entrance fee paid on the

residence being vacated, and the amount due of this extra entrance fee will be

the difference between the then (the time of move-in) entrance fee for the

Residence being vacated and the current entrance fee of the new Residence

being moved into. A change in type of entrance fee (the standard vs. the Fifty

Percent (50%) or Ninety Percent (90%) plans) is generally not available

because of differences in the amortization and refund provisions of the two

plans. The additional entrance fee paid will be added to the original entrance

fee and amortized for refund purposes from the same date as the original

entrance fee.

2. Permanent Transfers to the Health Center

If a determination is made, in consultation with Southminster healthcare

professionals and the Resident’s family, that a transfer to the Health Center or

to a hospital likely will be permanent in nature, the Resident hereby agrees to

surrender his/her rights and use of the independent living Residence or Health

Center accommodations, as the case may be, previously occupied by the

Resident. If it is subsequently determined that the Resident can resume

occupancy in accommodations equivalent to those previously occupied by the

Resident, the Resident shall have priority to such accommodations as soon as

they become available, with no additional Entrance Fee.

3. Transfers in the Health Center

Transfers and assignment of rooms in the Health Center will be controlled by

the level of care needed by the Resident. Requests for transfers within the

Health Center will be addressed by Southminster healthcare professionals. If

the transfer is initiated by the Resident, the transferring Resident will be

responsible for the charges for refurbishment of the accommodations being

vacated.

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D. Marriages

If a resident marries someone other than another resident, Southminster will admit the

spouse to residence so long as he/she meets the requirements for entry, enters into a

Residence and Services Agreement, and pays the second person entrance fee as

specified in the Agreement. The Monthly Service Fee will change to reflect the

second person rate and the size of Residence occupied. Should the new spouse not

meet the requirements for residency, the original resident may terminate the

Residence and Services Agreement in accordance with the terms outlined in Sections

IX, C or IX, D of the Agreement, or admission may be granted under special

circumstances and with the negotiated fees as mutually agreed to in writing by all

parties to the Agreement.

If one resident marries another resident, each of their contracts shall remain in place

(including treatment of refunds). If the residents choose to live together in one

Residence, the only change to the contract will be that the monthly fees for the

resident vacating their Residence will be reduced to a “Second Occupant” monthly

fee.

E. Inability to Pay

As long as Southminster remains classified as a non-profit, charitable organization

under Federal law and regulation, Southminster will endeavor to avoid termination of

the Residence and Services Agreement solely because of an inability to pay. The

decision to grant financial assistance is at the sole discretion of Southminster.

Southminster will provide financial assistance only if it is able to do so without

impairing its ability to operate on a sound financial basis.

A Resident seeking financial assistance should do so by contacting the CEO or the

CFO. In doing so, the Resident agrees to make available any and all information

requested by Southminster to assess the need for financial assistance. The Resident

also agrees that, when requested by Southminster, he/she will seek financial

assistance from other available sources, including family members and government

assistance programs. The Resident also agrees to provide timely notification of

financial need to Southminster, and to work cooperatively with Southminster to make

reasonable changes that might delay or minimize an eventual financial assistance

need.

A Resident who is granted financial assistance by Southminster agrees to comply

with reasonable conditions which may include a move to a different Residence. Upon

death, Southminster may seek to recover from the Resident’s estate any financial

assistance previously provided.

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III. SERVICES PROVIDED UNDER THE RESIDENCE AND SERVICES AGREEMENT

A. Standard Services Available

As stated in the Residence and Services Agreement, Southminster provides to its

residents the following services:

1. Residence

There are numerous types and sizes of living accommodations. Copies of

floor plans along with specific features of each type can be secured from the

marketing staff at Southminster. The Residence ultimately selected will be

listed in the Residence and Services Agreement.

2. Common Areas

Southminster will provide common areas and amenities for Resident use and

benefit. Common areas include at a minimum, dining rooms, multi-purpose

rooms, spaces and facilities for activities, lounges, a chapel, a library, a

wellness center that includes a pool and exercise facilities, and facilities for

beautician services. Southminster may also provide facilities for limited

banking services, facilities for the sale of sundry items, and other amenity

areas dependent on Southminster’s determination of demand or the

availability of providers.

3. Utilities, Communications, and Alarm Systems

The Monthly Service Fee includes water, sewer, one telephone line (including

local telephone service as provided through Southminster), trash removal,

basic cable television service (or equivalent), access to premium cable

television service (or equivalent), an urgent call system, a fire alarm system,

and a carbon monoxide detector (where required). Electricity is included in

the fee except for in cottages where it is an additional cost. Gas is available in

all cottages and is an additional cost. Gas may be available in some other

residences but may be an additional cost. Residents are responsible for the

cost of long-distance telephone calls and premium cable television service.

Additional telephone lines may be available for additional cost. Internet

access is currently available through the cable television provider at no

additional cost.

16

4. Meals

The Independent Living Monthly Service Fee includes access to

Southminster’s dining facilities. The dining plan provides a monthly

allowance equivalent to one (1) dinner for each day in the month, usable

anytime within the month in a Southminster dining room. The amount of

allowance, as well as policies related to the plan, may be changed at any time

by Southminster.

The Health Center daily fee includes three (3) meals per day. Other meals,

meals for guests, and catering are available at an additional cost. Special diets

as prescribed by a resident’s physician are included in the daily Health Center

fee. Limited special diets may be available for Independent Living residents

and may be at an additional cost. Limited tray service will be provided when it

is determined by Southminster health staff to be appropriate and may be at an

additional cost.

5. Housekeeping Services

Monthly Service Fees include housekeeping services on at least a weekly

basis. Housekeeping includes at a minimum vacuuming, dusting, cleaning of

baths and kitchens, changing of bed linens, and trash removal. Other

housekeeping services may be available at an additional cost. The independent

living monthly fee includes weekly laundering of personal linens as defined in

Southminster policy. The Health Center daily fee includes bed and bath linen

provided by Southminster. Some Residences are equipped with a washer and

dryer. Southminster provides washers and dryers in common areas at no

additional cost. Should Southminster determine that safety, sanitation, or

health issues arising in individual residences are the result of actions or

inactions on the part of the Resident, Southminster will provide, at the

Resident’s expense, whatever additional housekeeping or laundry services

Southminster determines are necessary to mitigate the issues.

6. Maintenance and Repairs

Southminster is responsible for maintenance, repair, and replacement of

property, furnishings, and equipment owned or leased by Southminster. Other

maintenance services may be available to Residents at an additional cost.

7. Grounds Keeping

Southminster is responsible for basic grounds keeping services including

lawn, tree, and shrubbery care for those items that are provided by

Southminster. Southminster, at its sole discretion, may make changes to

17

lawns, trees, shrubs, or any other landscaping on its property. Residents may

plant items approved by Southminster in areas determined by Southminster,

but are responsible for maintenance of those areas and plants.

8. Life Enrichment

Various social, recreational, spiritual, educational and cultural programs and

activities are provided by Southminster for the Resident to enjoy. However,

some activities may involve additional charges.

9. Parking

The Monthly Service Fee includes one (1) assigned parking space for each

Residence provided that at least one party to the Residence and Services

Agreement owns a licensed personal vehicle and has a valid driver’s license.

Covered or enclosed parking spaces may be subject to additional charges.

Southminster policy governs registration requirements, space assignment and

use, allowed vehicles, and other terms for parking.

10. Staffing

Southminster will have staff present on campus twenty-four (24) hours per

day, every day of the year.

11. Transportation

The Monthly Service Fee includes scheduled local transportation for shopping

trips, medical appointments, and occasional activities and events.

Transportation for special, personal, or group trips may be available and may

be at an additional cost.

12. Health Services

Included in the Health Center daily fee are facilities, equipment, staff, and

services that are required to maintain current licenses, and services permitted

and typically provided for each licensed level of health care. At a minimum,

the following services are included:

(a) Medical Director. Southminster will retain a licensed physician as Medical

Director to consult on the medical aspects of the licensed levels of care.

(b) Nursing Staff. Licensed and/or Registered Nurses will be available twenty-

four (24) hours per day.

18

(c) Other Services. Other services include diet planning by a registered and

licensed dietitian, assisted bathing facilities, goal-oriented care planning,

social services, and planned activities.

Other Health Services Not Included in Basic Fees. Additional health services

not included in the Health Center daily fee may include, but are not limited to:

physician services; dental work; physical, occupational, and speech therapy;

rehabilitative treatments and equipment; ambulance services; outpatient

nursing services; pharmacy services and medicines; laboratory services;

durable medical equipment; food supplements; personal care and incontinence

supplies or other health related items; and nursing, care planning, case

management, or personal care services for Residents in Independent Living or

above what is required for each licensed level of health care in the Health

Center. Some services may be available only for Residents in the Health

Center or only for Residents in Independent Living. These additional services

are subject to additional charges by Southminster or by third-parties that

provide the services on the Resident’s or on Southminster’s behalf. In some

cases Southminster policy may require that a third-party provider be approved

by Southminster prior to providing services on Southminster property.

IV. INFORMATION RELATING TO FEES

A. Ten Percent Deposit

As part of the admission process, a deposit equal to ten percent (10%) of the entrance

fee for the type of accommodation selected will be required at the time the Residence

and Services Agreement is executed. (Refer to the section below for a schedule of

entrance fees.)

B. Refundable/Non-Refundable Entrance Fees

Entrance fees are based on the size and type of Residence selected. Southminster

offers three types of entrance fee plans. The Standard Plan, sometimes referred to as

the Non-Refundable Plan, provides for no refund, except as noted in Section II B of

this Disclosure Statement.

Southminster also offers two types of Refundable Plans; a 50% Refundable Plan and

a 90% Refundable Plan. Residents selecting either of the Refundable Plans must pay

the Standard Entrance Fee plus the applicable surcharge factor determined at least

annually by Southminster. Residents selecting a refundable plan will be entitled to a

refund of either 50% or 90% (based on the Plan originally selected) of the full

Entrance Fee when the Residence and Services Agreement is terminated. Actual

payment of the refund is dependent on re-occupancy of the Residence as explained

more fully in Section II.B of this Disclosure Statement.

19

C. Payment of Entrance Fees

Ten percent (10%) of the Entrance Fee is due and payable upon execution of a

Residence and Services Agreement. The balance will be due and payable on the date

of Occupancy.

D. Entrance Fees

The entrance fee gives the Resident the right to have a residence or health care

accommodation at Southminster for life, while Southminster maintains and insures

the property. Payment of the entrance fee does not provide any deeded ownership

rights. It also provides the Resident with the use of all public and common areas, as

well as guaranteeing priority access to the Health Center.

The current and most recent Entrance Fee Schedule is outlined as follows:

Entrance Fee Schedule

(Effective October 1, 2023)

Type of Residence

Number

of Units

Square

Footage

Standard Entrance

Fees

Apartments:

Studio

1

292

$56,500

One Bedroom

53

598-1000

$116,400 - $279,600

One Bedroom with den

36

955-1,456

$262,300 - $438,100

Two Bedroom

78

955-2,260

$268,800 - $691,800

Two Bedroom with den

58

1,276-3,190

$368,500 -

$1,004,400

Three Bedroom

1

3,081

$1,078,200

Cottages:

Small Sunroom

4

1,500

$386,200

Large Sunroom

25

1,800-1,900

$464,500 - $517,800

Terraces:

Two Bedroom

12

1,383-1,563

$457,500 - $499,500

Two Bedroom with den

54

1,602-2,140

$529,600 - $749,700

20

Health Care Center:

Assisted Living

25

600 – 765

$30,000 - $40,000

Nursing Care Units

60

286 – 427

$17,500 - $25,000

Health Center entrance fees apply only to direct admissions. The 50% and the 90%

Refundable Fee options are not available for direct admissions to the Health Center.

An additional $30,000 is added to the entrance fee for a second occupant. A second occupant

will be required to meet all admissions criteria.

Pricing Factor for Refundable Fee Contracts

Refundable Entrance Fee pricing is based on Standard Entrance Fees multiplied by a factor.

The current multiple for the ninety percent (90%) refundable plan is 2.0. The multiple for the

fifty percent (50%) plan is 1.4. Southminster reserves the right to modify the refundable

multiple at any time and may also limit the number of refundable plans available to prospective

residents. The multipliers for both plans are higher for incoming residents between the ages of

86 and 89 and is not available for residents over the age of 89.

E. Monthly Service Fees

The Monthly Service Fee is a charge by Southminster for programs, services, food,

utilities, maintenance, housekeeping, debt service, insurance, administration, staffing

and other services. The Monthly Service Fee is based on the size and type of the

Residence selected and the number of occupants per Residence.

Monthly Service Fees

(Effective October 1, 2023)

Apartments:

Studio $3,410

One Bedroom Apartments $4,055 - $4,392

One Bedroom/Den Apartments $4,392 - $4,913

Two Bedroom $4,392 - $5,923

Two Bedroom/Den $4,913 - $6,204

Three Bedroom $7,261

Terraces:

Two Bedroom $5,168 - $5,254

Two Bedroom/Den $5,343 - $5,943

Cottages:

Small Sunroom $4,380

Large Sunroom $4,534

Second Occupants: $2,271

21

The Monthly Service Fee may change because of increases in the cost of services,

food and utilities and other circumstances beyond Southminster’s control.

Payment of the initial Monthly Service Fee is due and payable on the earlier of the

first day of occupancy or ninety (90) days after application is made unless otherwise

mutually agreed to. Thereafter, the Monthly Service Fee is due and payable by the

tenth (10th) of each successive month.

Southminster furnishes the Resident monthly statements showing the total amount of

the Monthly Service Fee and other charges owed by the Resident. These charges are

due and payable by the tenth (10th) of such month and, if not paid by such date, may

accrue interest thereafter at the rate of eighteen percent (18%) per annum.

Upon the failure of the Resident to pay the charge, plus accrued interest, by the

sixtieth (60th) day following notice that such payment is past due, Southminster has

the right to terminate the Residence and Services Agreement. There is no

requirement in the Residence and Services Agreement for continued residency at

Southminster if the Resident becomes unable to pay current charges. However,

Southminster, Inc. will endeavor to avoid termination of the Residence and Services

Agreement solely because of an inability to pay. See further discussion in Section

II.E.

Service Fees for Residences will continue to be charged until the Residence is fully

vacated and released.

F. Health Center Fees and Charges

Southminster’s per diem rates for the Domiciliary Care facility (Assisted Living), and

Nursing Care in the Health Center are as follows:

22

Daily Rates for Health Center

(Effective October 1, 2023)

Current Residents Direct Admit

Assisted Living $279 - $335 $296 - $357

Memory Support $363 - $419 $388 - $449

Nursing Care $419 - $456 $464 - $490

Rates may be decreased or increased as related costs decrease or increase.

Direct admissions to the Health Center will also be required to pay an Entrance Fee.

Health Center Credit Days

At the Date of Occupancy, each Resident in Independent Living is granted fourteen

(14) Health Center Credit Days. At each subsequent anniversary of the Date of

Occupancy, unused Health Center Credit Days for each Resident may be carried

forward and, for each Resident whose Residence is in Independent Living, up to

fourteen (14) new days granted, provided that the total accumulated for each Resident

never exceeds forty-four (44) days. Health Center Credit Days are non-transferable,

must be used only as defined in the Residence and Services Agreement and in

Southminster policy, and have no value if not used. No new Health Center Credit

Days are granted after the Resident becomes a permanent occupant of Southminster’s

Health Center.

Unless otherwise specified by Southminster policy, for each day a Resident occupies

or holds an accommodation in the Health Center, whether or not that accommodation

is the primary residence, Health Center Credit Days will be credited until all such

accumulated days are used. While Health Center Credit Days are being used, the

daily Health Center rate is waived but the Resident will be charged for other items,

such as medical supplies, that are not included in the Resident’s Monthly Independent

Living Service Fee. While the Resident uses Health Center Credit Days, Monthly

Service Fees continue based on the Independent Living Residence from which the

Resident Moved or Transferred.

The “Health Center Credit Days” benefit is not available for residents who were

direct admissions to the Health Center.

23

G. Notification of Fee Increase(s)

Southminster will use its best efforts to maintain Monthly Service Fees at the lowest

possible rates consistent with the level and quality of service traditionally provided.

The Monthly Service Fee is based, among other things, on the assumption that

Southminster will be able to maintain its North Carolina and Federal tax-exempt

status. Loss of such status, as well as other factors, could result in an increase in the

Monthly Service Fee. Southminster will, when necessary, at its discretion, adjust the

Monthly Service Fee or any other charges by giving thirty (30) days advance written

notice to Residents.

H. Sales Incentives

From time to time, Southminster may offer sales incentives in the form of discounts

to entrance and monthly fees. Such incentive programs may be offered on all or only

select Residences and may be discontinued at any time.

I. Historic Changes in Monthly Fees for the Previous Five Years

The following table shows average changes in the monthly service fees and health

center per diem fees over time. Note that it is the average dollar amount of the

change in fees from year to year that is shown – not the fees themselves.

Southminster’s policy has been to review resident fees and charges annually in

connection with preparation of the annual budget. All changes during this period

occurred once per year on October 1.

24

Historic Changes in Fees for the Previous Five Years

For Fiscal Years Beginning October 1,

Type of Residence

2019

2020

2021

2022

2023

Independent Living Service Fees (per month)

Extended Studio

$85

$87

$96

$133

$178

Standard One Bedroom

$102

$105

$111

$159

$212

One Bedroom/Den

$109

$113

$124

$172

$229

One Bedroom/Den –

Expansion*

$117

$120

$132

$184

$245

Two Bedroom

$113

$116

$137

$180

$235

Two Bedroom – Expansion*

$128

$132

$159

$202

$269

Two Bedroom –Terraces

$130

$134

$147

$204

$272

Two Bedroom/Den

$122

$127

$139

$192

$257

Two Bedroom/Den –

Expansion*

$140

$145

$158

$220

$295

Two Bedroom/Den – Terraces

$137

$144

$158

$219

$292

Three Bedroom – Expansion*

n/a

$284

$379

Cottage w/standard sunroom

$109

$112

$123

$171

$228

Cottage w/deluxe sunroom

$113

$116

$128

$177

$236

Second Occupant Rate

$30

$40

$64

$89

$118

Health Center Service Fees (per day)

Assisted Living

$7

$8

$11

$15

Memory Support

$9

$6

$10

$14

$19

Nursing Care

$10

$11

$12

$16

$22

Approx. Percentage Increase

for Independent Living and

Health Center Fees

3%

3.2%

4.3%

5.5%

*Expansion refers to previous expansion of North Tower, East Wing Extension, and

conversion of Top of East apartments from previous health center space.

An assessment of the current and future financial strength of Southminster can be

obtained from the Audited Financial Statements included in Attachment 1 and the Five

Year Forecast included in Attachment 2.

25

V. FINANCIAL INFORMATION RELATING TO SOUTHMINSTER

A. Financial Overview Statement

1. Audited Financial Reports

The audited financial statements of Southminster, Inc. for the year ended

September 30, 2023, are included in Attachment 1 of this Disclosure

Statement. The report of our independent auditors, CliftonLarsonAllen LLP,

is included on pages one and two of the audited financial statements. The

audited financial statements reflect the combined results of Southminster, Inc.

and its affiliate, Southminster Foundation, Inc. For the year ended September

30, 2023, the Foundation did not have any activity, nor did it have any assets

or liabilities, as a result of its activities being moved into Southminster, Inc.

effective fiscal year 2014.

2. Forecasted Financial Statements

The forecasted financial statements of Southminster, Inc. (not combined with

Southminster Foundation, Inc.) for the years ending September 30, 2024

through September 30, 2028 are included in Attachment 2 of this Disclosure

Statement.

3. Residence and Care Agreements

A copy of the Residence and Services Agreement is included in Attachment 4

of this Disclosure Statement.

B. Financial Reserves and Escrow Funds

Southminster has made no provisions to provide reserve funding or collateral security

to enable it to perform its obligations under contracts to provide continuing care other

than those required by documents related to its financing through the North Carolina

Medical Care Commission (the “Medical Care Commission”), the Public Finance

Authority (the “Authority”), and those required by the North Carolina Department of

Insurance. These include:

1. The Debt Service Reserve Fund

On November 10, 2016, the Corporation entered into a loan agreement with

the Medical Care Commission, and concurrently, the Medical Care

Commission issued $58,765,000 Retirement Facilities First Mortgage

Revenue Refunding Bonds (Series 2016 Bonds) in order to advance refund

$61,515,000 of the remaining $61,855,000 in Series 2007A Bonds and pay for

costs of issuance. The Series 2016 Bonds mature on October 1, 2017 through

26

2037 with interest rates ranging from 1.5% to 5%. The remaining $340,000 of

Series 2007A Bonds, bearing interest at 5.2%, was paid off on their maturity

date of October 1, 2017. The Debt Service Reserve Fund required for the

Series 2016 Bonds is $4,640,563 (equal to maximum annual debt service of

$4,746,688 less the $106,125 in the Series 1996 Debt Service Reserve Fund).

Following paydown of the Series 1996 Bonds on October 1, 2018, the

$106,125 in the Series 1996 Debt Service Reserve Fund was transferred to the

Series 2016 Debt Service Reserve Fund bringing the total to $4,746,688.

On July 18, 2018, the Corporation entered into a loan agreement with the

Public Finance Authority, and concurrently, the Public Finance Authority

issued $86,200,000 Retirement Facilities First Mortgage Revenue Bonds

(Series 2018 Bonds) in order to finance the construction of a replacement

health center and a portion of two independent living construction projects

(being financed by a combination of bank and bond financing). The 2018

Bonds were used to finance additional common areas, kitchen expansion,

office spaces for campus facilities and housekeeping, and a reconfigured

loading dock. Proceeds from the 2018 Bonds also were used to pay issuance

costs and fund additional debt service reserves of $4,282,850.

U.S. Bank National Association acts as Successor Trustee for each of the

Corporation’s Debt Service Reserve Funds. Ziegler Capital Management

LLC is responsible for investment management of the funds associated with

the Series 2016 Bonds and Series 2018 Bonds.

See Note 7 of the Audited Financial Statements for more information on

Southminster’s bond issuances.

2. Operating Reserves

Under North Carolina's General Statutes (G.S.58-64-33) regulating continuing

care communities operating in the state, Southminster, is required to maintain

an operating reserve equal to fifty percent (50%) of the total occupancy costs

projected for the twelve-month period following the period covered by the

most recent annual statement filed with the Department of Insurance. As

provided by the Statutes, the Commissioner may reduce the Operating

Reserve requirement to twenty-five percent (25%) if the occupancy rate of the

facility exceeds ninety percent (90%), or for such other reasons as deemed

appropriate by the Commissioner.

On September 30, 2023, Southminster’s occupancy rate, calculated in

accordance with the rules of Department of Insurance was above ninety

percent (90%), which required a twenty-five percent (25%) reserve. The

amount designated to meet the operating reserve requirement at September 30,

2023 is $7,720,072 (refer to Note 11 on page 24 of the attached Audited

27

Financial Statements). It is further understood that these assets funded with a

portion of Southminster’s long-term investments (as permitted by State statute

and Southminster’s investment policy) are not allowed to serve any other

function, and may only be released with the North Carolina Department of

Insurance’s approval.

In the attached “Forecasted Financial Statements” [page 4, line item

“Operating Reserve Fund Required Under North Carolina Statues”] we have

reflected this obligation for the five-year period 2024 through 2028 calculated

based on the twenty-five percent (25%) requirement.

Investment policy related to funds held by Southminster is determined by

members of the Board of Directors. In addition to exercising their own

investment skills, Southminster’s Board has engaged the investment firm of

UBS Financial Services, Inc. to provide advice and guidance with respect to

development and implementation of Southminster’s investment policy and

existing bond indenture document limitations.

VI. OTHER MATERIAL INFORMATION

A. Medicare/Medicaid Provider

Southminster is not a certified provider for Medicare or Medicaid programs. Hence,

nursing care services in the Southminster Health Center are not covered under either

of these programs.

Support services such as physical therapy, rehabilitation treatments, speech therapy,

etc. are generally arranged through Medicare certified providers who will submit

eligible charges for such services to the appropriate Medicare carrier for collection.

B. The Southminster Foundation

Southminster Foundation, Inc. is a not-for-profit, tax-exempt corporation that was

established by Southminster, Inc. to serve primarily as the vehicle to receive and

disburse funds for the financial support of residents at Southminster. The objective of

this philanthropic arm of Southminster, Inc. is to step in and provide assistance for

those residents at Southminster who may run out of funds due to no fault of the

resident. The Foundation’s funds may also be used to assist individuals with all or a

portion of their entrance fee if they are unable to do so. On October 1, 2013, the

operations of the Foundation were moved into Southminster, Inc. The Southminster

Foundation, Inc. will still remain as a legal entity but collection of contributions and

assisting residents who have outlived their resources, will be the responsibility of

Southminster, Inc. (as a tax exempt charitable organization).

28

C. Campus Expansion and Renovation

In 2017, Southminster obtained bank financing and started construction on 30

independent living units, the South Terraces, which came online and filled in 2019.

In 2018, tax-exempt financing was obtained to finance the construction of a

replacement health center as well as a portion of the financing for 36 independent

living units in the North Terraces. Construction was completed on both of these

buildings in late 2020 with healthcare residents relocated in November 2020 and

North Terraces fill-up completed in January 2021. Additional bank financing was

obtained in 2021 to refinance remaining Terraces bank debt and also finance the

renovation of the previous health center space where 20 independent living homes

were added. Those homes were brought online in phases beginning in late 2022, with

fill-up completed in early 2023.

In September 2022, the Corporation signed a construction contract for renovations in

the Promenade Dining, Main Kitchen, and Great Room areas. The contract stipulated

that the cost of the project was to be capped at $3,012,017 as originally designed,

with $174,331 in change orders executed through September 30, 2023. Work began

on the project in January 2023, with full completion by November 2023. As of

September 30, 2023, there were $77,245 in remaining construction costs, including

retainage. The Corporation continues to make ongoing cosmetic upfits and

improvements to its campus but no major construction projects are planned at this

time.

The impact of these projects are reflected in the attached “Forecasted Financial

Statements” in Attachment 2.

D. Conflicts with the Residence and Services Agreement

If information contained in the Disclosure Statement conflicts with the Residence and

Services Agreement, the Residence and Services Agreement will prevail.

ATTACHMENT 1 -

- Audited Financial Statements

SOUT

HMINSTER, INC.

COMBINED FINANCIAL STATEMENTS OF

SOUTHMINSTER, INC. AND

SOUTHMINSTER FOUNDATION, INC.

YEARS ENDED SEPTEMBER 30, 2023 AND 2022

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

TABLE OF CONTENTS

YEARS ENDED SEPTEMBER 30, 2023 AND 2022

INDEPENDENT AUDITORS’ REPORT 1

COMBINED FINANCIAL STATEMENTS

COMBINED BALANCE SHEETS 3

COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN NET

ASSETS (DEFICIT) 5

COMBINED STATEMENTS OF CASH FLOWS 7

NOTES TO COMBINED FINANCIAL STATEMENTS 9

CLA(CliftonLarsonAllenLLP)isanindependentnetworkmemberofCLAGlobal.SeeCLAglobal.com/disclaimer.



CliftonLarsonAllenLLP

CLAconnect.com

(1)

INDEPENDENT AUDITORS’ REPORT

Board of Directors

Southminster, Inc. and Southminster Foundation, Inc.

Charlotte, North Carolina

Report on the Audit of the Combined Financial Statements

Opinion

We have audited the accompanying combined financial statements of Southminster, Inc. and

Southminster Foundation, Inc. (the Organization) which comprise the combined balance sheets as of

September 30, 2023 and 2022 and the related combined statements of operations and changes in net

assets (deficit), and cash flows for the years then ended, and the related notes to the combined

financial statements.

In our opinion, the combined financial statements referred to above present fairly, in all material

respects, the combined financial position of the Organization as of September 30, 2023 and 2022, and

the results of their operations and changes in net assets (deficit), and their cash flows for the years then

ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States

of America (GAAS). Our responsibilities under those standards are further described in the Auditors’

Responsibilities for the Audit of the Financial Statements sections of our report. We are required to be

independent of the Organization and to meet our other ethical responsibilities in accordance with the

relevant ethical requirements relating to our audits. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial

statements in accordance with accounting principles generally accepted in the United States of

America, and for the design, implementation, and maintenance of internal control relevant to the

preparation and fair presentation of the combined financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the combined financial statements, management is required to evaluate whether there are

conditions or events, considered in the aggregate, that raise substantial doubt about the Organization’s

ability to continue as a going concern for one year after the date the combined financial statements are

available to be issued.

Board of Directors

Southminster, Inc. and Southminster Foundation, Inc.

(2)

Auditors’ Responsibilities for the Audit of the Combined Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole

are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that

includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance

and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a

material misstatement when it exists. The risk of not detecting a material misstatement resulting from

fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of internal control. Misstatements are considered

material if there is a substantial likelihood that, individually or in the aggregate, they would influence the

judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

 Exercise professional judgment and maintain professional skepticism throughout the audit.

 Identify and assess the risks of material misstatement of the financial statements, whether due

to fraud or error, and design and perform audit procedures responsive to those risks. Such

procedures include examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

 Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Organization’s internal control. Accordingly, no such opinion

is expressed.

 Evaluate the appropriateness of accounting policies used and the reasonableness of significant

accounting estimates made by management, as well as evaluate the overall presentation of the

financial statements.

 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,

that raise substantial doubt about the Organization’s ability to continue as a going concern for a

reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters,

the planned scope and timing of the audit, significant audit findings, and certain internal control related

matters that we identified during the audit.

CliftonLarsonAllen LLP

Charlotte, North Carolina

January 23, 2024

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

COMBINED BALANCE SHEETS

SEPTEMBER 30, 2023 AND 2022

See accompanying Notes to Combined Financial Statements.

(3)

2023 2022

ASSETS

CURRENT ASSETS

Cash and Cash Equivalents 385,922$ 2,494,723$

Short-Term Investments 821,067 -

Assets Limited as to Use, Current Portion 5,656,924 5,643,149

Accounts Receivable 602,715 382,860

Pledges Receivable, Current Portion 178,872 203,172

Employee Retention Credit Receivable

4,934,993 -

Other Current Assets 1,562,448 1,621,766

Total Current Assets 14,142,941 10,345,670

ASSETS LIMITED AS TO USE

Held by Trustee Under Bond Indenture Agreements 8,934,410 8,715,876

Southminster Community Fund 50,000 50,000

Capital Campaign Fund 146,799 1,700,086

Operating Reserve - Required by the North Carolina

Department of Insurance 7,720,072 6,444,655

Total Assets Limited as to Use, Net of Current Portion 16,851,281 16,910,617

PLEDGES RECEIVABLE, NET OF CURRENT PORTION,

PRESENT VALUE DISCOUNT, AND ALLOWANCE

124,798 394,052

PROPERTY AND EQUIPMENT, NET

203,212,879 206,990,905

RIGHT OF USE ASSET - FINANCE, NET

173,923 218,329

LONG-TERM INVESTMENTS, AT MARKET

13,818,419 16,048,524

DEFERRED COSTS AND OTHER ASSETS

400,883 359,175

Total Assets

248,725,124$ 251,267,272$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

COMBINED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2023 AND 2022

See accompanying Notes to Combined Financial Statements.

(4)

2023 2022

LIABILITIES AND NET ASSETS (DEFICIT)

CURRENT LIABILITIES

Accounts Payable

2,590,305$ 2,928,288$

Retainage Payable

35,000 972,430

Accrued Payroll and Employee Benefits

1,501,639 1,574,689

Accrued Interest Expense

3,449,282 3,504,170

Line of Credit

2,170,000 -

Current Portion of Right-of-Use Finance Lease Liability

42,741 41,068

Current Portion of Long-Term Debt

3,045,000 4,544,406

Total Current Liabilities

12,833,967 13,565,051

LONG-TERM DEBT, NET OF CURRENT PORTION

153,459,108 161,613,225

RIGHT-OF-USE FINANCE LEASE LIABILITY, NET OF

CURRENT PORTION

134,870 177,612

ADVANCE ENTRANCE FEE DEPOSITS

1,092,859 1,586,379

DEFERRED ENTRANCE FEE REVENUE

70,731,643 64,352,660

REFUNDABLE ENTRANCE FEES

26,558,391 27,866,514

Total Liabilities

264,810,838 269,161,441

NET ASSETS (DEFICIT)

Net Assets (Deficit) without Donor Restrictions

(16,604,827) (20,244,482)

Net Assets with Donor Restrictions

519,113 2,350,313

Total Net Assets (Deficit)

(16,085,714) (17,894,169)

Total Liabilities and Net Assets (Deficit)

248,725,124$ 251,267,272$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

COMBINED STATEMENTS OF OPERATIONS AND

CHANGES IN NET ASSETS (DEFICIT)

YEARS ENDED SEPTEMBER 30, 2023 AND 2022

See accompanying Notes to Combined Financial Statements.

(5)

2023 2022

REVENUES, GAINS, AND OTHER SUPPORT

Independent Living Revenue 20,568,320$ 18,610,663$

Health Care Revenue 10,077,790 9,459,975

Resident Home Care Revenue 3,144,351 2,576,796

Earned Entrance Fees 8,974,687 8,239,759

Less: Resident Assistance (751,453) (596,631)

Resident Service Revenue 42,013,695 38,290,562

Investment Income 1,369,187 2,568,331

Contributions 735,811 883,890

Contributions - Paycheck Protection Program - 1,911,845

Net Assets Released from Restrictions 46,542 32,130

Other Income 6,150,121 1,725,874

Total Revenues, Gains, and Other Support 50,315,356 45,412,632

OPERATING EXPENSES

Salaries, Wages, and Employee Benefits 21,208,683 19,014,327

Maintenance, Housekeeping, and Utilities 3,500,224 3,085,668

Food and Related Supplies 1,934,914 1,847,535

Insurance 409,141 378,518

Consulting and Professional Fees 726,569 423,612

Other Operating Expenses 3,250,149 3,992,109

Depreciation 11,930,847 10,490,297

Amortization of Deferred Costs 31,015 17,470

Interest Expense 7,397,827 6,619,198

Loss on Disposal of Assets 49,386 66,749

Total Operating Expenses 50,438,755 45,935,483

OPERATING LOSS

(123,399) (522,851)

NONOPERATING INCOME (LOSS)

Change in Unrealized Gains (Losses) on Investments 1,838,054 (8,336,754)

EXCESS (DEFICIT) OF REVENUES OVER (UNDER) EXPENSES

1,714,655 (8,859,605)

OTHER CHANGES IN NET ASSETS WITHOUT DONOR RESTRICTIONS

Net Assets Released from Restrictions for Payments of

Capital Project Related Debt Service 1,925,000 -

CHANGE IN NET DEFICIT WITHOUT DONOR RESTRICTIONS

3,639,655 (8,859,605)

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

COMBINED STATEMENTS OF OPERATIONS AND

CHANGES IN NET ASSETS (DEFICIT) (CONTINUED)

YEARS ENDED SEPTEMBER 30, 2023 AND 2022

See accompanying Notes to Combined Financial Statements.

(6)

2023 2022

NET ASSETS WITH DONOR RESTRICTIONS

Contributions 140,342$ 500,742$

Released from Restrictions (1,971,542) (32,130)

(DECREASE) INCREASE IN NET ASSETS WITH

DONOR RESTRICTIONS

(1,831,200) 468,612

CHANGE IN NET ASSETS

1,808,455 (8,390,993)

Net Assets (Deficit) - Beginning of Year (17,894,169) (9,503,176)

NET ASSETS (DEFICIT) - END OF YEAR

(16,085,714)$ (17,894,169)$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

YEARS ENDED SEPTEMBER 30, 2023 AND 2022

See accompanying Notes to Combined Financial Statements.

(7)

2023 2022

CASH FLOWS FROM OPERATING ACTIVITIES

Change in Net Assets 1,808,455$ (8,390,993)$

Adjustments to Reconcile Change in Net Assets to

Net Cash Used by Operating Activities:

Earned Entrance Fees (8,974,687) (8,239,759)

Depreciation 11,930,847 10,490,297

Amortization of Bond Issuance Costs 148,281 119,082

Amortization of Deferred Costs 31,015 17,470

Amortization of Bond Premium (546,012) (557,505)

Loss on Disposal of Assets 49,386 66,749

Change in Net Unrealized (Gains) Losses on Investments (1,838,054) 8,336,754

Realized Gains on Investments (489,245) (1,682,791)

(Increase) Decrease in:

Accounts Receivable (219,855) (160,396)

Pledges Receivable 293,554 (2,469)

Employee Retention Credit Receivable (4,934,993) -

Other Current Assets (13,405) (410,099)

Decrease in:

Accounts Payable, Excluding Amounts in Property and Equipment 32,211 (30,368)

Accrued Payroll and Employee Benefits (73,050) (67,695)

Accrued Bond Interest Expense, Net of Amounts Capitalized (29,195) (4,851)

Refundable Advance - Paycheck Protection Program - (1,911,845)

Net Cash Used by Operating Activities (2,824,747) (2,428,419)

CASH FLOWS FROM INVESTING ACTIVITIES

Change in Assets Limited as to Use, Net 254,649 (1,742,367)

Sales (Purchases) of Short-Term Investments, Net (821,067) 3,387,512

Sales (Purchases) of Long-Term Investments, Net 4,557,404 (1,080,685)

Purchases of Property for Routine Additions (4,959,183) (5,146,669)

Purchases of Property for Expansion Projects (5,450,119) (18,955,051)

Net Cash Used by Investing Activities (6,418,316) (23,537,260)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from Entrance Fees 18,554,310 14,604,631

Deposits Received, Net of Refunds and Conversions to Entrance Fees (493,520) (261,940)

Entrance Fees Refunded (3,590,579) (934,407)

Repayments of Long-Term Debt (12,963,843) (5,411,157)

Repa

y

ments of Line of Credit

(

3,950,000

)

-

Proceeds from Long-Term Debt 3,721,651 17,382,156

Proceeds from Line of Credit 6,120,000 -

Payments of Financing Costs (13,600) (17,223)

Repayments of Right-of-Use Lease Liability (41,069) (3,349)

Net Cash Provided by Financing Activities 7,343,350 25,358,711

NET DECREASE IN CASH, CASH EQUIVALENTS,

AND RESTRICTED CASH

(

1,899,713

)

(

606,968

)

Cash, Cash Equivalents, and Restricted Cash - Beginning of Year 8,226,770 8,833,738

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH -

END OF YEAR

6,327,057$ 8,226,770$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

YEARS ENDED SEPTEMBER 30, 2023 AND 2022

See accompanying Notes to Combined Financial Statements.

(8)

2023 2022

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash and Cash Equivalents 385,922$ 2,494,723$

Cash Held Under Bond Agreements 5,941,135 5,732,047

Total Cash, Cash Equivalents, and Restricted Cash

6,327,057$ 8,226,770$

SUPPLEMENTAL CASH FLOW INFORMATION

Cash Paid for Interest, Net of Amounts Capitalized

7,824,889$ 7,061,731$

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING

AND FINANCING ACTIVITIES

Property and Equipment Included in Accounts Payable, Retainage

Payable, and Accrued Interest Expense

647,711$ 2,899,212$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(9)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Southminster, Inc. (the Corporation) is a nonstock, nonprofit corporation organized under

the laws of the state of North Carolina. The Corporation was established to construct and

operate a multilevel residential and health care center (the Center). The Center’s purpose is

to operate a continuing care community providing a residential environment in which older

people may live independently for as long as they are able to do so. The Center opened for

operations on May 16, 1987, and has 60 licensed nursing beds and 25 assisted living beds.

During the year ended September 30, 2021, the Center opened its replacement health

center which resulted in two cottages and eight apartments being removed from inventory

and began renovation of its previous health center to convert it into 20 independent living

apartments. Two of the four phases of renovation were completed during the year ended

September 30, 2022, bringing 11 apartments into inventory; the final two phases were

completed during the year ended September 30, 2023, bringing 9 apartments into inventory

and the residential unit count to 324 (two apartments of which are used as guest rooms).

The Corporation is also a licensed home care provider, providing care primarily to residents

of its community. The license allows care to be provided outside of the community, with

revenues recorded in Other Income.

Southminster Foundation, Inc. (the Foundation) is a nonstock, nonprofit corporation

organized under the laws of the state of North Carolina on December 2, 1985. The

Foundation was established to operate exclusively for the benefit of the Corporation,

primarily through financial support to residents of the Center who are unable to meet their

financial obligations. During fiscal year 2014, the operations of the Foundation were moved

into the Corporation. There were no contributions for resident financial support to the

Foundation for the years ended September 30, 2023 and 2022, as contributions are now

recorded by the Corporation. Neither the Corporation nor the Foundation would be liable or

responsible in any matter for the debts or liabilities of the other. The Foundation did not have

any activity for the year ended September 30, 2023 or 2022, nor did it have any assets or

liabilities.

Principles of Combination

The combined financial statements include the accounts of the Corporation and the

Foundation (collectively, referred to herein as the Organization) with significant

intercompany accounts and transactions eliminated in combination.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally

accepted in the United States of America requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the combined financial statements, and the

reported amounts of revenues and expenses during the reporting period. Actual results

could differ from these estimates.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(10)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Cash and Cash Equivalents

All liquid investments with a maturity of three months or less at the time of purchase and not

limited as to their use or designated as long-term investments are considered to be cash

equivalents.

Accounts Receivable

Resident accounts receivable consists of resident monthly service fees and other resident

charges. When deemed necessary, the Corporation provides an allowance for uncollectible

accounts using management’s estimate about the collectability of any past due accounts.

Accounts past due are individually analyzed for collectability. Accounts receivable that

management determines will be uncollectible are written off upon such determination.

The allowance for uncollectible accounts as of September 30, 2023 and 2022 was

approximately $7,600 and $6,000, respectively.

Pledges Receivable

Pledges receivable consist of promises to pay from various individuals and foundations.

Pledges receivable that are expected to be collected more than a year out are presented at

net realizable value. Pledges receivable at September 30, 2023 and 2022 are designated for

a capital campaign.

Assets Limited as to Use

Assets Limited as to Use includes funds held by the trustee under a bond indenture

agreement, the Southminster Community Fund, the operating reserve required by the North

Carolina Department of Insurance, and proceeds from the capital campaign to be used to

pay down debt associated with the replacement health center.

Property and Equipment

Property and equipment is stated at cost. Assets contributed to the Corporation are

recorded at fair market value as of the date of receipt. Routine maintenance, repairs,

renewals, and replacement costs are charged to expense. Expenditures which materially

increase the value, change the capacities, or extend the useful lives of existing assets are

capitalized. Depreciation is computed by the straight-line method over the estimated useful

lives of the assets, which range from 3 to 30 years. Apartment refurbishment costs which, in

aggregate, total $2,500 or more per unit, are capitalized and depreciated over an average

seven-year period. Interest costs incurred during the construction period of significant

construction projects are capitalized as a cost of the constructed asset and amortized over

the useful life of the asset.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(11)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Investments

Investments in equity and debt securities are measured at fair value in the accompanying

combined financial statements. Investment income (including realized gains and losses on

investments, interest, and dividends) is included in excess (deficit) of revenues over (under)

expenses unless the income is restricted by donor or law. Unrealized gains and losses on

investments, if any, are included in nonoperating income (loss) and are also included in

excess (deficit) of revenues over (under) expenses.

Bond Issuance Costs

Bond issuance costs, which are amortized over the life of the bonds, which approximates

the effective interest method, include underwriters’ discounts, legal and consulting fees, and

printing costs incurred in issuing the Corporation’s revenue bonds. Accumulated

amortization at September 30, 2023 and 2022 was approximately $1,028,000 and $879,000,

respectively.

Entrance Fees

The Residence and Services Agreement (the Agreement), which is entered into at the time

a prospective resident pays a deposit equal to 10% of the published entrance fee, specifies

the services to be provided by the Corporation and the respective rights and duties of the

Corporation and resident. The liability associated with these advance deposits is reported as

advance entrance fee deposits in the accompanying combined balance sheets. Prospective

residents applying for direct admission to the Health Center are subject to the same

Agreement as those applying for independent living units.

The Corporation offers a standard contract in which entrance fees may be refunded on a

pro-rata basis to residents vacating a unit in the first 20 months of occupancy. Once a unit is

occupied, entrance fees are recorded as deferred entrance fee revenue. The deferred

revenue on the standard contracts is recognized as income over the actuarially determined

life of the resident.

The Corporation offers two refundable entrance fee plans. Under these plans, a new

resident can elect to pay a higher entrance fee, a portion of which is refundable only after

the unit is vacated and subsequently occupied by a new resident. The refundable fees under

this option are classified in the accompanying combined balance sheets as a refundable

entrance fees liability.

At September 30, 2023 and 2022, the portion of entrance fees subject to refund provisions

amounted to approximately $38,770,000 and $38,213,000, respectively.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(12)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Obligation to Provide Future Services

The Corporation annually calculates the present value of the net cost of future services and

the use of facilities to be provided to current residents and compares that amount with the

balance of deferred entrance fee revenue. If the present value of the estimated cost of future

services and use of facilities to be provided to current residents exceeds the deferred

revenue from entrance fees and the present value of periodic fees, a liability is recorded

(obligation to provide future services) with the corresponding change to income. The present

values of revenues and future service costs are calculated using a discount rate of 5.5%.

This calculation did not require the recording of a liability at either September 30, 2023 or

2022.

Net Assets (Deficit)

The Corporation reports its net assets using the following two classes: without donor

restrictions and with donor restrictions; depending on the presence and type of donor-

imposed restrictions limiting the Corporation’s ability to use or dispose of specific contributed

assets, or the economic benefits embodied in those assets. Net assets without donor

restrictions include those net assets whose use is not restricted by donors, even though

their use may be limited in other respects, such as by board designation. Net assets with

purpose donor restrictions are those net assets whose use by the Corporation has been

limited by donors to specified purposes. When a donor restriction is met (when the purpose

restriction is accomplished), net assets with donor restrictions are reclassified to net assets

without donor restrictions and reported in the combined statements of operations and

changes in net assets (deficit) as net assets released from restrictions. Donor restricted

contributions whose restrictions are met in the same reporting period are reported as

support without restrictions. Net assets with perpetual donor restrictions are those which

have been restricted by donors to be maintained by the Corporation in perpetuity. As of

September 30, 2023 and 2022, the Corporation did not have any net assets with perpetual

donor restrictions.

Charity Care and Community Benefit

The Corporation has a resident assistance policy to identify residents who are unable to

meet their financial obligations. Such residents are identified based on financial information

obtained from the resident and subsequent review, analysis, and approval by the

Corporation’s management and reported to the Corporation’s board of directors. Once

approved, monthly service fees are recorded by the Corporation and a corresponding

amount is recorded in the contra-revenue account, resident assistance. The Corporation

may also, at times, choose to waive all or a portion of a new resident’s entrance fees. The

Corporation is actively involved in the community through participation in various

educational, charitable, and volunteer service programs sponsored on campus or

throughout the community at large. The Corporation also allows various groups in the

community at large to use its facility space at no charge or at a reduced charge. The costs

of providing this community benefit is included in operating expense amounts on the

combined statements of operations and changes in net assets (deficit).

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(13)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Charity Care and Community Benefit (Continued)

The cost of providing resident support was $721,395 and $572,766 for the years ended

September 30, 2023 and 2022, respectively, estimated by applying a 4% operating margin

to the charges foregone. The Corporation waived entrance fees totaling $0 and $130,000 for

the years ended September 30, 2023 and 2022, respectively. Contributions to the

Corporation of $735,811 and $883,890 subsidized the costs of providing resident support

and community benefit for the years ended September 30, 2023 and 2022, respectively.

Excess (Deficit) of Revenues Over (Under) Expenses

The combined statements of operations and changes in net assets (deficit) include excess

(deficit) of revenues over (under) expenses. Changes in net assets without donor

restrictions which are excluded from excess (deficit) of revenues over (under) expenses

consistent with industry practice, include permanent transfers of assets to and from affiliates

for other than goods and services, and contributions of long-lived assets (including assets

acquired using contributions which by donor restriction were to be used for the purposes of

acquiring such assets), and net assets released from restrictions for payments of capital

project related debt service.

Fair Value of Financial Instruments

Fair value measurement applies to reported balances that are required or permitted to be

measured at fair value under an existing accounting standard. The Corporation emphasizes

that fair value is a market-based measurement, not an entity-specific measurement.

Therefore, a fair value measurement should be determined based on the assumptions that

market participants would use in pricing the asset or liability and establishes a fair value

hierarchy. The fair value hierarchy consists of three levels of inputs that may be used to

measure fair value as follows:

Level 1 – Inputs that utilize quoted prices (unadjusted) in active markets for identical

assets or liabilities that the Corporation has the ability to access.

Level 2 – Inputs that include quoted prices for similar assets and liabilities in active

markets and inputs that are observable for the asset or liability, either directly or

indirectly, for substantially the full term of the financial instrument. Fair values for these

instruments are estimated using pricing models, quoted prices of securities with similar

characteristics, or discounted cash flows.

Level 3 – Inputs that are unobservable inputs for the asset or liability, which are typically

based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from

different levels of the fair value hierarchy, the level in the fair value hierarchy within which

the entire fair value measurement falls is based on the lowest level input that is significant to

the fair value measurement in its entirety.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(14)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Fair Value of Financial Instruments (Continued)

Fair value measurement is based upon quoted prices, if available. If quoted prices are not

available, fair values are measured using independent pricing models or other model-based

valuation techniques such as the present value of future cash flows, adjusted for the

security’s credit rating, prepayment assumptions, and other factors such as credit loss

assumptions. Securities valued using Level 1 inputs include those traded on an active

exchange, such as the New York Stock Exchange, as well as U.S. Treasury and other U.S.

government and agency mortgage-backed securities that are traded by dealers or brokers in

active over-the-counter markets. The Corporation does not have any assets or liabilities that

are valued using Level 2 or Level 3 inputs at September 30, 2023 and 2022.

The Corporation follows the accounting standard that allows reporting certain financial

instruments at fair value. This standard allows entities the irrevocable option to elect fair

value for the initial and subsequent measurement for certain financial assets and liabilities

on an instrument-by-instrument basis. The Corporation has not elected to measure any

existing financial instruments at fair value. However, it may elect to measure newly acquired

financial instruments at fair value in the future.

Leases

The Corporation determines if an arrangement is a lease at inception. Operating leases are

included in property, plant, and equipment as right-of-use (ROU) assets and lease liability in

the combined balance sheet. ROU assets represent the Corporation’s right to use an

underlying asset for the lease term and lease liabilities represent the Corporation’s

obligation to make lease payments arising from the lease. ROU assets and liabilities are

recognized at the lease commencement date based on the present value of lease payments

over the lease term. Lease terms may include options to extend or terminate the lease when

it is reasonably certain that the Corporation will exercise that option. Lease expense for

operating lease payments is recognized on a straight-line basis over the lease term. The

Corporation has elected to recognize payments for short-term leases with a lease term of 12

months or less as expense as incurred and these leases are not included as lease liabilities

or right-of-use assets on the combined balance sheet.

The individual lease contracts do not provide information about the discount rate implicit in

the lease. Therefore, the Corporation has elected to use an incremental borrowing rate that

represents an estimate of the interest rate the Corporation would have to pay on any

borrowed funds.

Employee Retention Credit

The CARES Act allows a credit (Employee Retention Credit or ERC) against applicable

employment taxes for eligible employers. The management of the Corporation believes it

has complied with the conditions of the ERC and has claimed a credit of approximately

$4,935,000. At September 30, 2023, the corporation has recorded a receivable in the

amount of approximately $4,935,000 related to this credit.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(15)

NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Refundable Advance – Paycheck Protection Program

In March 2021, the Corporation received proceeds in the amount of $1,911,845 to fund

payroll, rent, utilities, and interest on mortgages and existing debt through the Paycheck

Protection Program (the PPP Loan). The PPP Loan may be forgiven by the U.S. Small

Business Administration (SBA) subject to certain performance barriers, as outlined in the

loan agreement and the CARES Act. During the year ended September 30, 2022, the SBA

forgave the full $1,911,845 of the PPP Loan held by the Corporation and at that time the

Corporation recognized the amount forgiven as Contributions – Paycheck Protection

Program in the combined statement of operations and changes in net assets (deficit). With

the forgiveness of the loan, the Corporation was not liable to make any principal or interest

payments. The SBA may review funding eligibility and the usage of funds in compliance with

the program based on the dollar threshold and other factors. The amount of liability, if any,

from potential noncompliance cannot be determined with certainty; however, management is

of the opinion that any review will not have a material adverse impact on the Corporation’s

financial position.

Provider Relief Funding

Due to the Coronavirus pandemic, the U.S. Department of Health and Human Services

(HHS) made available emergency relief grant funds to health care providers through the

CARES Act Provider Relief Fund (PRF). During the year ended September 30, 2022, the

Corporation received approximately $699,000 in PRF. The Corporation did not receive any

additional funds in the year ended September 30, 2023. The PRF’s are subject to certain

restrictions on eligible expenses or uses, reporting requirements, and will be subject to

audit. As of September 30, 2022, the Corporation recognized approximately $699,000 as

other income in the combined statements of operations and changes in net assets (deficit).

The Corporation did not recognize any amounts as other income as of September 30, 2023.

Management believes the amounts have been recognized appropriately as of

September 30, 2023 and 2022.

Income Taxes

The Corporation and the Foundation have been recognized by the Internal Revenue Service

as exempt from income taxes under Internal Revenue Code Section 501(c)(3). The

Corporation is classified as a public charity under Section 509a(1) and the Foundation is

classified as a Type I supporting organization under Section 509a(3) of the Internal Revenue

Code.

The Corporation and Foundation file as tax-exempt organizations. The Corporation and the

Foundation are not aware of any activities that would jeopardize their tax-exempt status.

The Corporation and the Foundation are not aware of any activities that are subject to tax on

unrelated business income or excise or other taxes.

The Corporation and the Foundation follow guidance in the income tax standard regarding

recognition and measurement of uncertain tax positions. The application of the standard has

had no impact on the Corporation and the Foundation’s combined financial statements.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(16)

NOT

E 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

Subsequent Events

In preparing these combined financial statements, the Organization has evaluated events

and transactions for potential recognition or disclosure through January 23, 2024, the

date the combined financial statements were available to be issued.

NOTE 2 RESIDENT SERVICE REVENUE

Resident service revenue is reported at the amount that reflects the consideration to which

the Corporation expects to be entitled in exchange for providing resident care. These

amounts are due from residents. Monthly service fees paid by residents for maintenance,

meals, and other services are assessed monthly and are recognized as revenue in the

period services are rendered. Revenue is recognized as performance obligations are

satisfied.

Performance obligations are determined based on the nature of the services provided by the

Corporation. Revenue for performance obligations satisfied over time is recognized based

on actual charges incurred in relation to total expected (or actual) charges. The Corporation

believes that this method provides a faithful depiction of the transfer of services over the

term of the performance obligation based on the inputs needed to satisfy the obligation.

Generally, performance obligations satisfied over time relate to residents living at

Southminster receiving independent living or healthcare services. The Corporation

considers daily services provided to residents of the health center, and monthly rent charged

to residents living in independent living, as a separate performance obligation measured on

a monthly basis or upon move-out within the month, whichever is shorter. Nonrefundable

entrance fees are considered to contain a material right associated with access to future

services, which is the related performance obligation. Revenue from nonrefundable

entrance fees is recognized ratably in future periods covering a resident’s life expectancy

using a time-based measurement similar to the output method. Revenue for performance

obligations satisfied at a point in time is generally recognized when goods are provided to

residents and customers in a retail setting (for example, meals or guest rooms) and

Southminster does not believe it is required to provide additional goods or services related

to that sale.

Because all of its performance obligations have a duration of less than one year, the

Corporation has elected to apply the optional exemption provided in FASB

ASC 606-10-50-14(a) and, therefore, is not required to disclose the aggregate amount of the

transaction price allocated to performance obligations that are unsatisfied or partially

unsatisfied at the end of the reporting period.

The Corporation determines the transaction price based on standard charges for goods and

services provided, assistance provided to residents in accordance with the Corporation’s

policy, and/or implicit price concessions provided to residents. The Corporation determines

its estimate of implicit price concessions based on its historical collection experience.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(17)

NOTE 2 RESIDENT SERVICE REVENUE (CONTINUED)

The Corporation has determined that the nature, amount, timing, and uncertainty of revenue

and cash flows are affected by the following factors: service line, method of payment, and

timing of when revenue is recognized.

All resident service revenue is from private pay individuals.

The composition of resident service revenue based on the Corporation’s lines of business,

method of payment, and timing of revenue recognition for the years ended September 30

are as follows:

2023 2022

Service Lines:

Independent Living 20,451,740$ 18,540,893$

Health Care Services 12,587,268 11,509,910

Amortization of Entrance Fees

8,974,687 8,239,759

Total

42,013,695$ 38,290,562$

Method of Payment:

Monthly Service Fees 20,026,122$ 18,141,820$

Per Diem Fees

9,343,800 8,846,921

Fee for Service

3,669,086 3,062,062

Amortization of Entrance Fees

8,974,687 8,239,759

Total

42,013,695$ 38,290,562$

Timing of Revenue and Recognition:

Health Care Services Transferred Over Time 42,013,695$ 38,290,562$

Contract Costs

The Corporation has applied the practical expedient provided by FASB ASC 340-40-25-4

and all incremental customer contract acquisition costs are expensed as they are incurred

as the amortization period of the asset that the Corporation otherwise would have

recognized is one year or less in duration.

The opening and closing contract balances related to resident accounts receivable and

residence and services agreements were as follows:

Accounts

Receivable

Deferred

Revenue

Balance as of October 1, 2021 222,464$ 60,928,373$

Balance as of September 30, 2022 382,860 64,352,660

Balance as of September 30, 2023 602,715 70,731,643

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(18)

NOTE 3 ASSETS LIMITED AS TO USE

Assets limited as to use, reported at fair value, are comprised of the following at

September 30:

2023 2022

Cash and Cash Equivalents 6,207,399$ 7,503,833$

Fixed Income Securities 5,081,880 2,889,069

Fixed Income Securities Funds 2,116,588 2,102,821

U.S. Government Securities 3,931,051 5,737,908

Equity Securities Funds 2,460,964 2,307,595

Equity Securities 2,710,323 2,012,540

Subtotal 22,508,205 22,553,766

Less: Amounts Required to Meet Current Obligations (5,656,924) (5,643,149)

Total 16,851,281$ 16,910,617$

Amounts restricted under debt agreements are comprised of the following at September 30:

2023 2022

Series 2016 Interest Account 1,231,260$ 1,286,635$

Series 2016 Principal Account 2,325,127 2,215,072

Series 2016 Debt Service Reserve 4,698,475 4,583,620

Series 2018 Debt Service Reserve 4,235,936 4,132,256

Series 2018 Interest Account 2,100,536 2,141,442

Subtotal 14,591,334 14,359,025

Less: Amounts Required to Meet Current Obligations (5,656,924) (5,643,149)

Total 8,934,410$ 8,715,876$

NOTE 4 PLEDGES RECEIVABLE

Pledges receivable have been recorded at net present value as of September 30 and were

as follows:

2023 2022

Due in Less than One Year

178,872$ 203,172$

Due in Two Years or More

148,625 448,192

Total Pledges Receivable

327,497 651,364

Less: Net Present Value Discount

(10,102) (31,415)

Less: Allowance

(13,725) (22,725)

Less: Current Portion

(178,872) (203,172)

Pledges Receivable, Net

124,798$ 394,052$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(19)

NOTE 5 PROPERTY AND EQUIPMENT

The Corporation’s property and equipment, including right-of-use assets, consists of the

following at September 30:

2023 2022

Land and Land Improvements

5,396,637$ 5,229,017$

Building and Improvements

287,071,596 271,857,745

Furniture and Equipment

10,489,302 10,167,010

Subtotal

302,957,535 287,253,772

Less: Accumulated Depreciation

(103,655,185) (92,932,063)

Total

199,302,350 194,321,709

Construction in Progress

3,910,529 12,669,196

Property and Equipment, Net

203,212,879$ 206,990,905$

There was approximately $41,000 and $197,000 of interest capitalized during the years

ended September 30, 2023 and 2022, respectively.

Construction in progress at September 30, 2023 relates primarily to the Corporation’s

renovations of dining space being funded out of operations. Construction in progress at

September 30, 2022 relates primarily to the Corporation’s construction costs incurred

converting its previous health center space into 20 independent living homes within its main

building.

NOTE 6 INVESTMENTS

Investments, reported at fair value, are comprised of the following at September 30:

2023 2022

Cash and Cash Equivalents 1,033,527$ 177,172$

Fixed Income Securities Funds 3,764,173 5,196,144

Fixed Income Securities 645,086 -

Equity Securities Funds 4,376,618 5,702,150

Equity Securities 4,820,082 4,973,058

Total Investments 14,639,486 16,048,524

Less: Short-Term Investments (821,067) -

Long-Term Investments 13,818,419$ 16,048,524$

Investment income is comprised of the following for the years ended September 30:

2023 2022

Investment Income:

Interest and Dividend Income

879,942$ 885,540$

Net Realized Gains on Sales of Investments

489,245 1,682,791

Total 1,369,187$ 2,568,331$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(20)

NOTE 6 INVESTMENTS (CONTINUED)

Board-managed investments, which include long-term investments, investments designated

to fund the North Carolina Department of Insurance Operating Reserve, and the

Southminster Community Fund, are guided by an investment policy adopted by the board of

directors. The long-term objective of the policy is to provide growth of capital and income,

using diversification to manage risk.

NOTE 7 LONG-TERM DEBT AND LINE OF CREDIT

The Corporation’s long-term debt consists of the following at September 30:

Description 2023 2022

Retirement Facilities First Mort

g

a

g

e Revenue Refundin

g

Bonds Series 2016

(

Maturin

g

on October 1, 2020

Throu

g

h 2037 with an Interest Rate of 5%

)

49,870,000$ 52,085,000$

Retirement Facilities First Mort

g

a

g

e Revenue Bonds

Series 2018

(

Maturin

g

on October 1, 2038 Throu

g

h 2053

with an Interest Rate of 4.25% - 5%

)

84,275,000 86,200,000

2021 Bank Loan due June 30, 2028, with a Variable

Interest Rate of 1.30% Plus One-Month LIBOR

- 8,703,843

2021 Bank Loan due June 30, 2033, with a Variable

Interest Rate of 1.41% Plus 1-Month CME Term SOFR

17,880,000 14,278,348

Total 152,025,000 161,267,191

Add: Unamortized Bond Premium 6,689,189 7,235,202

Less: Unamortized Bond Issuance Costs (2,210,081) (2,344,762)

Total

156,504,108 166,157,631

Less: Current Portion (3,045,000) (4,544,406)

Total Long-Term Debt 153,459,108$ 161,613,225$

The following schedule presents future principal payments due on all the Corporation’s

outstanding long-term debt:

Year Ending September 30,

Amount

2024 3,045,000$

2025 3,160,000

2026 3,275,000

2027 3,400,000

2028 3,535,000

Thereafter 135,610,000

Total 152,025,000$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(21)

NOTE 7 LONG-TERM DEBT AND LINE OF CREDIT (CONTINUED)

Expansion Project

On June 30, 2021, the Corporation entered into two term loan agreements with a financial

institution to provide up to $30,000,000 to refinance existing bank debt issued for

independent living construction completed in prior years and to finance renovations to

convert the previous health center space into 20 independent living apartments, with

construction completed during the year ended September 30, 2023. At issuance, the term

loans bore interest at one-month LIBOR plus 1.30%. Loan 1 was comprised of $12,000,000

in principal, had a seven-year maturity, and was expected to be repaid in full from project

entrance fees. As of September 30, 2022, Loan 1 was fully drawn and $3,296,157 had been

repaid out of entrance fee proceeds received, and as of September 30, 2023, Loan 1 had

been fully repaid out of entrance fee proceeds received. Loan 2 is comprised of $18,000,000

in principal and has a final maturity of 12 years; interest-only payments were due monthly

during the draw period. Effective on the first interest rate change date on or after July 5,

2023, Loan 2 bears interest at one-month CME Term SOFR plus 1.4%. Principal and

interest payments began being made on a monthly basis in August 2023, equal to 1/300 of

the outstanding principal balance on the Completion Date (defined in the loan agreement as

the date occurring on the first business day of the seventh month after the receipt of the final

certificate of occupancy, but in any event not before July 3, 2023). Loan 2 was fully drawn

during the year ended September 30, 2023, with $120,000 in principal payments made,

leaving $17,880,000 outstanding at September 30, 2023.

On July 18, 2018, the Corporation entered into a loan agreement with the Public Finance

Authority (the Authority) and, concurrently, the Authority issued its $86,200,000 Retirement

Facilities First Mortgage Revenue Bonds (Southminster), Series 2018 (Series 2018 Bonds).

The Series 2018 Bonds were issued to finance the construction of a replacement health

center and a portion of the two independent living construction projects (financed by a

combination of the Series 2018 Bonds and previously issued bank loans, as discussed

above). The Series 2018 Bond proceeds were also used for additional common areas,

kitchen expansion, office spaces for environmental services operations (housekeeping,

maintenance, transportation), a reconfigured loading dock, and to pay issuance costs and

fund debt service reserves. During the year ended September 30, 2023, the Corporation

used capital campaign proceeds to accelerate, without penalty, principal payments totaling

$1,925,000. Subsequent to year end, the Corporation accelerated an additional principal

payment of $80,000.

Line of Credit

On June 30, 2021, the Corporation entered into an agreement with a financial institution for

a $2,000,000 revolving line of credit. Any outstanding balance would bear interest at a rate

of one-month LIBOR plus 2.25%; all principal outstanding was due June 29, 2022. No

amounts were drawn on this line of credit and it expired on June 29, 2022. On June 29,

2022, the Corporation entered into an agreement with a financial institution for a $3,000,000

revolving line of credit. Any outstanding balance would bear interest at a rate of Term SOFR

plus 2.50% (with a floor of 0.00%). On June 28, 2023, the agreement was amended to

increase the revolving line of credit from $3,000,000 to $5,000,000. All principal outstanding

is due June 27, 2024. As of September 30, 2023, $2,170,000 was outstanding on the line of

credit.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(22)

NOTE 7 LONG-TERM DEBT AND LINE OF CREDIT (CONTINUED)

Other Long-Term Debt

2007 Expansion, Financing, and Refinancing

In 2007, the Corporation undertook a $73 million expansion and renovation project which

resulted in the addition of 89 new independent living apartments, a new wellness/aquatic

center, expansion of and enhancements to administrative and common areas, and a modest

renovation to the health center. Construction began in January 2007 using a bank line of

credit and construction loan that was later repaid with permanent financing. Construction

was completed during fiscal year 2010 and stable occupancy was reached in the first

quarter of the 2013 fiscal year. On November 15, 2007, the Corporation entered into a loan

agreement with the North Carolina Medical Care Commission (the Medical Care

Commission) and, concurrently, the Medical Care Commission issued $62,180,000 and

$2,000,000 Fixed Rate Retirement Facilities First Mortgage Revenue Bonds (Southminster

Project) Series 2007A and 2007B Bonds (Series 2007A Bonds and Series 2007B Bonds),

respectively, and $25,500,000 Variable Rate Retirement Facilities First Mortgage Revenue

Bonds (Southminster Project) Series 2007C (Series 2007C Bonds). In addition to repaying

the outstanding construction loan and line of credit, the proceeds from Series 2007 Bonds

were deposited with the trustee to cover the remaining construction, capitalized interest, and

other project-related costs; to pay for costs of issuance; and to fund various debt service

reserves. The Series 2007B and Series 2007C Bonds have been repaid in prior years.

On November 10, 2016, the Corporation entered into a loan agreement with the North

Carolina Medical Care Commission (the Medical Care Commission) and, concurrently, the

Medical Care Commission issued $58,765,000 Retirement Facilities First Mortgage

Revenue Refunding Bonds Series 2016 to advance refund the Series 2007A Bonds, pay for

costs of issuance, and fund debt reserves. The Series 2016 Bonds mature on October 1,

2020 through 2037 with interest rates of 5%.

Debt Compliance

Under the terms of the Second Amended and Restated Master Trust Indenture dated

November 1, 2007, the Trust Agreements, and the Loan Agreements (the Agreements), the

Corporation is subject to certain restrictive covenants and reporting requirements, among

which are a Rate covenant requiring a Historical Debt Service Coverage Ratio of 1.20:1 and

a Liquidity covenant requiring a minimum Days’ Cash on Hand of 180 days. Under the

Series 2018 Loan Agreement dated July 1, 2018, the Corporation was also required to meet

marketing and occupancy covenants until the project stabilization date, which was deemed

met as of April 1, 2021. All outstanding Long-Term Debt issuances are secured by a deed of

trust of certain facilities of the Corporation.

Management is non aware of any noncompliance with the covenants contained in the

Master Trust Indenture, the Trust Agreements, and the Loan Agreements. To the extent that

investment earnings are credited to the bond funds, future deposits to such accounts are

reduced. Substantially all property and equipment is pledged as security.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(23)

NOTE 8 RIGHT-OF-USE LEASES

The Corporation leases office equipment for various terms under long-term, noncancelable

lease agreements, expiring at various dates through 2027.

The maturity analysis of annual discounted cash flows for lease liabilities as of

September 30, 2023, is as follows:

Year Ending September 30,

Amount

2024 49,068$

2025 49,068

2026 49,068

2027 44,965

Total Lease Payments

192,169

Less: Current Portion (42,741)

Less: Imputed Interest (14,558)

Present Value of Lease Payable, Net of Current Portion

134,870$

The lease payable will continue to be impacted by new leases, lease modifications, lease

terminations, and reevaluation of any new facts and circumstances. As of September 30,

2023, the weighted average lease term remaining that is included in the maturities of the

leases payable is four years.

As the rate implicit in each lease is not readily determinable, the Corporation uses an

incremental borrowing rate to calculate the lease liability that represents an estimate of the

interest rate the Corporation would have to borrow on a collateralized basis over the term of

the lease. The weighted average discount rate used for leases was 4.0% at September 30,

2023.

NOTE 9 BENEFIT PLAN

The Corporation maintains a defined contribution savings retirement plan (the Plan) eligible

to all employees. For all employees having been employed for one year, through

December 31, 2021, the Corporation made a 100% match of an employee’s contribution to

the Plan up to 4% and a 1.5% discretionary contribution each pay period. Effective

January 1, 2022, the Corporation began making a 100% match of an employee’s

contribution to the Plan up to 6% and no longer makes the 1.5% discretionary contribution to

the Plan. The Corporation’s contributions to the Plan for the years ended September 30,

2023 and 2022 were $455,606 and $441,688, respectively.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(24)

NOTE 10 CONTINUING CARE LICENSE

In November 1992, the North Carolina Department of Insurance (the Department) issued a

continuing care facility license to the Corporation, effective September 1, 1992. The license

may require the Corporation to provide quarterly interim financial and occupancy statements

to the Department. Additionally, all prospective residents are required to sign an

acknowledgement of receipt of the current disclosure statement.

NOTE 11 OPERATING RESERVE

The General Statutes of the state of North Carolina require that continuing care retirement

communities, such as the Corporation, maintain an Operating Reserve equal to 50% of the

current year’s projected operating expenses. As provided in the statutes, the Commissioner

of the North Carolina Department of Insurance may reduce the Operating Reserve

requirement to 25% if the occupancy level of the facility is in excess of 90%, or such other

reasons as deemed appropriate by the department.

On September 30, 2023 and 2022, the Corporation’s occupancy was above 90%,

mandating the lower Operating Reserve requirement. The Operating Reserve is funded with

a portion of the Corporation’s long-term investments, as permitted by state statute and the

Corporation’s investment policy.

NOTE 12 NET ASSETS WITH DONOR RESTRICTIONS

Net assets with donor restrictions consist of the following at September 30:

2023 2022

Restricted for Time:

Pledges Receivable 303,670$ 597,224$

Restricted for Purpose:

Capital Campaign 146,799 1,700,086

Other 68,644 53,003

Total 519,113$ 2,350,313$

Net assets released from restriction relate to various Southminster initiatives and totaled

approximately $47,000 and $32,000 for the years ended September 30, 2023 and 2022,

respectively. Net assets released from restriction related to debt repayment totaled

$1,925,000 for the year ended September 30, 2023.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(25)

NOTE 13 LIQUIDITY AND AVAILABILITY

Southminster invests cash in excess of short-term requirements in short-term investments.

In addition, Southminster has long-term mutual funds and equity securities which are liquid

within one week. Southminster also has a $5,000,000 revolving line of credit, of which

$2,830,000 is available as of September 30, 2023.

Financial assets available for general expenditure, that is, without donor or other restrictions

limiting their use, within one year of the balance sheet date, comprise the following:

2023 2022

Cash and Cash E

q

uivalents 385,922$ 2,494,723$

Investments:

Cash and Cash Equivalents

1,033,527 177,172

Fixed Income Securities Funds

3,764,173 5,196,144

Fixed Income Securities

645,086 -

Equity Securities Funds

4,376,618 5,702,150

Equity Securities

4,820,082 4,973,058

Accounts Receivable 602,715 382,860

Less: Net Assets with Donor Restrictions - Other

(

68,644

)

(

53,003

)

Total Financial Assets Available to Meet

Liquidity Needs 15,559,479$ 18,873,104$

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(26)

NOTE 14 FAIR VALUE MEASUREMENTS

The Corporation uses fair value measurements to record fair value adjustments to certain

assets and liabilities and to determine fair value disclosures. For additional information on

how the Corporation measures fair value refer to Note 1 – Organization and Summary of

Significant Accounting Policies. The following tables present the fair value hierarchy for the

balances of the assets and liabilities of the Corporation measured at fair value on a recurring

basis as of September 30:

Level 1 Level 2 Level 3 Total

Assets:

Assets Limited as to Use:

Fixed Income 5,081,880$ -$ -$ 5,081,880$

Fixed Income Securities Funds 2,116,588 - - 2,116,588

U.S. Government Securities 3,931,051 - - 3,931,051

Equity Securities Funds 2,460,964 - - 2,460,964

Equity Securities 2,710,323 - - 2,710,323

Subtotal 16,300,806 - - 16,300,806

Investments:

Fixed Income Securities Funds 3,764,173 - - 3,764,173

Fixed Income Securities 645,086 - - 645,086

Equity Securities Funds 4,376,618 - - 4,376,618

Equity Securities 4,820,082 - - 4,820,082

Subtotal 13,605,959 - - 13,605,959

Total Assets Measured at Fair Value 29,906,765$ -$ -$ 29,906,765$

2023

Level 1 Level 2 Level 3 Total

Assets:

Assets Limited as to Use:

Fixed Income 2,889,069$ -$ -$ 2,889,069$

Fixed Income Securities Funds 2,102,821 - - 2,102,821

U.S. Government Securities 5,737,908 - - 5,737,908

Equity Securities Funds 2,307,595 - - 2,307,595

Equity Securities 2,012,540 - - 2,012,540

Subtotal 15,049,933 - - 15,049,933

Investments:

Fixed Income Securities Funds 5,196,144 - - 5,196,144

Equity Securities Funds 5,702,150 - - 5,702,150

Equity Securities 4,973,058 - - 4,973,058

Subtotal 15,871,352 - - 15,871,352

Total Assets Measured at Fair Value 30,921,285$ -$ -$ 30,921,285$

2022

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(27)

NOTE 15 FUNCTIONAL EXPENSES

Program, management, and fundraising expenses for the years ended September 30, 2023

and 2022 are summarized as follows:

Program Management

Services and General Fundraising Total

Salaries, Wages, and Employee Benefits

18,072,702$ 3,049,021$ 86,960$

21,208,683$

Maintenance, Housekeeping, and Utilities

3,443,434 56,790 -

3,500,224

Food and Related Supplies

1,934,914 - -

1,934,914

Insurance

- 409,141 -

409,141

Consulting and Professional Fees

106,230 602,839 17,500

726,569

Other Operating Expenses

1,717,250 1,481,390 51,509

3,250,149

Depreciation

11,778,024 152,823 -

11,930,847

Amortization of Deferred Costs

31,015 - -

31,015

Interest Expense

7,303,068 94,759 -

7,397,827

Loss on Disposal of Assets

49,386 - -

49,386

Total Functional Expenses 44,436,023$ 5,846,763$ 155,969$ 50,438,755$

2023

Program Management

Services and General

Fundraisin

g

Total

Salaries, Wages, and Employee Benefits

16,091,343$ 2,842,564$ 80,420$

19,014,327$

Maintenance, Housekeeping, and Utilities

3,034,964 50,704 -

3,085,668

Food and Related Supplies

1,847,535 - -

1,847,535

Insurance

- 378,518 -

378,518

Consulting and Professional Fees

100,643 322,969 -

423,612

Other Operating Expenses

2,551,218 1,404,910 35,981

3,992,109

Depreciation

10,355,926 134,371 -

10,490,297

Amortization of Deferred Costs

17,470 - -

17,470

Interest Expense

6,534,412 84,786 -

6,619,198

Loss on Disposal of Assets

66,749 - -

66,749

Total Functional Expenses 40,600,260$ 5,218,822$ 116,401$ 45,935,483$

2022

The combined financial statements report certain categories of expenses that are

attributable to more than one program or supporting function. Therefore, these expenses

require allocation on a reasonable basis that is consistently applied. The expenses that are

allocated on a square footage basis include depreciation and interest expense.

SOUTHMINSTER, INC.

(SOUTHMINSTER, INC. AND SOUTHMINSTER FOUNDATION, INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023 AND 2022

(28)

NOT

E 16 COMMITMENTS AND CONTINGENCIES

Health Care Industry

The Corporation is subject to legal proceedings and claims which arise in the ordinary

course of business. The Corporation maintains liability insurance coverage for claims

occurring during the policy year. Occurrence-based policies need only to be in effect on the

date that an accident causing damage occurs in order to trigger coverage. In management’s

opinion, adequate provision has been made for amounts expected to be paid under the

policy’s deductible limits for claims not covered by the policy and any other uninsured

liability.

Self-Insured Health Plan

The Corporation is self-insured for its employee health plan and purchases specific stop-

loss protection for all claims over $90,000 and aggregate stop-loss protection for total claims

which exceed $1,000,000. An accrual for the self-insurance program was established to

provide for estimated claims incurred but not reported. This accrual totaled approximately

$126,000 and $153,000 at ended September 30, 2023 and 2022, respectively, and is

included in Accrued Payroll and Employee Benefits on the combined balance sheets.

Dining Renovation

In September 2022, the Corporation signed a construction contract for renovations in the

Promenade Dining, Main Kitchen, and Great Room areas. The contract stipulates that the

cost of the project is to be capped at $3,012,017 as originally designed, with $174,331 in

change orders executed through September 30, 2023. Work began on the project in

January 2023, with full completion by November 2023. As of September 30, 2023, there are

$77,245 in remaining construction costs, including retainage.

ATTACHMENT 2 -

- Five Year Forecast

SOUTHMINSTER, INC.

FORECASTED FINANCIAL STATEMENTS AND

INDEPENDENT ACCOUNTANTS’ COMPILATION REPORT

FOR THE FIVE YEARS ENDING

SEPTEMBER 30, 2024 THROUGH SEPTEMBER 30, 2028

TABLE OF CONTENTS

Independent Accountants’ Compilation Report ............................................................................. 1

Forecasted Statements of Operations and Changes in Net Deficit

For the Five Years Ending September 30, 2024 through 2028 ......................................... 2

Forecasted Statements of Cash Flows

For the Five Years Ending September 30, 2024 through 2028 ......................................... 3

Forecasted Balance Sheets

At September 30, 2024 through 2028 ............................................................................... 4

Summary of Significant Forecast Assumptions and Accounting Policies

Background and Information ............................................................................................. 5

Summary of Significant Accounting Policies ..................................................................... 9

Management’s Basis for Forecast of Revenue ............................................................... 15

Management’s Basis for Forecast of Expenses .............................................................. 20

Management’s Basis for Forecast of Other Items ........................................................... 22

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1

INDEP

ENDENT ACCOUNTANTS’ COMPILATION REPORT

Board of Directors

Southminster, Inc.

Charlotte, North Carolina

Management is responsible for the accompanying forecasted financial statements of Southminster, Inc.

(the Corporation), which comprise the forecasted balance sheets as of September 30, 2024, 2025, 2026,

2027 and 2028, and the related forecasted statements of operations and changes in net deficit, and cash

flows for the years then ending, and the related summaries of significant forecast assumptions and

accounting policies in accordance with the guidelines for presentation of a financial forecast established

by the American Institute of Certified Public Accountants (AICPA). We have performed a compilation

engagement in accordance with Statements on Standards for Accounting and Review Services

promulgated by the Accounting and Review Services Committee of the AICPA. We did not examine or

review the forecasted financial statements nor were we required to perform any procedures to verify the

accuracy or completeness of the information provided by management. Accordingly, we do not express

an opinion, a conclusion, nor provide any form of assurance on this forecast.

Furthermore, the forecasted results may not be achieved, as there will usually be differences between

the forecasted and actual results, because events and circumstances frequently do not occur as

expected, and those differences may be material.

The accompanying forecasted information and this report are intended solely for the information and use

of management, the Board of Directors, and the North Carolina Department of Insurance (pursuant to

the requirements of North Carolina General Statutes, Chapter 58, Article 64 and is included in the

Corporation’s disclosure statement filing), and is not intended to be and should not be used, by anyone

other than these specified parties.

We have no responsibility to update this report for events and circumstances occurring after the date of

this report.

CliftonLarsonAllen LLP

Charlotte, North Carolina

February 26, 2024

SOUTHMINSTER, INC.

FORECASTED STATEMENTS OF OPERATIONS AND CHANGES IN NET DEFICIT

FOR THE YEARS ENDING SEPTEMBER 30,

See Accompanying Independent Accountants’ Compilation Report and Summary of Significant

Forecast Assumptions and Accounting Policies

2

2024 2025 2026 2027 2028

REVENUES, GAINS, AND OTHER SUPPORT

Independent Living Revenue 21,509,020$ 22,622,554$ 23,765,135$ 24,700,082$ 25,550,106$

Healthcare Revenue 13,311,543 13,769,352 14,573,732 15,236,732 15,830,996

Earned Entrance Fees 9,952,494 11,677,936 11,692,868 11,770,116 11,928,116

Investment Income 694,322 1,204,365 1,269,231 1,381,465 1,572,809

Contributions 690,000 710,700 732,021 753,982 776,601

Net Assets Released from Restrictions for Operations 28,025 - - - -

Other Income 1,398,432 1,462,892 1,525,491 1,585,032 1,631,631

Total Revenues, Gains and Other Support 47,583,836 51,447,799 53,558,478 55,427,409 57,290,259

OPERATING EXPENSES:

Healthcare Expenses 6,066,982 6,248,993 6,436,461 6,629,554 6,828,442

Administrative Expenses 6,597,108 6,938,350 7,252,258 7,516,084 7,772,065

Maintenance Expenses 5,167,666 5,322,698 5,482,380 5,646,849 5,816,257

Laundry Expenses 181,496 186,940 192,549 198,325 204,274

Housekeeping Expenses 2,282,440 2,391,160 2,486,328 2,585,287 2,662,845

Dietary Expenses 6,116,999 6,391,147 6,646,026 6,878,240 7,084,587

Other Expenses 5,416,023 5,684,641 5,910,905 6,146,183 6,330,571

Depreciation 12,541,482 12,889,093 13,054,730 13,238,561

13,209,741

Amortization 26,052 21,323 21,299 20,321 18,080

Interest Expense 7,610,426 7,233,107 6,867,478 6,559,710 6,407,820

Total Operating Expenses 52,006,674 53,307,452 54,350,414 55,419,114 56,334,682

OPERATING INCOME (LOSS) (4,422,838) (1,859,653) (791,936) 8,295 955,577

OTHER CHANGES IN NET ASSETS WITHOUT DONOR RESTRICTIONS:

Net Assets Released from Restrictions for Payments of Debt Service 185,000 96,850 28,100 22,100 1,300

(4,237,838) (1,762,803) (763,836) 30,395 956,877

NET ASSETS (DEFICIT) WITHOUT DONOR RESTRICTIONS, BEGINNING OF YEAR (16,604,827) (20,842,665) (22,605,468) (23,369,304) (23,338,909)

NET ASSETS (DEFICIT) WITHOUT DONOR RESTRICTIONS, END OF YEAR (20,842,665) (22,605,468) (23,369,304) (23,338,909) (22,382,032)

NET ASSETS WITH DONOR RESTRICTIONS

Net Assets Released from Restrictions (213,025) (96,850) (28,100) (22,100) (1,300)

Contributions 36,300 6,000 5,500 5,000 4,000

CHANGE IN NET ASSETS WITH DONOR RESTRICTIONS (176,725) (90,850) (22,600) (17,100) 2,700

NET ASSETS WITH DONOR RESTRICTIONS, BEGINNING OF YEAR 519,113 342,388 251,538 228,938 211,838

NET ASSETS WITH DONOR RESTRICTIONS, END OF YEAR 342,388 251,538 228,938 211,838 214,538

CHANGE IN NET ASSETS (DEFICIT) (4,414,563) (1,853,653) (786,436) 13,295 959,577

NET DEFICIT, BEGINNING OF YEAR (16,085,714) (20,500,277)

(22,353,930) (23,140,366) (23,127,071)

NET DEFICIT, END OF YEAR (20,500,277)$ (22,353,930)$ (23,140,366)$ (23,127,071)$ (22,167,494)$

EXCESS (DEFICIT) OF REVENUES OVER EXPENSES AND INCREASE (DECREASE) IN NET

ASSETS (DEFICIT) WITHOUT DONOR RESTRICTIONS

SOUTHMINSTER, INC.

FORECASTED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDING SEPTEMBER 30,

See Accompanying Independent Accountants’ Compilation Report and Summary of Significant

Forecast Assumptions and Accounting Policies

3

2024 2025 2026 2027 2028

CASH FLOWS FROM OPERATING ACTIVITIES

Change in net asset (deficit) (4,414,563)$ (1,853,653)$ (786,436)$ 13,295$ 959,577$

Adjustments to reconcile change in net asset (deficit)

to net cash provided (used) by operating activities:

Depreciation and amortization 12,567,534 12,910,416 13,076,029 13,258,882 13,227,821

Amortization of debt issuance cost 114,096 103,894 103,896 103,895 103,895

Change in other assets 90,850 22,600 17,100 (2,700) (3,052)

Decrease (increase) in other currrent assets 5,435,793 21,608 (42,706) (29,525) (50,975)

Increase (decrease) in current liabilities (201,088) (5,409) (3,701) 8,357 13,464

Earned entrance fees (9,952,494) (11,677,937) (11,692,867) (11,770,116) (11,928,116)

Amortization of premium (522,773) (501,944) (482,211) (461,511) (439,770)

Net cash provided by (used in) operating activities 3,117,355 (980,425) 189,104 1,120,577 1,882,844

CASH FLOWS FROM INVESTING ACTIVITIES

Increase in investments (4,796,816) (1,646,283) (1,038,190) (3,174,466) (6,241,608)

Fixed asset additions (5,147,712) (5,000,000) (5,175,000) (5,356,125) (5,543,589)

Increase in assets limited as to use (2,950,769) (117,258) (624,116) 63,697 (186,816)

Net cash used in investing activities (12,895,297) (6,763,541) (6,837,306) (8,466,894) (11,972,013)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from entrance fees and deposits, net 11,231,500 11,346,000 12,014,000 12,718,000 13,698,000

Payments of line of credit, net (139,750) (95,885) (1,600,000) (334,365) -

Payments of finance lease liability (42,740) (44,483) (46,295) (44,093)

-

Repayments of long-term debt (3,230,000) (3,256,850) (3,303,100) (3,422,100) (3,536,300)

Net cash provided by financing activities 7,819,010 7,948,782 7,064,605 8,917,442 10,161,700

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,958,932) 204,816 416,403 1,571,125 72,531

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR 8,226,770 6,267,838 6,472,654 6,889,057 8,460,182

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR 6,267,838$ 6,472,654$ 6,889,057$ 8,460,182$ 8,532,713$

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash and Cash Equivalents 500,000$ 650,000$ 1,000,000$ 2,500,000$ 2,500,000$

Cash Held Under Bond Agreements 5,767,838 5,822,654 5,889,057 5,960,182 6,032,713

Total Cash, Cash Equivalents, and Restricted Cash 6,267,838$ 6,472,654$ 6,889,057$ 8,460,182$ 8,532,713$

SUPPLEMENTAL CASH FLOW INFORMATION

Cash Paid for Interest 7,843,097$ 7,570,638$ 7,250,544$ 6,980,620$ 6,813,716$

Accounts Payable Related to Fixed Asset Additions 112,712$ -$ -$ -$ -$

SOUTHMINSTER, INC.

FORECASTED BALANCE SHEETS

AT SEPTEMBER 30,

See Accompanying Independent Accountants’ Compilation Report and Summary of Significant

Forecast Assumptions and Accounting Policies

4

2024 2025 2026 2027 2028

ASSETS

CURRENT ASSETS

Cash and Cash Equivalents 500,000$ 650,000$ 1,000,000$ 2,500,000$ 2,500,000$

Accounts Receivable 620,796 639,420 658,603 678,361 698,712

Other Current Assets 1,222,439 1,182,207 1,205,730 1,215,497 1,246,121

Assets Limited As To Use - Current 5,767,838 5,822,654 5,889,057 5,960,182 6,032,713

Total Current Assets 8,111,073 8,294,281 8,753,390 10,354,040 10,477,546

ASSETS LIMITED AS TO USE

Bond Fund 5,767,838 5,822,654 5,889,057 5,960,182 6,032,713

Debt Service Reserve Funds 9,029,538 9,029,538 9,029,538 9,029,538 9,029,538

Southminster Community Fund 50,000 50,000 50,000 50,000 50,000

Capital Campaign Fund 140,000 - - - -

Operating Reserve Fund Required Under North Carolina Statutes 8,398,588 8,655,846 9,279,962 9,216,265 9,403,081

Total Assets Limited As To Use 23,385,964 23,558,038 24,248,557 24,255,985 24,515,332

Less Current Portion (5,767,838) (5,822,654) (5,889,057) (5,960,182) (6,032,713)

Assets Limited As To Use, Net of Current Portion 17,618,126 17,735,384 18,359,500 18,295,803 18,482,619

PROPERTY AND EQUIPMENT 312,090,092 317,090,092 322,265,092 327,621,217 333,164,806

Less Accumulated Depreciation (116,244,772) (129,133,865) (142,188,595) (155,427,156) (168,636,897)

Net Property and Equipment 195,845,320 187,956,227 180,076,497 172,194,061

164,527,909

LONG-TERM INVESTMENTS 19,436,302 21,082,585 22,120,775 25,295,241 31,536,849

DEFERRED MARKETING AND OTHER COSTS 408,779 364,856 326,457 308,836 293,808

TOTAL ASSETS 241,419,600$ 235,433,333$ 229,636,619$ 226,447,981$ 225,318,731$

2024 2025 2026 2027 2028

LIABILITIES AND NET ASSETS (DEFICIT)

CURRENT LIABILITIES

Accounts Payable 1,000,000$ 1,030,000$ 1,060,900$ 1,092,727$ 1,125,509$

Accrued Expenses 1,546,688 1,593,089 1,640,882 1,690,108 1,740,811

Accrued Interest 3,432,554 3,350,744 3,268,350 3,195,654 3,125,633

Line of Credit 2,030,250 1,934,365 334,365 - -

Current Portion of Finance Lease Liability 44,483 46,295 44,093 - -

Current Portion of Long-Term Debt 3,160,000 3,275,000 3,400,000 3,535,000 3,675,000

Total Current Liabilities 11,213,975 11,229,493 9,748,590 9,513,489 9,666,953

LONG-TERM DEBT, NET OF CURRENT PORTION 151,801,416 147,927,622 144,017,311 139,998,700 135,882,630

Less Bond Issue Cost (2,095,985) (1,992,091) (1,888,195) (1,784,300) (1,680,405)

Long-Term Debt, Net 149,705,431 145,935,531 142,129,116 138,214,400 134,202,225

FINANCE LEASE LIABILITY 90,388 44,093 - - -

ADVANCE ENTRANCE FEE DEPOSITS 1,092,859 1,092,859 1,092,859 1,092,859 1,092,859

DEFERRED REVENUE - NONREFUNDABLE ENTRANCE FEES 60,201,764 61,561,496 62,608,567 64,059,586 66,056,334

DEFERRED REVENUE - REFUNDABLE ENTRANCE FEES 11,467,003 10,863,793 11,048,571 11,304,633 11,657,000

REFUNDABLE ENTRANCE FEES 28,148,457 27,059,998 26,149,282 25,390,085 24,810,854

Total Liabilities 261,919,877 257,787,263 252,776,985 249,575,052 247,486,225

NET DEFICIT:

Net Assets Without Donor Restrictions (20,842,665) (22,605,468) (23,369,304) (23,338,909) (22,382,032)

Net Assets With Donor Restrictions 342,388 251,538 228,938 211,838 214,538

Total Net Assets (Deficit): (20,500,277) (22,353,930) (23,140,366) (23,127,071) (22,167,494)

TOTAL LIABILITIES AND NET ASSETS (DEFICIT) 241,419,600$ 235,433,333$ 229,636,619$ 226,447,981$ 225,318,731$

Summary of Significant Forecast Assumptions and Accounting Policies

Background and Information

See Accompanying Independent Accountants’ Compilation Report

5

Basis of Presentation

The accompanying financial forecast presents, to the best of the knowledge and belief of management

(“Management”) of Southminster, Inc., a North Carolina nonprofit corporation (the “Corporation”), the

Corporation’s expected financial position, results of operations and cash flows as of September 30, 2024,

2025, 2026, 2027 and 2028 and for each of the years then ending (the “Forecast Period”).

Accordingly, the financial forecast reflects Management’s judgment as of February 26, 2024, the date of

this forecast, of the expected conditions and its expected course of action during the Forecast Period.

The assumptions disclosed herein are the assumptions which Management believes are significant to

the financial forecast. There usually will be differences between the forecast and actual results, because

events and circumstances frequently do not occur as expected, and those differences may be material.

The financial forecast does not include Southminster Foundation, Inc. (the “Foundation”), an affiliate of

the Corporation. The activities of the Southminster Foundation, Inc., have ceased and are expected to

remain inactive during the Forecast Period. The Foundation is not obligated for any payments under the

Series 2016 Bonds, Series 2018 Bonds, or any taxable bank loans entered into by the Corporation.

The accompanying forecasted information and this report are intended solely for the information and use

of management, the Board of Directors, and the North Carolina Department of Insurance (pursuant to

the requirements of North Carolina General Statutes, Chapter 58, Article 64 and is included in the

Corporation’s disclosure statement filing), and is not intended to be and should not be used, by anyone

other than these specified parties.

Summary of Significant Forecast Assumptions and Accounting Policies

Background and Information (continued)

See Accompanying Independent Accountants’ Compilation Report

6

Background of the Corporation

The Corporation owns and operates a Life Plan Community (also known as continuing care retirement

community) known as “Southminster” located in Charlotte, North Carolina. Southminster offers its

residents use of independent living units and care in its health center in accordance with the terms of a

Residence and Services Agreement (as defined subsequently hereinafter) entered into by the

Corporation with each resident. The Corporation is a North Carolina nonprofit corporation organized in

1984 to construct and operate Southminster. Southminster opened for operations in May 1987.

The Corporation has received a determination that it is exempt from federal income taxation as an

organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the

“Code”). The Corporation is classified as a public charity under Section 509a(1).

Southminster is not a legal entity separate from the Corporation. Southminster is the name under which

the Corporation operates its Life Plan Community. The management and staff of the Corporation, under

the direction of the board of directors of the Corporation, manage Southminster.

Southminster Foundation, Inc. (the "Foundation") is a North Carolina nonprofit corporation that was

established to operate exclusively for the benefit of the Corporation, primarily through financial support

to residents of Southminster who are unable to meet their financial obligations. Effective October 1,

2013, the operations of the Foundation were moved into the operations of Southminster. As such, the

financial forecasts included herein contain contribution income and resident support previously recorded

on the books and records of the Foundation.

The business and other affairs of the Corporation are governed by a 19-member board of directors,

comprised of 13 voting members, 1 non-voting founding director and 5 non-voting Chairs Emeritus. The

Corporation is affiliated with Christ Episcopal Church and Myers Park Baptist Church, both of which are

located in Charlotte, North Carolina. Although not all of the directors are associated with the sponsoring

churches, the governing bodies of the two churches ratify those persons nominated to serve as directors.

Southminster is an entrance fee community located on approximately 27 acres of land at 8919 Park

Road, Charlotte, North Carolina, consisting of 29 one-story duplex/triplex cottage units, 66 Terrace units,

and a main building that includes 227 independent living apartments, dining rooms, the main kitchen,

common rooms for activities and social interactions, a library, administrative offices, and all the necessary

support service areas for the normal functioning of the community (e.g., maintenance, housekeeping,

resident storage spaces, etc.). The health center (the “Health Center”) building is attached to the main

building and houses 25 licensed assisted living beds and 60 licensed nursing beds.

Independent Living Units

The independent living units of Southminster (the “Independent Living Units”) consist of 322 apartments,

duplex/triplex cottage units, and terraces. The apartments are contained within three- and eight-story

main buildings and are connected to common areas and healthcare service facilities via enclosed

walkways and elevators. Floor plans vary depending on location and include studio, one, two, and three-

bedroom units, with one to three bathrooms. Most units include either a patio or balcony, storage

facilities, monitored emergency fire and safety systems, and central heating and air conditioning with

individual thermostatic controls. Most units also include washer/dryer units. The cottage floor plans also

vary in design and size, but include two bedrooms and a den. Southminster has combined some units

in its original building to make larger units and continues to look for further opportunities to do so. The

terraces are multi-unit buildings with underground parking and units with at least two sides with windows.

Summary of Significant Forecast Assumptions and Accounting Policies

Background and Information (continued)

See Accompanying Independent Accountants’ Compilation Report

7

Assisted Living

The Health Center includes 25 licensed assisted living units (all private) with additional memory support

care, where needed. Each unit is a one-bedroom suite and equipped with individually controlled heating

and air-conditioning, cable hook-ups, a phone jack and an emergency call system. Assisted living

residents receive nursing staff attention daily. Residents also receive assistance with medication,

bathing, dressing and grooming; linen and housekeeping service; activities and social service programs;

and meals three times per day. Residents may be directly admitted into this level of care from the outside

community under a Residence and Services Agreement.

Nursing Care

The Health Center also includes 60 licensed nursing care beds (all private) divided among four

neighborhoods. The Health Center provides nursing care residents 24-hour supervision and assistance

in activities of daily living and health-related care. Bathing facilities, a dining room, and common rooms

are also included in this area. Residents may be directly admitted into this level of care from the outside

community under a Residence and Services Agreement.

Common Areas

The common areas are located throughout the main building. They serve as gathering places for

residents and include a wellness aquatic center, theater, dining rooms, multi-purpose rooms, lounges,

central kitchen, library, administration areas, common rooms for activities and social interactions, resident

storage spaces, exercise room, and facilities for beautician services. Southminster may also provide

facilities for the sale of sundry items, and other amenity areas dependent on Southminster’s

determination of demand or the availability of providers.

Residents moving into Southminster are admitted under a Residence and Services Agreement,

which specifies the terms and conditions, and obligations for residing at Southminster. For

copies of the Residence and Services Agreement, please refer to the disclosure statement.

Summary of Significant Forecast Assumptions and Accounting Policies

Background and Information (continued)

See Accompanying Independent Accountants’ Compilation Report

8

Table 1

Unit Configuration by Type, Number and Weighted Average Square Footage

Source: Management

Note: Two guest rooms have been excluded from the unit count above.

Unit Type Total

Average Square

Footage by Unit Type

Independent Living Units

Apartments:

Studio 1292

One-bedroom 53 598 - 1,000

One-bedroom/den 36 955 - 1,456

Two-bedrooms 78 955 - 2,260

Two-bedrooms/den or great room 58 1,276 - 3,190

Three-bedroom 1 3,081

Terraces:

Two-bedrooms 12 1,383 - 1,563

Two-bedrooms with den 54 1,602 - 2,140

Cottages:

Small sunroom 4 1,500

Large sunroom 25 1,800 - 1,900

Total Independent Living Units 322

Assisted Living

Assisted Living 25 600

Skilled Nursing

Private 60 300

Total Health Care Units and Beds 85

Total Campus Units and Beds 407

Summary of Significant Forecast Assumptions and Accounting Policies

Summary of Significant Accounting Policies

See Accompanying Independent Accountants’ Compilation Report

9

Basis of Accounting

The Corporation maintains its accounting and financial records using the accrual method of accounting.

Cash and Cash Equivalents

All liquid investments with a maturity of three months or less at the time of purchase and not limited as to

their use or designated as long-term investments are considered to be cash equivalents.

Accounts Receivable

Resident accounts receivable consist of resident monthly service fees and other resident charges.

Accounts receivable are reported net of an allowance for credit losses to represent the Company's

estimate of expected losses at the balance sheet date. The adequacy of the Company's allowance for

credit losses is reviewed on an ongoing basis, using historical payment trends, write-off experience,

analyses of receivable portfolios by payor source and aging of receivables, a review of specific accounts,

as well as expected future economic conditions and market trends, and adjustments are made to the

allowance as necessary.

Management believes no allowance for expected credit loss estimate is considered necessary based on

historical credit losses and estimated future credit losses and has not forecasted a reserve.

When deemed necessary, the Corporation provides an allowance for uncollectible accounts using

management’s estimate about the collectability of any past due accounts. Accounts past due are

individually analyzed for collectability. Accounts receivable that management determines will be

uncollectible are written off upon such determination.

Assets Limited as to Use

Assets limited as to use includes funds held by the Trustee under a bond indenture agreement, the

Southminster Community Fund, the operating reserve required by the North Carolina Department of

Insurance, and proceeds from the Capital Campaign to be used to pay down debt associated with the

replacement health center.

Management classifies as current the portion of assets whose use is limited that are available to meet

current liabilities.

Property and Equipment

Property and equipment is stated at cost. Assets contributed to the Corporation are recorded at fair

market value as of the date of receipt. Routine maintenance, repairs, renewals, and replacement costs

are charged to expense. Expenditures (in excess of $500) which materially increase the value, change

the capacities or extend the useful lives of existing assets are capitalized. Depreciation is computed by

the straight-line method over the estimated useful lives of the assets, which range from 3 to 30 years.

Apartment refurbishment costs which, in aggregate, total $2,500 or more per unit, are capitalized and

depreciated over an average seven-year period. Interest costs incurred during the construction period

of significant construction projects are capitalized as a cost of the constructed asset and amortized over

the useful life of the asset.

Summary of Significant Forecast Assumptions and Accounting Policies

Summary of Significant Accounting Policies

See Accompanying Independent Accountants’ Compilation Report

10

Long-Term Investments

Investments in equity and debt securities are measured at fair value in the accompanying forecasted

financial statements. Investment income (including realized gains and losses on investments, interest

and dividends) is included in operating income unless the income is restricted by donor or law. Unrealized

gains and losses on investments, if any, are excluded from operating income.

Leases

The Corporation determines if an arrangement is a lease at inception. Operating leases are included in

property, plant, and equipment as right-of-use (ROU) assets and lease liability in the combined balance

sheet. ROU assets represent the Corporation’s right to use an underlying asset for the lease term and

lease liabilities represent the Corporation’s obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at the lease commencement date based on the present value

of lease payments over the lease term. Lease terms may include options to extend or terminate the lease

when it is reasonably certain that the Corporation will exercise that option. Lease expense for operating

lease payments is recognized on a straight-line basis over the lease term. The Corporation has elected

to recognize payments for short-term leases with a lease term of 12 months or less as expense as

incurred and these leases are not included as lease liabilities or right-of-use assets on the combined

balance sheet.

The individual lease contracts do not provide information about the discount rate implicit in the lease.

Therefore, the Corporation has elected to use an incremental borrowing rate that represents an estimate

of the interest rate the Corporation would have to pay on any borrowed funds.

Employee Retention Credit

The CARES Act allows a credit (Employee Retention Credit or ERC) against applicable employment

taxes for eligible employers. The management of the Corporation believes it has complied with the

conditions of the ERC and has claimed a credit of approximately $4,935,000. At September 30, 2023,

the corporation has recorded a receivable in the amount of approximately $4,935,000 related to this

credit.

Summary of Significant Forecast Assumptions and Accounting Policies

Summary of Significant Accounting Policies (continued)

See Accompanying Independent Accountants’ Compilation Report

11

Deferred Costs and Other Assets

Deferred costs include sales commissions associated with acquiring expansion residential contracts and

are deferred until construction is complete and units are available for occupancy. Management amortizes

such costs over the estimated average life expectancy of the residents. Other Assets include long-term

pledges that consist of promises to pay from various individuals and foundations. Management estimates

the present value of such pledges at net realizable value.

Bond Issuance Costs

Issuance costs are deferred and amortized over the terms of the related bond issue. Debt issuance costs

consist of costs incurred from the issuance of revenue bonds benefiting the Corporation and include

underwriter’s discounts, legal and consulting fees, and printing costs.

Debt issuance costs are presented in the forecasted balance sheets as a deduction from the carrying

amount of the related liability and amortization expense associated with the debt issuance costs is shown

as a component of interest expense. The straight-line method of amortization is used, which

approximates the effective interest method.

Original Issuance Premium

Original issuance premium is being amortized over the terms of the related bond issue. Original issuance

premium is presented in the forecasted balance sheets as an addition from the carrying amount of the

related liability and amortization expense associated with the original issuance premium is shown as a

component of interest expense. The effective interest method of amortization is used.

Entrance Fees

The Residence and Services Agreement (the Agreement), which is entered into at the time a prospective

resident pays a deposit equal to 10% of the published entrance fee, specifies the services to be provided

by the Corporation and the respective rights and duties of the Corporation and resident. The liability

associated with these advance deposits is reported as advance entrance fee deposits in the

accompanying forecasted balance sheets. Prospective residents applying for direct admission to the

Health Center are subject to the same Agreement as those applying for independent living units.

The Corporation offers a standard contract in which entrance fees may be refunded on a pro-rata basis

to residents vacating a unit in the first 20 months of occupancy. Once a unit is occupied, entrance fees

are recorded as deferred entrance fee revenue. The deferred revenue on standard contracts is

recognized as income over the actuarially determined life of the resident.

The Corporation offers two refundable entrance fee plans. Under these plans, a new resident can elect

to pay a higher entrance fee, a portion of which is refundable only after the unit is vacated and

subsequently occupied by a new resident. The refundable fees under this option are classified in the

accompanying forecasted balance sheets as a refundable entrance fees liability.

Summary of Significant Forecast Assumptions and Accounting Policies

Summary of Significant Accounting Policies (continued)

See Accompanying Independent Accountants’ Compilation Report

12

Net Assets (Deficit)

The Corporation reports its net assets using the following two classes: without donor restrictions and with

donor restrictions; depending on the presence and type of donor-imposed restrictions limiting the

Corporation’s ability to use or dispose of specific contributed assets, or the economic benefits embodied in

those assets. Net assets without donor restrictions include those net assets whose use is not restricted by

donors, even though their use may be limited in other respects, such as by board designation. Net assets

with purpose donor restrictions are those net assets whose use by the Corporation has been limited by

donors to specified purposes. When a donor restriction is met (when the purpose restriction is

accomplished), net assets with donor restrictions are reclassified to net assets without donor restrictions and

reported in the forecasted statements of operations and changes in net assets (deficit) as net assets released

from restrictions. Donor restricted contributions whose restrictions are met in the same reporting period are

reported as support without restrictions. Net assets with perpetual donor restrictions are those which have

been restricted by donors to be maintained by the Corporation in perpetuity. As of September 30, 2023, the

Corporation did not have any net assets with perpetual donor restrictions.

Excess (Deficit) of Revenues over (under) Expenses

The forecasted statements of operations and changes in net assets (deficit) include excess (deficit) of

revenues over (under) expenses. Changes in net assets without donor restrictions which are excluded from

excess (deficit) of revenues over (under) expenses consistent with industry practice, include permanent

transfers of assets to and from affiliates for other than goods and services, and contributions of long-lived

assets (including assets acquired using contributions which by donor restriction were to be used for the

purposes of acquiring such assets).

Obligation to Provide Future Services

The Corporation annually calculates the present value of the net cost of future services and the use of

facilities to be provided to current residents and compares that amount with the balance of deferred

entrance fee revenue. If the present value of the estimated cost of future services and use of facilities to

be provided to current residents exceeds the deferred revenue from entrance fees and the present value

of periodic fees, a liability is recorded (obligation to provide future services) with the corresponding

change to income. The present values of revenues and future service costs are calculated using a

discount rate of 5.5%.

Independent Living, Healthcare, and Other Revenues

Independent living revenue and healthcare revenue consists of monthly resident Independent Living Unit

and Health Center per diem charges and other revenues associated with resident services and are

recorded when earned.

Home care revenue associated with off-campus cases is included in other income during the Forecast

Period.

Summary of Significant Forecast Assumptions and Accounting Policies

Summary of Significant Accounting Policies (continued)

See Accompanying Independent Accountants’ Compilation Report

13

Income Taxes

The Corporation has been recognized by the Internal Revenue Service as exempt from income taxes

under Internal Revenue Code Section 501(c)(3). The Corporation is classified as a public charity under

Section 509a(1) of the Internal Revenue Code.

The Corporation files as a tax-exempt organization. The Corporation is not aware of any activities that

would jeopardize its tax-exempt status. The Corporation is not aware of any activities that are subject to

tax on unrelated business income or excise or other taxes.

The Corporation follows guidance in the income tax standard regarding recognition and measurement of

uncertain tax positions. The application of the standard has had no impact on the Corporation’s

forecasted financial statements. The Corporation is also currently exempt from property taxes.

Management has forecasted that they will continue to be exempt from property taxes during the Forecast

Period.

Use of Estimates

The preparation of forecasted financial statements in conformity with accounting principles generally

accepted in the United States of America requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at

the date of the forecasted financial statements, and the reported amounts of revenues and expenses

during the reporting period. Actual results could differ from these estimates.

Resident Service Revenue

Resident service revenue is reported at the amount that reflects the consideration to which the

Corporation expects to be entitled in exchange for providing resident care. These amounts are due from

residents. Monthly service fees paid by residents for maintenance, meals, and other services are

assessed monthly and are recognized as revenue in the period services are rendered. Revenue is

recognized as performance obligations are satisfied.

Performance obligations are determined based on the nature of the services provided by the Corporation.

Revenue for performance obligations satisfied over time is recognized based on actual charges incurred

in relation to total expected (or actual) charges. The Corporation believes that this method provides a

faithful depiction of the transfer of services over the term of the performance obligation based on the

inputs needed to satisfy the obligation. Generally, performance obligations satisfied over time relate to

residents living at the Corporation receiving independent living or healthcare services. The Corporation

considers daily services provided to residents of the health center, and monthly rent charged to residents

living in independent living, as a separate performance obligation measured on a monthly basis or upon

move-out within the month, whichever is shorter. Nonrefundable entrance fees are considered to contain

a material right associated with access to future services, which is the related performance obligation.

Revenue from nonrefundable entrance fees is recognized ratably in future periods covering a resident’s

life expectancy using a time-based measurement similar to the output method. Revenue for performance

obligations satisfied at a point in time is generally recognized when goods are provided to residents and

customers in a retail setting (for example, meals or guest rooms) and the Corporation does not believe it

is required to provide additional goods or services related to that sale.

Summary of Significant Forecast Assumptions and Accounting Policies

Summary of Significant Accounting Policies (continued)

See Accompanying Independent Accountants’ Compilation Report

14

Because all of its performance obligations have a duration of less than one year, the Corporation has

elected to apply the optional exemption provided in FASB ASC 606-10-50-14(a) and, therefore, is not

required to disclose the aggregate amount of the transaction price allocated to performance obligations

that are unsatisfied or partially unsatisfied at the end of the reporting period.

The Corporation determines the transaction price based on standard charges for goods and services

provided, assistance provided to residents in accordance with the Corporation’s policy, and/or implicit

price concessions provided to residents. The Corporation determines its estimate of implicit price

concessions based on its historical collection experience.

The Corporation has determined that the nature, amount, timing, and uncertainty of revenue and cash

flows are affected by the following factors: service line, method of payment, and timing of when revenue

is recognized.

All resident service revenue is from private pay individuals.

Contract Costs

The Corporation has applied the practical expedient provided by FASB ASC 340-40-25-4 and all

incremental customer contract acquisition costs are expensed as they are incurred as the amortization

period of the asset that the Corporation otherwise would have recognized is one year or less in duration.

Risks and Uncertainties

The Corporation holds investments in a variety of investment funds. In general, investments are exposed

to various risks, such as interest rate, credit and overall market volatility risk. While no changes in

investments have been forecasted, due to the level of risk associated with certain investments, it is

reasonably possible that changes in the values of the investments will continue to occur in the near term

and that such changes could materially affect the Corporation’s investment balances and the amounts

reported in the forecasted balance sheets of the Corporation.

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Revenue

See Accompanying Independent Accountants’ Compilation Report

15

Revenue for the Corporation is generated primarily as follows:

 Independent Living Revenue- Reflects revenue from monthly service fees for the Independent

Living Units.

 Healthcare Revenue- Reflects revenue from per diem charges from the assisted living and

nursing residents as well as in-house home care fees.

 Earned Entrance Fees- Reflects revenue (non cash) associated with the amortization of deferred

revenue from entrance fees.

Revenue for the Independent Living Units is based on the monthly service fees assumed by Management

to be charged to the residents and the assumed utilization of the Independent Living Units. Healthcare

revenues consist of funds generated from services provided to residents transferring from the

independent living units, and those services provided to residents directly admitted into either assisted

living or nursing. Healthcare revenue also includes home care revenue being provided to residents.

Forecasted Occupancy Levels

Forecasted occupancy for the Corporation’s Independent Living Units is based upon the historical

experience of Management and the actuarial report, giving consideration to current economic conditions

and expectations of ongoing success in its marketing activities.

Occupancy of the assisted living units is forecasted to be from Independent Living Units. Nursing bed

occupancy is based primarily on internal transfers from Independent Living Units, assisted living units,

and a limited number of direct admissions. Forecasted resident transfers from independent living to

assisted living or nursing have been provided by Management.

The following tables present the forecasted occupancy for Independent Living Units, as forecasted by

Management.

Table 2

Forecasted Utilization of the Independent Living Units

Source: Management

Year Ending September 30,

Average Number of

Independent Living

Units Occupied

Average Number of

Independent Living

Units Available

Average Occupancy

Percentage

Forecasted:

2024 315 322 97.8%

2025 315 322 97.8%

2026 315 322 97.8%

2027 315 322 97.8%

2028 315 322 97.8%

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Revenue (continued)

See Accompanying Independent Accountants’ Compilation Report

16

The forecasted double occupancy percentages in the Independent Living Units are based upon

assumptions provided by Management and are as follows:

Table 3

Forecasted Second Person Occupancy of the Independent Living Units

Source: Management

The combined 85 Health Center beds are all located in the same building. For reasons of operating

efficiency and regulatory requirements, assisted living residents may be placed in a skilled nursing unit

(but not vice versa). Daily rates are based on level of care, not the physical location of the resident’s

room.

Table 4

Forecasted Utilization of the Assisted Living and Memory Support Units

Source: Management

Table 5

Forecasted Utilization of the Skilled Nursing Units

Source: Management

Year Ending September 30,

Average Number of

Independent Living

Units Occupied

Average Number of

Existing Independent

Living Units with

Double Occupants

Double Occupancy

Percentage

Forecasted:

2024 315 97 30.8%

2025 315 96 30.5%

2026 315 93 29.5%

2027 315 89 28.3%

2028 315 85 27.0%

Forecasted Year Ending September 30,

Average Number of

Available Units Total Residents

Average Percent

Occupancy

2024 25 24 96.0%

2025 25 24 96.0%

2026 25 24 96.0%

2027 25 24 96.0%

2028 25 24 96.0%

Forecasted Year Ending September 30,

Average Number of

Available Units Total Residents

Average Percent

Occupancy

2024 60 53 88.3%

2025 60 51 85.0%

2026 60 51 85.0%

2027 60 51 85.0%

2028 60 51 85.0%

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Revenue (continued)

See Accompanying Independent Accountants’ Compilation Report

17

Forecasted Entrance and Monthly Service Fees

The following tables summarize the entrance fees, monthly service fees and daily rates.

From time to time, Management may implement special incentives and move-in incentives with the effect

of reducing the entrance fees or reducing net cash flow depending on the incentive. These are currently

not being offered nor are they contemplated during the Forecast Period.

Table 6

Monthly Service and Entrance Fees through September 30, 2024

Notes to Table 6:

Source: Management

(1) Residents admitted directly to health care units/beds are charged daily rates, as shown.

(2) Entrance fees listed above are for the Standard Plan (0% refundable after 20 months). Management also

offers a 90% Refundable Plan and 50% Refundable Plan priced higher than the pricing shown in this

table.

(3) Entrance fees required for direct admission residents only.

Increases in fees are generally anticipated to approximate increases in operating expenses during the

Forecast Period. However, fee increases may be adjusted to reflect actual changes in expenses which

could be higher than forecasted. Entrance fees are continuously reviewed and adjusted as necessary

to align with market demands. Management has forecasted annual increases to its monthly and daily

fees in the range of 4% to 5.5% during the Forecast Period. Management has noted that the 2024 rate

increases approximated 5.5%.

Unit Type Units Monthly Service Fee

(1)

Entrance Fee

(2)

Independent Living Units:

Apartments:

Studio 1 $3,410 $56,500

One-bedroom 53 $4,055 - $4,392 $116,400 - $279,600

One-bedroom/den 36 $4,392 - $4,913 $262,300 - $438,100

Two-bedrooms 78 $4,392 - $5,923 $268,800 - $691,800

Two-bedrooms/den 58 $4,913 - $6,204 $368,500 - $1,004,400

Three-bedroom 1 $7,261 $1,078,200

Terraces:

Two-bedrooms 12 $5,168 - $5,254 $457,500 - $499,500

Two-bedrooms/den 54 $5,343 - $5,943 $529,600 - $749,700

Cottages:

Small sunroom 4 $4,380 $386,200

Large sunroom 25 $4,534 $464,500 - $517,800

Second Person Fees $2,271 $30,000

Total Independent Living Units

322

Assisted Living

Assisted Living 25 $296 - $357 $30,000 - $40,000

(3)

Assisted Living Memory Support $388 - $449 $30,000 - $40,000

(3)

Total Assisted Living Units

25

Skilled Nursing

Private 60 $464 - $490 $17,500 - $25,000

(3)

Total Nursing Units

60

Total Units/Beds

407

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Revenue (continued)

See Accompanying Independent Accountants’ Compilation Report

18

Entrance Fee Receipts

Entrance fee receipts and refunds are based on information provided by Management based on historical

experience, as well as Management’s assumptions relating to occupancy during the Forecast Period.

The following table reflects entrance fees received and refunds paid during the Forecast Period for the

Corporation, as forecasted by Management.

Table 7

Forecasted Entrance Fee and Deposit Receipts, Net of Refunds

Source: Management

For purposes of forecasting entrance fee receipts, Management has assumed that 80% of entrants would

select the Standard Plan, 5% would select the 50% Refundable Plan, and 15% would select the 90%

Refundable Plan during the Forecast Period.

Investment Income

Investment income consists of interest earnings on cash, cash equivalents, investments, and assets

limited as to use, as provided by Management. Management has assumed that its cash, cash

equivalents, investments, and assets limited as to use would earn investment income throughout the

Forecast Period.

The following table reflects Management’s assumed realized investment earning rates during the

Forecast Period.

Table 8

Investment Income Earnings Rates

Forecasted Years Ending September 30,

Source: Management

Other Revenue Items

Other income is comprised primarily of external home care cases and rent, with the most significant

lessee being a hospice provider. Under the terms of the lease agreement with the hospice provider, the

Corporation is to receive rent each month, with inflationary increases every two years. The lease began

November 1, 2020 and expires after 10 years.

Forecasted Year Ending September 30, 2024 2025 2026 2027 2028

Entrance fees received from unit turnover 13,231,500$ 13,348,000$ 14,362,000$ 15,186,000$ 16,240,000$

Entrance fees refunded from unit turnover (2,000,000) (2,002,000) (2,348,000) (2,468,000) (2,542,000)

Total entrance fees received, net of refunds 11,231,500$ 11,346,000$ 12,014,000$ 12,718,000$ 13,698,000$

2024 2025 2026 2027 2028

Cash and Cash Equivalents 5.00% 4.00% 3.00% 3.00% 3.00%

Debt Service Reserve Fund 2.00% 2.00% 2.00% 2.00% 2.00%

Investments 3.00% 4.00% 4.00% 4.00% 4.00%

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Revenue (continued)

See Accompanying Independent Accountants’ Compilation Report

19

Contributions

Management has forecasted unrestricted contributions throughout the Forecast Period based on

historical experience.

Management has forecasted donor-restricted contributions related to its capital campaign, as well as the

change in the net present value of pledges receivable.

Net Assets Released From Restrictions

Management has forecasted that it would release net assets from restrictions associated with amounts

for the pay down of debt related to the construction of its replacement health center, consistent with the

purpose of its capital campaign.

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Expenses

See Accompanying Independent Accountants’ Compilation Report

20

Operating Expenses

Management has forecasted operating expenses (excluding depreciation, amortization, and interest)

based upon Management’s experience and current market conditions. Due to labor and inflationary

pressures being experienced, management has forecast operating expenses to increase approximately

3% to 4% annually for inflation throughout the Forecast Period.

The specific basis for major expense items were formulated by Management and are discussed below.

Salaries, Wages and Employee Benefits

In aggregate, salaries and wages are forecasted to increase approximately 3% to 4% annually throughout

the Forecast Period. Individual department increases in labor vary depending on the type of position,

labor pressures being experienced in the market, and to address caseload increases or other job

changes.

Benefit costs include payroll taxes and employee benefits including FICA, unemployment taxes, workers’

compensation, health insurance, 403(b) defined contribution plan, incentives and other miscellaneous

benefits for the entire facility. These benefit costs are assumed to approximate 27% of wages during the

Forecast Period, based on Management’s historical experience.

Healthcare Expenses

Costs include those for providing care in assisted living and skilled nursing neighborhoods in

Southminster’s Health Center. Costs, other than those related to labor, are forecasted to increase 3%

each year of the Forecast Period, due to inflation.

Administrative Expenses

Costs include insurance, recruiting and staff development, professional service fees, and other

administrative costs. Costs also include community benefit spending needed to maintain property tax

exemption.

Administrative expenses (excluding community benefit) increase between 3% and 6% over the Forecast

Period due to inflation, costs related to employee recruitment, training, and retention; technology; and

insurance increases driven by market activity and increases in construction costs. Resident support and

community benefit amounts are expected to increase over the Forecast Period, in conjunction with related

fee increases and revenue growth.

Maintenance Expenses

Costs include electricity, water and sewer, gas, and cable television and all activities of maintenance for

the campus. Costs, other than those related to labor, are forecasted to increase 3% each year of the

Forecast Period, due to inflation.

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Expenses (continued)

See Accompanying Independent Accountants’ Compilation Report

21

Laundry Expenses

Costs include laundry costs for the Corporation. Costs, other than those related to labor, are forecasted

to increase 3% each year of the Forecast Period, due to inflation.

Housekeeping Expenses

Costs include housekeeping costs for the Corporation. Costs, other than those related to labor, are

forecasted to increase between 3% and 5% each year of the Forecast Period, due to inflation.

Dietary Expenses

Costs include raw food and dietary supplies. Costs, other than those related to labor, are forecasted to

increase between 3% and 4.5% each year of the Forecast Period, due to inflation.

Other Operating Expenses

Costs include all other costs incurred with operation of the campus, exclusive of the costs noted above.

Costs, other than those related to labor, are forecasted to increase between 3% and 5% each year of the

Forecast Period, due to inflation.

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Other Items

See Accompanying Independent Accountants’ Compilation Report

22

Assets Limited as to Use

Held by the Trustees:

The trustees are assumed, by Management, to maintain the following funds for certain indebtedness

under the terms of the related trust agreements for each series of bonds and the Master Trust Indenture:

 Bond Funds – The Bond Funds combine the Interest, Principal, and Sinking Fund Accounts

required to be funded for the Bonds. Management assumes that the Corporation would make

monthly deposits into the Interest Accounts equal to 1/6

th

of the next semi-annual interest

payments due on the Bonds and monthly deposits into the Principal Accounts equal to 1/12

th

of

the next scheduled principal payments for the Bonds.

 Debt Service Reserve Funds– The Debt Service Reserve Funds include reserves, as required by

the Master Trust Indenture for the various bonds that require debt service reserve funds.

Board Designated:

 Southminster Community Fund – Board Designated amount supporting Southminster’s

fundraising and community benefit efforts.

 North Carolina Statutory Operating Reserve Requirement – Section 58-64-33 of the General

Statutes of North Carolina, as amended, requires that all continuing care facilities maintain

operating reserves equal to 50% of the total operating costs (as defined in Section 58-64-33) (or

25% of the total operating costs if such facilities maintain an occupancy level in excess of 90%

and the North Carolina Commissioner of Insurance so approves) forecasted for the twelve-month

period covered by the most recent annual statement filed with the North Carolina Department of

Insurance. Such operating reserves may only be released upon approval of the North Carolina

Commissioner of Insurance. Management has forecasted, based on its forecasted occupancies,

meeting the 25% operating reserve requirement.

The following table sets forth the forecasted calculation of the operating reserve.

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Other Items (continued)

See Accompanying Independent Accountants’ Compilation Report

23

Table 9

Forecasted Operating Reserve Calculation

Source: Management

2024 2025 2026 2027 2028

Forecasted Total Operating Expenses 52,006,674$ 53,307,452$ 54,350,414$ 55,419,114$ 56,334,682$

Include:

Principal Payment 3,230,000 3,256,850 3,303,100 3,422,100 3,536,300

Line of Credit Payment 139,750 95,885 1,600,000 334,365 -

Exclude:

Debt Service (reserved for separately in DSRF) (9,029,538) (9,029,538) (9,029,538) (9,029,538) (9,029,538)

Depreciation (12,541,482) (12,889,093) (13,054,730) (13,238,561) (13,209,741)

Amortization of Deferred Marketing Cost (26,052) (21,323) (21,299) (20,321) (18,080)

Principal Redeemed from Capital Campaign Proceeds (185,000) (96,850) (28,100) (22,100) (1,300)

Total Operating Costs 33,594,352$ 34,623,383$ 37,119,847$ 36,865,059$ 37,612,323$

Operating Reserve Percentage * 25% 25% 25% 25% 25%

Operating Reserve 8,398,588$ 8,655,846$ 9,279,962$ 9,216,265$ 9,403,081$

* Units Occupied at 9/30:

Independent Living 315 315 315 315 315

Assisted Living 24 24 24 24 24

Total Units Occupied and Reserved 339 339 339 339 339

Units Available 347 347 347 347 347

Occupancy Percentage 98% 98% 98% 98% 98%

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Other Items (continued)

See Accompanying Independent Accountants’ Compilation Report

24

Property and Equipment

Property and equipment balances, net of accumulated depreciation, were forecasted based on costs of

routine property and equipment additions during the Forecast Period, reduced by estimated annual

depreciation. The following table presents capital expenditures during the Forecast Period.

Table 10

Capital Expenditures

Source: Management

Long-Term Debt and Interest Expense

Forecasted interest expense and long term debt during the Forecast Period were based on the Series

2016 Bonds, the Series 2018 Bonds, and the 2021 Bank Loans as described below. Interest rates are

forecasted to range from 4 to 6.7 percent during the Forecast Period.

On June 30, 2021, the Corporation entered into two term loan agreements with a financial institution to

provide up to $30,000,000 to refinance existing bank debt issued for independent living construction

completed in prior years and to finance renovations to convert the previous health center space into 20

independent living apartments, with construction completed during the year ended September 30, 2023.

At issuance, the term loans bore interest at one-month LIBOR plus 1.30%. Loan 1 was comprised of

$12,000,000 in principal, had a seven-year maturity, and was expected to be repaid in full from project

entrance fees. As of September 30, 2022, Loan 1 was fully drawn and $3,296,157 had been repaid out

of entrance fee proceeds received, and as of September 30, 2023, Loan 1 had been fully repaid out of

entrance fee proceeds received. Loan 2 is comprised of $18,000,000 in principal and has a final maturity

of 12 years; interest-only payments were due monthly during the draw period. Principal and interest

payments began being made on a monthly basis in August 2023, equal to 1/300 of the outstanding

principal balance on the Completion Date (defined in the loan agreement as the date occurring on the

first business day of the seventh month after the receipt of the final certificate of occupancy, but in any

event not before July 3, 2023). Loan 2 was fully drawn during the year ended September 30, 2023, with

$120,000 in principal payments made, leaving $17,880,000 outstanding at September 30, 2023.

On July 18, 2018, the Corporation entered into a loan agreement with the Public Finance Authority (the

Authority) and, concurrently, the Authority issued its $86,200,000 Retirement Facilities First Mortgage

Revenue Bonds (Southminster), Series 2018 (Series 2018 Bonds). The Series 2018 Bonds were issued

to finance the construction of a replacement health center and a portion of the two independent living

construction projects (financed by a combination of the Series 2018 Bonds and previously issued bank

loans, as discussed above). The Series 2018 Bond proceeds were also used for additional common

areas, kitchen expansion, office spaces for environmental services operations (housekeeping,

maintenance, transportation), a reconfigured loading dock, and to pay issuance costs and fund debt

service reserves. During the year ended September 30, 2023, the Corporation used capital campaign

proceeds to accelerate, without penalty, principal payments totaling $1,925,000.

For the Forecasted Year Ending September 30, 2024 2025 2026 2027 2028

Routine Capital Additions 4,636,937$ 5,000,000$ 5,175,000$ 5,356,125$ 5,543,589$

Dining Renovations:

Construction Costs 510,775 - - - -

Total Property and Equipment Additions 5,147,712$ 5,000,000$ 5,175,000$ 5,356,125$ 5,543,589$

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Other Items (continued)

See Accompanying Independent Accountants’ Compilation Report

25

Line of Credit

On June 29, 2022, the Corporation entered into an agreement with a financial institution for a $3,000,000

revolving line of credit. Any outstanding balance would bear interest at a rate of Term SOFR plus 2.50%

(with a floor of 0.00%). On June 28, 2023, the agreement was amended to increase the revolving line of

credit from $3,000,000 to $5,000,000. All principal outstanding is due June 27, 2024. As of September

30, 2023, $2,170,000 was outstanding on the line of credit. Management anticipates that it will renew

the revolving line of credit prior to its expiration and has forecasted the repayment of the line of credit as

presented in its forecast.

Interest rates are forecasted to range from 5 to 7.8 percent during the Forecast Period.

Other Long-Term Debt

2007 Expansion, Financing, and Refinancing

In 2007, the Corporation undertook a $73 million expansion and renovation project which resulted in the

addition of 89 new independent living apartments, a new wellness/aquatic center, expansion of and

enhancements to administrative and common areas, and a modest renovation to the health center.

Construction began in January 2007 using a bank line of credit and construction loan that was later repaid

with permanent financing. Construction was completed during fiscal year 2010 and stable occupancy

was reached in the first quarter of the 2013 fiscal year. On November 15, 2007, the Corporation entered

into a loan agreement with the North Carolina Medical Care Commission (the Medical Care Commission)

and, concurrently, the Medical Care Commission issued $62,180,000 and $2,000,000 Fixed Rate

Retirement Facilities First Mortgage Revenue Bonds (Southminster Project) Series 2007A and 2007B

Bonds (Series 2007A Bonds and Series 2007B Bonds), respectively, and $25,500,000 Variable Rate

Retirement Facilities First Mortgage Revenue Bonds (Southminster Project) Series 2007C (Series 2007C

Bonds). In addition to repaying the outstanding construction loan and line of credit, the proceeds from

Series 2007 Bonds were deposited with the trustee to cover the remaining construction, capitalized

interest, and other project-related costs; to pay for costs of issuance; and to fund various debt service

reserves. The Series 2007B and Series 2007C Bonds have been repaid in prior years.

On November 10, 2016, the Corporation entered into a loan agreement with the North Carolina Medical

Care Commission (the Medical Care Commission) and, concurrently, the Medical Care Commission

issued $58,765,000 Retirement Facilities First Mortgage Revenue Refunding Bonds Series 2016 to

advance refund the Series 2007A Bonds, pay for costs of issuance, and fund debt reserves. The Series

2016 Bonds mature on October 1, 2020 through 2037 with interest rates of 5%.

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Other Items (continued)

See Accompanying Independent Accountants’ Compilation Report

26

Forecasted principal payments on the Corporation’s debt are as follows.

Table 11

Forecasted Principal Payments

Source: Management

At September 30, 2023, there was an unamortized bond premium equal to $6,689,189.

Current Assets and Current Liabilities

Cash

Cash balances for the Forecast Period are based on the results of the forecasted Statements of Cash

Flows. For purposes of presentation, cash balances are forecasted to achieve a balance of $2,500,000

by the end of the Forecast Period.

Accounts Receivable

Accounts receivable are forecasted to remain at historical levels throughout the Forecast Period, adjusted

for inflation.

Other Current Assets

Other current assets include interest receivable, sales tax receivable, prepaid expenses and dietary

inventories which have been forecasted based on historical levels, and also included the ERC.

Management has forecasted receipt of the ERC in 2024.

Accounts Payable

Accounts payable have been forecasted based on historical levels throughout the Forecast Period,

adjusted for inflation, except for amounts related to construction payables.

Accrued Expenses

Accrued expenses have been forecasted based on historical levels throughout the Forecast Period,

adjusted for inflation.

Forecasted Year Ending September 30,

Series 2016

Bonds

Series 2018

Bonds

2021 First

Horizon Bank

Loan #2 Line of Credit

Total Principal

Payments

2024 2,325,000$ 185,000$ 720,000$ 139,750$ 3,369,750$

2025 2,440,000 96,850 720,000 95,885 3,352,735

2026 2,555,000 28,100 720,000 1,600,000 4,903,100

2027 2,680,000 22,100 720,000 334,365 3,756,465

2028 2,815,000 1,300 720,000 3,536,300

2029 2,955,000 275 720,000 3,675,275

2030 3,100,000 - 720,000 3,820,000

2031 3,255,000 - 720,000 3,975,000

Thereafter 27,745,000 83,941,375 12,120,000 123,806,375

Total

(1)

49,870,000$ 84,275,000$ 17,880,000$ 2,170,000$ 154,195,000$

Summary of Significant Forecast Assumptions and Accounting Policies

Management’s Basis for Forecast of Other Items (continued)

See Accompanying Independent Accountants’ Compilation Report

27

Accrued Interest

Accrued interest has been calculated based on forecasted interest rates and repayment terms on the

outstanding debt of the Corporation.

ATTACHMENT 3 -

COMPARATIVE FINANCIAL STATEMENTS OF THE 2023 FORECASTED TO ACTUAL

RESULTS INCLUDING DESCRIPTIONS OF ANY MATERIAL DIFFERENCES (specifically those

greater than $500,000):

Statement of Operations:

PY FORECAST ACTUAL

2023 2023 VARIANCE

REVENUES, GAINS, AND OTHER SUPPORT

Independent Living Revenue 20,580,445$ 20,451,742$ (128,703)$

Healthcare Revenue 12,679,390 12,587,266 (92,124)

Earned Entrance Fees 9,154,468 8,974,687 (179,781)

Investment Income 376,537 1,369,187 992,650 [1]

Contributions 690,000 735,811 45,811

Net Assets Released from Restrictions 20,000 46,542 26,542

Other Income 1,166,835 6,150,121 4,983,286 [2]

Total Re ve nue s , Gains and Othe r Support 44,667,675 50,315,356 5,647,681 [2]

OPERATING EXPENSES:

Healthcare Expenses 6,320,894 6,107,826 213,068

Administrative Expenses 6,011,128 6,275,891 (264,763)

Maintenance Expenses 4,937,057 5,309,054 (371,997)

Laundry Expenses 183,440 184,689 (1,249)

Housekeeping Expenses 2,106,496 2,177,338 (70,842)

Dietary Expenses 5,516,946 5,850,791 (333,845)

Other Expenses 5,166,756 5,173,477 (6,721)

Depreciation 11,923,196 11,930,847 (7,651)

Amortization 21,660 31,015 (9,355)

Interest expense 7,332,109 7,397,827 (65,718)

Total Operating Expenses 49,519,682 50,438,755 (919,073) [3]

OPERATING LOSS (4,852,007) (123,399) 4,728,608 [2]

EXCESS OF REVENUES OVER EXPENSES (4,852,007) (123,399) 4,728,608 [2]

OTHER CHANGES IN UNRESTRICTED NET DEFICIT

Net Assets Released from Restrictions for Payments of Debt Service 1,925,000 1,925,000 -

Change in Unrealized Gain on Investments 2,422,970 1,838,054 (584,916) [4]

NET ASSETS (DEFICIT) WITHOUT DONOR RESTRICTIONS (504,037) 3,639,655 4,143,692 [2]

NET DEFICIT WITHOUT DONOR RESTRICTIONS, BEGINNING OF YEAR (20,244,482) (20,244,482) -

NET DEFICIT WITHOUT DONOR RESTRICTIONS, END OF YEAR (20,748,519) (16,604,827) 4,143,692 [2]

NET ASSETS RELEASED FROM DONOR RESTRICTIONS (1,945,000) (1,971,542) 26,542

DONOR RESTRICTED CONTRIBUTIONS 46,300 140,342 (94,042)

NET ASSETS WITH DONOR RESTRICTIONS, BEGINNING OF YEAR 2,350,313 2,350,313 -

NET ASSETS WITH DONOR RESTRICTIONS, END OF YEAR 451,613 519,113 67,500

INCREASE IN NET DEFICIT (2,402,737) 1,808,455 4,211,192 [2]

NET DEFICIT, BEGINNING OF YEAR (17,894,169) (17,894,169) -

NET DEFICIT, END OF YEAR (20,296,906)$ (16,085,714)$ 4,211,192$ [2]

[1] Investment income is higher than forecast due to $489,000 in unbudgeted realized gains recognized

when liquidations were made during the fiscal year out of long-term investments, $263,000 in unbudgeted

capital gains in December 2022, and overbudget dividend income in the second and third quarters (which

included money market earnings), all related to Southminster’s long-term investment portfolio.

Southminster also experienced over budget interest income from earnings on its debt service reserve

funds held for its Series 2016 and Series 2018 tax exempt bonds due to higher interest rates, as well as the

use of a sweep account to utilize daily cash balances to capitalize on higher interest rates. [2] In

September 2023, Southminster filed three amended payroll tax returns for the first three quarters of

calendar 2021, in order to claim the Employee Retention Credit (ERC), which resulted in the recording of

a $4,934,993 receivable and other income. [3] Total Operating Expenses were $919,000 higher than

forecast due to negative variances in Maintenance and Administrative expenses. Dietary expenses were

also over budget but were offset in part by below budget Healthcare expenses related to shifting

healthcare dining staff away from healthcare universal workers and back to a more traditional

dining/dietary model; inflation of food costs also was a driver of over budget dietary expenses.

Maintenance expenses were over budget due to maintenance contract labor (due to work on the various

building systems), utilities, and landscaping overages. Administrative expenses were over budget due to

unbudgeted consulting work related to the ERC. [4] Southminster does not typically forecast for

Changes in Unrealized Gain/Loss on Investments, however, due to significant negative market volatility

experienced in 2022, Southminster did budget $2.4 million in market recovery. Most of 2023 tracked

towards that recovery, however, there was negative market activity in August and September, right at the

end of the 2023 fiscal year, that resulted in being $585,000 below forecasted Unrealized gains on

investments for the 2023 fiscal year.

Statement of Cash Flows:

PY FORECAST ACTUAL

2023 2023 VARIANCE

CASH FLOWS FROM OPERATING ACTIVITIES

Change in net deficit (2,402,737)$ 1,808,455$ 4,211,192$

[2]

Adjustments to reconcile change in net deficit

to net cash provided by operating activities:

Depreciation and amortization 11,944,856 11,961,862 17,006

Amortization of debt issuance costs 108,776 148,281 39,505

Loss on disposal of assets - 49,386 49,386

Realized and unrealized gain on investments (2,422,970) (2,327,299) 95,671

Change in Other Assets 145,792 293,554 147,762

Change in Prepaids and Receivables 383,221 (233,260) (616,481) [5]

Change in C urrent Liabilities (368,045) (70,034) 298,011

Earned entrance fees (9,154,468) (8,974,687) 179,781

Amortization of bond premium (546,012) (546,012) -

Employee Retention Credit receivable - (4,934,993) (4,934,993) [2]

Net cash used by operating activities (2,311,587) (2,824,747) (513,160) [5]

CASH FLOWS FROM INVESTING ACTIVITIES

Sales (purchases) of investments (46,658) 3,736,337 3,782,995 [6]

Fixed asset additions (9,795,008) (10,409,302) (614,294) [7]

Increase in assets limited as to use 22,109 254,649 232,540

Ne t cas h us e d in inve s ting activitie s (9,819,557) (6,418,316) 3,401,241 [6]

CASH FLOWS FROM FINANCING ACTIVITIES

P

roceeds from entrance fees and deposits, net 16,344,402 14,470,211 (1,874,191) [8]

Proceeds from debt 3,721,652 3,721,651 (1)

Proceeds from line of credit 3,000,000 6,120,000 3,120,000 [9]

Repayments of line of credit - (3,950,000) (3,950,000) [9]

Payments of Financing costs - (13,600) (13,600)

Repayments of right- o f- use lease liab ility (41,068) (41,069) (1)

Repayments of long-term debt (12,963,843) (12,963,843) -

Ne t cas h provide d by financing activitie s 10,061,143 7,343,350 (2,717,793) [8]

NET DECREASE IN CASH AND CASH EQUIVALENTS (2,070,001) (1,899,713) 170,288

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,226,770$ 8,226,770$ -$

CASH AND CASH EQUIVALENTS, END OF YEAR 6,156,769$ 6,327,057$ 170,288$

Supplementary Disclosure: Interest paid during year 7,842,652$ 7,824,889$ (17,763)$

[5] Cash flows Used by Operating activities was $513,000 higher than forecast due to the Change in

Prepaids and Receivables line due to a $367,000 unbudgeted insurance settlement being received

subsequent to year end (thus being recorded as an increase in a receivable, as opposed to a decreased

receivables balance as presented in the forecast). [6) Net Cash Used in Investing Activities is $3.4

million lower than forecast due to an inflow of liquidity totaling $3.7 million during fiscal year 2023 from

the sale of investments during FY23 to meet liquidity pressures from capital purchases and higher

expenses. Southminster also did not reinvest earnings during the year in order to preserve long-term

investments, following significant unrealized losses incurred during FY22, but instead liquidated those

earnings to meet liquidity needs during the year. Those earnings would have been forecasted to be

reinvested as in prior years, rather than pulled for operating needs. [7] Fixed Asset Additions are

$614,000 higher than forecast due to $800k more in gross PP&E purchases (due to higher spending for

apartment refurbishments during the year and higher spending on a planned dining renovation) offset by

lower amounts of PP&E in AP than forecast. [8] Net Cash Provided by Financing Activities is lower due

to approximately $500,000 less in entrance fee receipts than forecast and $1.6 million more in refunds

paid out during the fiscal year than originally forecast. There has been no change in the overall mix of

contracts with 20% of residents continuing to select refundable entrance fee plans, however due to the

mix of homes turning over during the year, the amounts received were weighted more heavily to the

standard entrance fee plan. [9] The forecast also expected Southminster would draw a total of $3 million

on its line of credit (on which it had not previously made draws). Instead, Southminster had draws

totaling $6.12 million offset by paydowns totaling $3.95 million, for a remaining line balance at year end

of $2.17 million.

Balance Sheet:

PY FORECAST ACTUAL

2023 2023 VARIANCE

ASSETS

CURRENT ASSETS

Cash and Cash Equivalents 500,000$ 385,922$ (114,078)$

Short-term Investments - 821,067 821,067 [10]

Accounts Receivable, Net 394,346 602,715 208,369

Other Current Assets 1,430,231 6,676,313 5,246,082 [2]

Total Current Assets 2,324,577 8,486,017 6,161,440 [2]

ASSETS LIMITED AS TO USE

Bond Fund, current 5,656,769 5,656,924 155

Capital Campaign Fund - 146,799 146,799

Amounts held by Trustee 9,029,538 8,934,410 (95,128)

Southminster Community Fund 50,000 50,000 -

Operating Reserve Fund Required Under North Carolina Statutes 7,720,072 7,720,072 -

Total Assets Limited As To Use 22,456,379 22,508,205 51,826

PROPERTY AND EQUIPMENT 307,548,268 306,868,064 (680,204) [11]

Less Accumulated Depreciation (104,858,959) (103,655,185) 1,203,774 [11]

Net Property and Equipment 202,689,309 203,212,879 523,570 [11]

LONG-TERM INVESTMENTS 18,518,152 13,818,419 (4,699,733) [12]

DEFERRED MARKETING AND OTHER COSTS 585,775 699,604 113,829

TOTAL ASSETS 246,574,192$ 248,725,124$ 2,150,932$ [13]

PY FORECAST ACTUAL

2023 2023 VARIANCE

LIABILITIES AND NET DEFICIT

CURRENT LIABILITIES

Accounts Payable 1,063,449$ 2,590,305$ (1,526,856)$ [14]

Retainage Payable 35,000 (35,000)

Accrued Expenses 1,404,877 1,501,639 (96,762)

Accrued Interest 3,421,469 3,449,282 (27,813)

Current Po rtion of Lease Liability 42,741 42,741 -

Current Portion of Long- Term Debt (including line of credit) 6,045,000 5,215,000 830,000 [15]

Total Current Liabilities 11,977,536 12,833,967 (856,431) [16]

LONG-TERM DEBT, NET OF CURRENT PORTION AND ISSUANCE COSTS 153,433,204 153,459,108 (25,904)

ADVANCE ENTRANCE FEE DEPOSITS 900,000 1,092,859 (192,859)

RIGHT-OF-USE LEASE LIABILITY 134,871 134,870 1

DEFERRED REVENUE 70,096,990 70,731,643 (634,653) [17]

REFUNDABLE ENTRANCE FEES 30,328,497 26,558,391 3,770,106 [17]

Total Liabilities 266,871,098 264,810,838 2,060,260 [18]

NET ASSETS (DEFICIT):

Net Assets (Deficit) without Donor Restrictions (20,748,519) (16,604,827) 4,143,692 [2]

Net Assets with Donor Restrictions 451,613 519,113 67,500

Total Net Assets (Deficit): (20,296,906) (16,085,714) 4,211,192 [2]

TOTAL LIABILITIES AND NET ASSETS (DEFICIT) 246,574,192$ 248,725,124$ 2,150,932$ [19]

[10] Southminster had not forecast utilizing Short-Term Investments during the 2023 fiscal year,

however, given liquidity needs, stock market concerns about the banking industry, and higher interest

rates leading to higher earnings opportunities in a less volatile environment, Southminster used a money

market account during the year to help manage cash flow needs while also earning in excess of 5%

interest. [11] Accumulated Depreciation is $1.2 million below forecast due to $1.2 million in write-offs

that were not included in the forecast. These write-offs also impacted the gross Property and Equipment

balance, however, the $1.2 million impact was offset by over budget fixed asset additions during 2023, as

noted in the cash flow statement above. [12] Long-Term Investments were $4.7 million below forecast

due to $3.8 million in drawdowns not included in the forecast due to higher liquidity pressures from

increased expenses, higher capital spending and refund payouts during the fiscal year. The investment

portfolio also did not recover as much as forecasted, with the Unrealized Gain/Loss on Investments being

$585,000 below forecast, discussed in the Income Statement above. [13] Total Assets are $2.2 million

above forecast due the recording of the Employee Retention Credit receivable and higher Property and

Equipment balance, offset by the lower Investments balance discussed above.

[14] Accounts Payable is $1.5 million higher than forecast due to $1.3 million in entrance fee refunds

outstanding at 2023 fiscal year end that were not anticipated in the forecast. [15] The Current portion of

long-term debt is $830,000 lower than forecast due to the line of credit balance being $2.17 million at

period end versus the forecasted $3 million. [16] Current Liabilities are $856,000 higher than forecast

due to the higher A/P balance for entrance fee refunds offset by the lower current portion of debt due to

the line balance outstanding at year end. [17] Total Deferred Revenue from entrance fees is $3.1 million

below forecast due to $500,000 less in entrance fee receipts than forecast and $1.6 million more in

refunds paid out during the fiscal year than originally forecast. It was expected that 30% of deferred

entrance fees at fiscal year end would be refundable, however, based on the mix of homes turning over

and which homes had refundable contracts selected, the mix ended at 27% refundables, rather than the

expected 30%, which led to lower Refundable Entrance Fees recorded on the balance sheet at fiscal year

end. [18] Total Liabilities were $2 million below forecast due to lower Refundable Entrance Fees and

Line of Credit balance offset by higher Accounts Payable than forecast. [19] Total Liabilities and Net

Deficit are $2.15 million higher than forecast due to a lower Net Deficit than forecast from the recording

of the $4.9 million Employee Retention Credit offset by a lower Refundable Entrance Fee balance at

period end.

ATTACHMENT 4 -

- Residence and Services Agreement

Version 4- 2/26/2021 Page 1 of 17

8919 Park Road – Charlotte, NC 28210

Residence and Services Agreement

I. Introduction

This Residence and Services Agreement (hereinafter called the “Agreement”) is made this day of

, 20 , by and between Southminster, Inc., a North Carolina non-profit corporation

(hereinafter called “Southminster”), and (hereinafter called "Resident", “You”, or “Your”).

In the event that more than one person enters into this Agreement together, the terms Resident,

You, and Your shall apply to all persons jointly and severally except where the context otherwise

requires.

Southminster is a continuing care retirement community and is solely responsible for the

financial and contractual obligations of Southminster. The Southminster Foundation, Inc. is an

affiliated organization that raises charitable donations for the benefit of Southminster and

Southminster’s Residents. The Southminster Foundation, Inc. has no responsibility for the

financial or contractual obligations of Southminster. Christ Episcopal Church, 1412 Providence

Road, Charlotte, NC 28207 and Myers Park Baptist Church, 1900 Queens Road, Charlotte, NC

28207 are the founding churches of Southminster. The founding churches have no responsibility

for the financial or contractual obligations of Southminster.

II. Definitions

A. Basic Fees. Basic Fees are Your Entrance Fee and Your Service Fees.

B. Date of Agreement. The Date of Agreement is the date, appearing in the Introduction

Section, when You and Southminster execute this agreement provided that You have

paid Southminster an Entrance Fee deposit to reserve a Residence for potential

occupancy. Southminster does not approve You for residency and is not obligated to

provide You with a Residence or services until the Date of Occupancy.

C. Date of Availability. The Date of Availability is the date when the Residence that You

reserved is declared by Southminster, at its sole discretion, to be available for occupancy.

Version 4- 2/26/2021 Page 2 of 17

D. Date of Occupancy. The Date of Occupancy is the mutually agreed upon date when

Southminster’s obligation to provide You with services as defined in this Agreement

begins, when Southminster provides an accommodation for You to occupy as Your

Residence, and when Your obligation to pay for services begins.

E. Date of Termination. The Date of Termination is the date when Southminster is no

longer obligated to provide You with services or with an accommodation for Your use as

a Residence.

F. Date of Vacancy. The Date of Vacancy is the date on or after the Date of Termination

when the Residence that You last occupied is Vacated. When more than one (1) Resident

is a party to this Agreement, this definition applies only when the last party to this

Agreement Vacates.

G. Entrance Fee. The Entrance Fee is a fee paid by the Date of Occupancy. An Entrance Fee

has an associated refund plan that You select from options that may be provided to You.

Schedule I specifies the Entrance Fee You pay, the Entrance Fee refund plan that You

select, and the method for calculating any Entrance Fee refund for which You may be

eligible based in that selected refund plan. Additions to the number of parties to this

Agreement or certain changes in Residence may result in an additional Entrance Fee

amount.

H. Health Center Credit Day. A Health Center Credit Day is a credit that You can use to

offset one (1) day’s worth of the Service Fees for an accommodation in the Health

Center.

I. Health Center. The Health Center consists of licensed, and at Southminster’s option,

unlicensed health care accommodations. At the Date of Agreement, the two (2) licensed

levels of care provided by Southminster are Nursing and Adult Care Home as defined,

regulated, and licensed by the appropriate governing authorities.

J. Independent Living. Independent Living consists of accommodations in cottages and

apartments. When Your Residence is in Independent Living, there is an expectation that

You are able to live independently. Southminster makes available limited health services

to Your Residence in Independent Living. Southminster policy specifies the criteria for

initial and continued occupancy of a Residence in Independent Living.

K. Move. A Move is a permanent change in Your Residence.

L. Rescission Period. The Rescission Period is a period of thirty (30) days following the

later of the Date of Agreement or the date You receive a disclosure statement from

Southminster that meets the requirements of North Carolina law.

M. Residence. Residence is the accommodation at Southminster that is Your home. You are

entitled to one (1) Residence at any given time, except that when there are multiple

parties to this Agreement each may be entitled to separate Residences under

circumstances defined in this Agreement. Any of Southminster’s different types of

accommodations may serve as Your Residence, including those in Independent Living

Version 4- 2/26/2021 Page 3 of 17

and in the Health Center. Southminster may restrict the number of people that may

occupy a Residence.

N. Service Fees. Service Fees are periodic fees that You pay beginning with the Date of

Occupancy and on an on-going basis until the Date of Vacancy. For different types of

accommodations, Service Fees may be monthly fees or daily fees.

O. Transfer. A Transfer is a temporary stay in an accommodation that is not Your Residence

and is at or outside of Southminster.

P. Vacate. Vacate means to remove all of Your property from the Residence (and

associated storage areas) from which You are Moving and to return all Southminster

property (including items such as keys, access cards, etc.). If there is not another party to

this Agreement that is still a Resident, Your property must be removed from

Southminster property.

III. Additional Terms Applicable until the Date of Occupancy

A. Final Admission Decision. The final decision to approve You for admission is made

solely by Southminster by the Date of Occupancy. At all times before the Date of

Occupancy, You agree to provide or arrange for others to provide Southminster with

requested health and financial information as required by Southminster for the admission

process, and to immediately notify Southminster of changes in Your health or financial

circumstances that may affect the admissions decision. You may be required to interview

with Southminster health staff, or to obtain, at Your expense, physical and mental

examinations and tests as required by Southminster for the admissions process.

Southminster reserves the right, as allowed by law, to accept or reject any person for

residency up until the Date of Occupancy. If Southminster denies You admission, or if

changes in Your health preclude You from taking occupancy, Sections IX.B. and X.B.a.

define the process to cancel this Agreement and the refunds due to You. If You submit

false or misleading information as part of the admission process, Southminster may

terminate this Agreement in accordance with Section IX.E.

B. Entrance Fee Deposit. By the Date of Agreement You will have paid a deposit equal to

ten percent (10%) of the Entrance Fee for the Residence that You have reserved and

selected the Entrance Fee refund plan as described in Schedule I. Your Entrance Fee

deposit fixes Your Entrance Fee for Your reserved Residence at the amount in effect on

the day of the deposit. You may change Your reserved Residence or Entrance Fee refund

plan up until the Date of Occupancy, but for changes made more than thirty (30) days

after the Date of Agreement, the Entrance Fee amount and the 10% deposit amount due

may change based on the Entrance Fee rates in effect at the time of Your change. Your

Entrance Fee deposit will be credited toward the balance of the Entrance Fee due or

returned to You in accordance with Section X. When required by law, Your Entrance Fee

deposit will be placed into an escrow account as described in Schedule I.

C. Service Fees Prior to Occupancy. The Service Fees described in Schedule I are those in

effect at the Date of Agreement for Your reserved Residence. Southminster may change

Version 4- 2/26/2021 Page 4 of 17

Service Fees with thirty (30) days written notice including during the period between the

Date of Agreement and the Date of Occupancy.

D. Availability and Occupancy of an Independent Living Residence. If Your reserved

Residence was previously occupied, You must schedule a Date of Occupancy within

sixty (60) days of the Date of Agreement unless an extension is granted in writing by

Southminster. If Your reserved Residence has not been previously occupied (for example

new construction), Southminster will give You at least forty-five (45) days notice of the

Date of Availability and You must schedule a Date of Occupancy that falls within forty-

five (45) days after the Date of Availability, unless an extension is granted in writing by

Southminster. The Date of Occupancy cannot occur until You have been approved for

residency by Southminster. If You do not schedule the Date of Occupancy or obtain an

extension as stated in this paragraph, the Entrance Fee amount and the 10% deposit

amount due may change based on the Entrance Fee rates in effect at the final Date of

Occupancy, or Southminster may terminate this Agreement in accordance with Section

IX.E. By the Date of Occupancy You must pay the remaining balance of the Entrance

Fee and the first Service Fees due in advance for Your reserved Residence. You are not

required to have a Date of Occupancy that falls within the Rescission Period. The

Date of Occupancy will appear on Schedule I.

E. Availability of Your Reserved Residence. If actions or events subsequently cause

Southminster to notify You that the Residence that You reserved will not be available for

occupancy, You will have thirty (30) days to reserve another Residence based on the

same priority for reservation used in Your initial reservation, or to cancel this Agreement

in accordance with Section IX.B. These are Your only remedies. You are not entitled to,

and hereby waive, any right of specific enforcement to require Southminster to make

available Your reserved Residence. Southminster will endeavor to make available the

Residence that You reserved, but cannot guarantee delivery of that Residence or be held

responsible for failure to deliver that Residence or campus renovations or expansions.

Without limiting the foregoing, Southminster is not responsible for any delays in the

delivery of a Residence resulting from causes beyond the control of Southminster,

including changes and/or upgrades to the Residence made by You, Acts of God, natural

disasters, fire, labor disputes or other force majeure occurrences. You will be kept

informed of progress on Your reserved Residence.

IV. Residence

A. Your Initial Residence. The number and a description of Your initial Residence is in

Schedule I of this Agreement. An optional Schedule II describes options, upgrades, or

other non-standard items that You have chosen, changes made by previous occupants that

You have chosen to keep, along with additional conditions, charges, and terms for

payment associated with those items.

B. Continuum. Southminster provides a variety of accommodations for Your Residence,

including some accommodations designed to provide for additional support and services

if and when required by changes in Your health or capabilities. You understand that Your

Residence may change during the time You live at Southminster in accordance with the

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terms of this Agreement. By executing this Agreement, You agree to abide by

Southminster’s policy regarding criteria for remaining in a Residence in Independent

Living or in accommodations in the different levels of care in the Health Center.

C. Modification of Your Residence by Southminster. Southminster has the right to modify

Your Residence to meet applicable law or regulation, for reasons of health or safety, for

maintenance or repair, to prevent damage or deterioration, to maintain it in marketable

condition, or for other reasonable purposes.

D. Modification of Your Residence by You. Southminster must approve, in advance, any

structural or physical change to Your Residence or to the surfaces, fixtures or equipment

provided by Southminster. You are responsible for the costs of any such change. Unless

Southminster chooses to keep the changes, You or Your estate are liable for the

subsequent cost to return the Residence to its original condition. Southminster will own

and retain title to such changes, but is not responsible for the cost of maintenance of such

changes. The value of changes is not a factor in determining any Entrance Fee refund

due.

E. Right of Entry. You authorize employees or agents of Southminster to enter Your

Residence or storage areas for the purposes of services, repairs, maintenance, renovation,

inspection, security, emergency drills, in the event of an emergency, to check compliance

with this Agreement or with Southminster policy, and for other reasonable purposes.

Southminster will always endeavor to maintain Your privacy and the privacy of the

Residence.

F. Vacating Your Residence. If You terminate this Agreement or Move from a Residence,

and that Residence does not continue to be the Residence of another party to this

Agreement, You must Vacate that Residence within the time allowed by Southminster

policy. Your Date of Termination and Date of Vacancy must be the same except in the

event of Your death in which case Southminster policy defines the time available to

Vacate the Residence. If You have not Vacated within the time allowed, Southminster

may charge extra fees, or may remove and either dispose of, or store, Your personal

belongings at the expense of You or Your estate. Section VI.I. describes Your obligation

for Service Fees as You Vacate.

G. Condition of Vacated Residence. Upon Vacating Your Residence, You shall leave it in

good condition. Except for normal wear and tear, You or Your estate shall be liable to

Southminster for costs required to restore the Residence to good condition or to standard

condition.

V. Common Areas and Amenities, Programs and Services

A. Common Areas and Amenities. Southminster will provide common areas and amenities

for Your use and benefit. Common areas include at a minimum, dining rooms, multi-

purpose rooms, spaces and facilities for activities, lounges, a chapel, a library, an

equipped exercise room, and facilities for beautician services. Southminster may also

provide facilities for limited banking services, facilities for the sale of sundry items, and

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other amenity areas dependent on Southminster’s determination of demand or the

availability of providers.

B. Utilities, Communications, and Alarm Systems. Your Basic Fees include water, sewer,

one telephone line (including local telephone service as provided through Southminster),

trash removal, basic cable television service (or equivalent), access to premium cable

television service (or equivalent), an urgent call system, a fire alarm system, and a carbon

monoxide detector (where required). Electricity is included in Your Basic Fees except for

in cottages where it is an additional cost. Gas is available in all cottages and is an

additional cost. Gas may be available in some other Residences but may be an additional

cost. You are responsible for the cost of long-distance telephone service and calls and for

premium cable television service. Additional telephone lines may be available for

additional cost. Internet services are available through Southminster’s contracted

provider. See current Southminster policy for associated costs.

C. Meals. If Your Residence is in Independent Living, Your Basic Fees each month include

a number of meals equivalent to one (1) dinner for each day in the month, usable anytime

within the month in a Southminster dining room. If Your Residence is in the Health

Center, Your Basic Fees include three (3) meals per day. Other meals, meals for guests,

and catering are available at an additional cost. Special diets as prescribed by Your

physician are provided in Basic Fees when You are in the Health Center. Limited special

diets may be available for You if Your Residence is in Independent Living and may be at

an additional cost. Limited tray service will be provided when it is determined by

Southminster health staff to be appropriate and may be at an additional cost.

D. Housekeeping and Laundry Services. Your Basic Fees include housekeeping services on

at least a weekly basis. Housekeeping includes at a minimum vacuuming, dusting,

cleaning of baths and kitchens, changing of bed linens, and trash removal. Other

housekeeping services may be available at an additional cost. If Your Residence is in

Independent Living, Your Basic Fees include weekly laundering of personal linens as

defined in Southminster policy. If Your Residence is in the Health Center, Your Basic

Fees include bed and bath linen provided by Southminster. Some Residences are

equipped with a washer and dryer. Southminster provides washers and dryers in common

areas at no additional cost to You if You do not have a washer and dryer in Your

Residence. If Southminster determines that safety, sanitation, or health issues arise in

Your Residence because of Your actions or inactions, You agree that Southminster will

provide, at Your expense, whatever additional housekeeping or laundry services

Southminster determines are necessary to mitigate the issues.

E. Groundskeeping. Your Basic Fees include basic groundskeeping services including lawn,

tree, and shrubbery care for those items that are provided by Southminster. Southminster

at its sole discretion may make changes to lawns, trees, shrubs, or any other landscaping

on its property. You may plant items approved by Southminster in areas determined by

Southminster, but You are responsible to maintain those areas and plants at Your

expense.

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F. Maintenance and Repairs. Your Basic Fees include the maintenance, repair, and

replacement of property, furnishings, and equipment owned or leased by Southminster.

Other maintenance services may be available at an additional cost.

G. Staffing. Southminster will have staff present at Southminster twenty-four hours per day,

every day of the year.

H. Transportation. Your Basic Fees include scheduled local transportation for You for

shopping trips, medical appointments, and occasional activities and events.

Transportation for special, personal, or group trips may be available and may be at an

additional cost.

I. Parking. Your Basic Fees include one (1) parking space for each Residence provided that

You or another party to this Agreement who shares the Residence owns a licensed

personal vehicle and has a valid driver’s license. Covered or enclosed parking spaces

may be subject to additional charges. Southminster policy governs registration

requirements, space assignment and use, allowed vehicles, and other terms for parking.

J. Life Enrichment. Various social, recreational, spiritual, educational and cultural programs

and activities will be provided by Southminster for You to enjoy at Your option. Some of

these programs may require an additional charge.

K. Health Center. As part of Your Base Fees when You occupy an accommodation in the

Health Center, Southminster will provide facilities, equipment, staff, and services that are

required to maintain current licenses, and will provide services permitted and typically

provided for each licensed level of health care. At a minimum, the following services are

provided as part of Your Basic Fees when you are staying in an accommodation in the

Health Center:

a. Medical Director. Southminster will retain a licensed physician as Medical

Director to consult on the medical aspects of the licensed levels of care.

b. Nursing Staff. Licensed and/or Registered Nurses will be available twenty-four

(24) hours per day.

c. Other Services. Other services include diet planning by a registered and licensed

dietitian, assisted bathing facilities, goal-oriented care planning, social services,

and planned activities.

L. Other Health Services Not Included in Basic Fees. Additional health services not

included in Your Basic Fees may include, but are not limited to: physician services;

dental work; physical, occupational, and speech therapy; rehabilitative treatments and

equipment; ambulance services; outpatient nursing services; pharmacy services and

medicines; laboratory services; durable medical equipment; food supplements; personal

care and incontinence supplies or other health related items; and nursing, care planning,

case management, or personal care services for Residents in Independent Living or above

what is required for each licensed level of health care in the Health Center. Some services

may be available exclusively only for Residents in the Health Center or only for

Residents in Independent Living. These additional services are subject to additional

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charges by Southminster or by third-parties that provide the services on Your or on

Southminster’s behalf.

VI. Financial Arrangements

A. Entrance Fee. By the Date of Occupancy You agree to pay Southminster the remaining

balance of the Entrance Fee for Your Residence as set forth in Schedule I. Entrance Fee

deposits and reservation or waiting list deposits not previously credited or paid to You

will be credited toward the balance of the Entrance Fee due. Your Entrance Fee may be

subject to refund (see Section X).

B. Service Fees. You agree to pay Service Fees on an on-going basis for a period beginning

with Your Date of Occupancy and ending with Your Date of Vacancy except as

described in this Agreement or in Southminster policy. Service Fees are to be paid in

advance and will be pro-rated for partial months. If there is more than one party to this

Agreement, the first or single person rate applies to one (1) of You when You share the

same Residence, and to each of You if You each have different Residences.

C. Additional Fees and Charges. There may be additional fees and charges for services that

are not included in the Basic Fees. The means for billing or payment of these additional

fees and charges will be decided by Southminster. When services are provided by third

parties, You may be responsible for payment arrangements directly with those parties.

D. Adjustments in Fees and Charges. Southminster may change the Service Fees or any

other fees or charges at any time with thirty (30) days advance notice to You. It is

anticipated that Service Fees will be adjusted at least annually to coincide with the start

of Southminster’s fiscal year.

E. Billing and Payment Terms. Southminster will furnish You with a monthly statement

showing Service Fees and additional fees or charges for the current or previous periods.

The total amount due is payable within ten (10) days of the monthly statement date.

Southminster may charge interest at a rate not to exceed the maximum allowed by law on

any unpaid balance owed thirty (30) days from the monthly statement date. Southminster

may terminate this Agreement if You have a past due amount in excess of sixty (60)

days. You shall be responsible for the payment of attorney’s fees and all other costs

incurred by Southminster relative to the collection of any amounts past due. Termination

of this Agreement does not end the obligation of You or Your estate to pay all amounts

due, no matter when incurred.

F. Health Center Credit Days. At the Date of Occupancy, each Resident whose Residence is

in Independent Living is granted fourteen (14) Health Center Credit Days. At each

subsequent anniversary of the Date of Occupancy, unused Health Center Credit Days for

each Resident may be carried forward and, for each Resident whose Residence is in

Independent Living, up to fourteen (14) new days granted, provided that the total

accumulated for each Resident never exceeds forty-four (44) days. Health Center Credit

Days are non-transferable, must be used only as defined in this Agreement and in

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Southminster policy, and have no value if not used. No new Health Care Credit Days are

granted after You Move to the Health Center.

G. Use of Health Center Credit Days in the Health Center. Unless otherwise specified by

Southminster policy, for each day You occupy or hold an accommodation in the Health

Center, whether or not that accommodation is Your Residence, You must use a Health

Center Credit Day until all such accumulated days are used. When You use a Health

Center Credit Day, one day’s worth of the Service Fee for an accommodation in the

Health Center is waived but You will be charged for the additional two (2) meals per day

provided in the Health Center and for other items that are not included in Your Base

Fees. While You use Health Center Credit Days, Your Service Fees continue based on

the Independent Living Residence from which You Moved or Transferred.

H. Stays in a Health Center Accommodation without Health Center Credit Days. For each

day that You occupy an accommodation in the Health Center without the use of a Health

Center Credit Day, whether or not the accommodation is Your Residence, You will be

charged the Service Fees for the Health Center accommodation.

I. Continuation of Service Fees. Except as described in this Agreement or by Southminster

policy, You are obligated to continue to pay Service Fees for Your Residence (including

a Residence in the Health Center) until the Residence has been Vacated or while You are

away from the Residence for any reason including a temporary stay in a different

accommodation at or outside of Southminster.

VII. Terms of Residency

A. Rights of Occupancy and Use. Subject to the terms and provisions of this Agreement,

You have the right to occupy, use, and enjoy a Residence, common areas, amenities,

programs and services of Southminster as defined in this Agreement from the Date of

Occupancy until the Date of Termination.

B. Damage. You are responsible for any damage to Southminster’s owned or controlled

property, including the cost of repair, replacement, or diminution of value that occurs as a

result of Your negligence, abuse, or misuse or that of Your guest, employee, contractor or

volunteer.

C. Inappropriate Use. You may not engage in illegal activity while on or in Southminster

owned or leased property, including in Your Residence, nor may that property be used in

any manner in violation of any law or regulation. Your Residence may not be used for

commercial purposes unless approved in writing by Southminster.

D. Policies. You agree to abide by Southminster policies and procedures, including

amendments, modifications and changes as may be adopted by Southminster. Such

policies and procedures shall be made readily available to You.

E. Access to Southminster. Southminster has the right to deny access to, or limit the use of

its premises and property by any party but may not deny You access to Your Residence

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or to common areas except in emergencies, for health or safety reasons, or as provided

for in this Agreement.

F. Transfer of Property. You agree not to make any gift or other transfer of property for the

purpose of evading Your obligations under this Agreement, or if such gift or transfer

would render You unable to meet such obligations. Such action could render You

ineligible for potential financial assistance from Southminster.

G. Representations Made by You. You affirm that representations and information that You

provided for consideration for admission to Southminster, including health and financial

information and including all additional information provided up to the Date of

Occupancy, are accurate and reflect Your current status and, as such, are the basis for this

Agreement.

H. Financial and Health Information. While this Agreement is in effect and at

Southminster’s request, You agree to provide updates of the personal health and financial

information that You originally provided to Southminster as part of the admission

process. Except as prohibited by law, You agree to keep Southminster informed of health

changes that affect Southminster’s ability to meet its obligations to You, including

authorizing access by appropriate Southminster staff or providers to records for health

services that You receive away from Southminster.

I. Visitors. Your visitors may stay for short periods in Your Residence or in other

Southminster accommodations that may be provided. No person other than You may

reside in Your Residence without the written approval of Southminster.

J. Non-Southminster Service Providers. Should you choose to engage, on a paid or un-paid

basis, the services of any party other than Southminster or its agents for services provided

at Southminster, You agree to abide by Southminster policies and procedures for use of

such providers. Southminster reserves the right to limit or prohibit access to its property

by a provider or providers or to limit the use of providers. You agree to be responsible for

the provider and the actions of the provider while engaged by You and to indemnify and

hold harmless Southminster for any actions of such providers. Such providers are not

considered Visitors as described in Section VII.I.

K. Loss of Property. Southminster shall not be responsible for the loss of, or damage to any

property belonging to You due to theft, mysterious disappearance, fire or any other cause.

L. Insurance. You agree to furnish Southminster with evidence of required insurance

coverage when requested. Any liability insurance that You carry should insure Your

performance of the indemnity provisions of this Agreement. If You undertake activities

that Southminster determines may create risk for Southminster, its employees and agents,

other Residents, or visitors, Southminster may require that You carry other or additional

insurance related to that risk. From the Date of Occupancy:

a. You agree to maintain Medicare Part A, Medicare Part B, and one supplemental

health insurance policy or equivalent insurance coverage acceptable to

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Southminster and to assign rights to proceeds to Southminster for services

provided by Southminster;

b. You agree to maintain insurance on vehicles that You park or drive at

Southminster with coverage at least equal to the minimum required by law;

c. You agree to maintain an insurance policy that provides You with liability and

personal property insurance with coverage at least equal to the minimum

recommended in Southminster policy. You are strongly encouraged to carefully

consider Your circumstances in deciding if limits higher than the minimum

required by Southminster are appropriate.

M. Will, Power of Attorney, and Health Care Power of Attorney. You agree, prior to the

Date of Occupancy, to have executed a will naming an executor and a general power of

attorney designating a competent person as attorney-in-fact. You are strongly encouraged

to execute a healthcare power of attorney, and, if so desired, a living will. You agree to

provide Southminster with copies of general and health care power of attorney

documents, any living will, any other advance directives, and the location of Your will,

prior to the Date of Occupancy. Except for Your will, You agree to provide Southminster

with copies when these documents are changed.

N. Inability to Manage Your Affairs. You agree that if you become incapable of governing

yourself and managing your affairs and you have no legally recognized representative

that can act on Your behalf, Southminster will have an interest in the matter which will

entitle Southminster to institute legal action for the determination of Your competency

and for the appointment of a legal guardian.

O. Personal Physician. You agree to designate a licensed physician as Your personal

physician. You are responsible for the cost of physician services.

VIII. Moves, Transfers, and Marriage after Occupancy

A. General. Moves or Transfers within Southminster may occur with Southminster approval

and are subject to the availability of the desired accommodation. A Move may involve

the payment of an additional Entrance Fee amount and other fees as described in

Southminster policy. You are responsible for Move costs and arrangements except as

specified in Southminster policy or as agreed to in writing by Southminster. Southminster

may prioritize Moves and Transfers at its sole discretion.

B. Moves or Transfers to or within the Health Center. As a continuing care retirement

community, Southminster provides multiple levels of care and Residence options. Each

of these is designed to serve various needs that You may have as a Resident. Should You

have needs that require or are best met by an accommodation in the Health Center, or by

a change to a different accommodation there, You agree to Move or Transfer as

recommended by Southminster. Southminster will consult to the extent possible with

You, Your designated representative, Your physician, Southminster health care

professionals, and representatives of Your family when appropriate in assessing the

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appropriate accommodation. You agree that Southminster retains the right to make a final

determination of the need to recommend that You Move or Transfer, and You agree to

voluntarily comply with that recommendation as one of the conditions of being a

Resident of Southminster.

C. Move or Transfer to an Outside Organization. Southminster is not designed or licensed to

care for persons who have certain conditions, including but not limited to certain

psychiatric conditions or mental illnesses, certain acute medical conditions, and certain

contagious or dangerous diseases. If You or Southminster determines that You need care

beyond that provided by Southminster, or that Your continuing presence at Southminster

is detrimental to the health or peace of You or of others at Southminster, You agree to

voluntarily Move or Transfer to an outside organization capable of providing such care as

one of the conditions of being a Resident of Southminster. Except in an emergency,

Southminster will consult to the extent possible with You, Your designated

representative, Your physician, Southminster health care professionals, and

representatives of Your family when appropriate in assessing the appropriate

accommodation. You agree to pay the expense of such a Move or Transfer and for all

care subsequently provided by the other organization. This Agreement will be terminated

by You or by Southminster in accordance with Section IX if the outside Move or

Transfer becomes permanent.

D. Temporary Displacement from Your Residence. If Southminster decides that Your

Residence must be temporarily unoccupied for more than one (1) day for an emergency,

to meet a law or regulation, for reasons of health or safety, for inspection, for purposes of

modifications or repairs, or for some other reasonable purpose, You agree to Transfer to a

temporary accommodation arranged by Southminster. Your Service Fees will continue

but the costs of Transfer and of the temporary accommodation will be paid by

Southminster unless the reason for the Transfer was caused by actions or inactions by

You, Your guests, or Your non-Southminster service providers.

E. Move to Accommodate Changes by Southminster. You agree to Move to a different

Residence if changes implemented by Southminster will eliminate or significantly change

Your Residence. Such a Move would only be required when deemed necessary by

Southminster for the welfare of current or future Residents or for the continued

successful operation of Southminster. You will be given at least thirty (30) days notice.

All costs for Your Move will be paid by Southminster. Southminster will endeavor to

provide You with a similar Residence whenever possible. Improvements that You made

to the Residence that You are Vacating will be reimbursed by Southminster based on fair

market value or, at Southminster’s option and expense, relocated or replicated in Your

new Residence.

F. Marriage or Addition of Another Party after Date of Occupancy. Should You marry a

person who is also a Resident of Southminster, the two of You may occupy either

Residence or both Residences. Should You marry a person who is not a Resident or wish

to add an additional party to this Agreement, Your spouse or the additional person may

become a Resident if he or she meets all the requirements for admission, enters into a

Residence and Services Agreement with Southminster, and pays the Entrance Fee and

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Service Fees as defined in this Agreement. If Your spouse or the additional person does

not meet the requirements of Southminster for admission as a Resident, You may

terminate this Agreement in accordance with Section IX.C. or IX.D. (whichever is

appropriate), or Your spouse or the additional person may be approved for admission

under special circumstances and with negotiated fees as agreed to in writing by all parties

to this Agreement.

IX. Rescission, Cancellation, and Termination

A. Rescission. (See the definition of Rescission Period at II.L. on page 2.) You may rescind

this Agreement during the Rescission Period. (See Section X.B.a. for refund terms.) You

are not required to have a Date of Occupancy that falls within the Rescission Period.

B. Cancellation. If, prior to the Date of Occupancy, Southminster denies You admission, or

You die, or if, on account of illness, injury, or incapacity You are precluded from

occupying a Residence at Southminster, this Agreement is automatically cancelled. You

agree to provide evidence of changes in Your condition and Southminster will determine

if the changes preclude You from occupancy. If more than one of You is a party to this

Agreement, and the changes listed above that preclude occupancy affect only one of You,

the Agreement can continue or be cancelled at the option of the other party or parties as

expressed in writing to Southminster. If Southminster notifies You that Your reserved

Residence will not be available for occupancy, You may reserve another Residence in

accordance with Section III.E. or cancel this Agreement in accordance with the terms of

this paragraph. (See Section X.B.a. for refund terms.)

C. Termination by You Before the Date of Occupancy. After the Rescission Period and

before Your Date of Occupancy, You may terminate this Agreement for reasons other

than those defined in Section IX.B. above with thirty (30) days written notice. (See

Section X.B.b. for refund terms.)

D. Termination by You After the Date of Occupancy. After the later of the Rescission

Period or the Date of Occupancy, You may terminate this Agreement by giving

Southminster thirty (30) days written notice of such termination. In the event of the death

of the last surviving Resident that is a party to this contract, this Agreement shall

terminate immediately. (See Section X.B.c. for refund terms.)

E. Termination by Southminster. Southminster may terminate this Agreement at any time if

there is a determination by Southminster that there is just cause. Just cause may include,

among other reasons, any material misrepresentation or omission made by You in the

materials that You submitted as part of the admissions or financial assistance process;

Your failure to make timely payments in accordance with Section VI; Your failure to

abide by Southminster policies; the breach of any of the terms and conditions of this

Agreement; Your refusal to voluntarily make a Move or Transfer that is deemed

necessary and recommended in accordance with this Agreement; Your permanent Move

or Transfer to an outside organization; or a good faith determination made by

Southminster that You are a danger to Yourself or to others. Southminster will provide

You with thirty (30) days notice of termination unless You are determined to be a danger

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to Yourself or others in which case termination may be effective immediately. (See

Section X.B.b. or Section X.B.c. for refund terms.). Denial of admission by Southminster

prior to the Date of Occupancy is considered a cancellation rather than a termination and

is described in Section IX.B.

X. Refund of the Entrance Fee

A. General. Schedule I identifies the Entrance Fee that You paid, the Entrance Fee refund

plan that You selected, and the basis for calculating the amount of the Entrance Fee that

may be refundable to You. Any Entrance Fee refund for which You may be eligible is not

made until the last surviving Resident that is a party to this Agreement has a Date of

Vacancy and all other terms of this Agreement have been met. For purposes of

calculating any refund of Your Entrance Fee, additional Entrance Fees paid under this

Agreement after the Date of Occupancy (for certain Moves or for adding additional

parties to the Agreement) are added together and treated as if paid at the first Date of

Occupancy. Your refund will be paid to Your estate unless You arranged otherwise in

writing with Southminster.

B. Entrance Fee Refund by Type of Termination. This section describes Entrance Fee

refunds, by type of terminations as described in Section IX.

a. Rescission or Cancellation. If there is a rescission or cancellation as described

in Sections IX.A and IX.B, the refund is 100% of all portions of the Entrance

Fee that You have paid, less applicable non-standard costs described in

Schedule II. Depending on the type of termination, any refund due will be

paid within thirty (30) days of the end of the Rescission Period or from the

date of cancellation.

b. Termination Before the Date of Occupancy. If, before the Date of Occupancy,

You or Southminster terminate this Agreement as described in Sections IX.C.

or IX.E., the refund is 100% of all portions of the Entrance Fee that You have

paid, less non-refundable fees specified in Schedule I, less applicable non-

standard costs described in Schedule II, less any other amounts owed under

the terms of this Agreement. Any refund due will be paid within thirty (30)

days from the date of termination.

c. Termination After the Date of Occupancy. If, after the Date of Occupancy,

You or Southminster terminate this Agreement as described in Sections IX.D.

or IX.E., the refund is the refundable portion of Your Entrance Fee as

described in Schedule I, less applicable non-standard costs described in

Schedule II, less any other amounts owed under the terms of this Agreement.

Any refund due will be paid within thirty (30) days of the date of receipt by

Southminster of an Entrance Fee received in full by Southminster from the

next Resident that occupies the Independent Living Residence being Vacated

as a result of Your termination.

XI. Financial Assistance

As long as Southminster remains classified as a non-profit charitable organization under

Federal law and regulation, Southminster will endeavor to avoid termination of this

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Agreement solely because You are financially unable to pay Southminster’s fees. The

decision to deny or grant financial assistance is at the sole discretion of Southminster.

Southminster will provide financial assistance only if it can do so without impairing its

ability to operate on a sound financial basis.

You agree that to be eligible for consideration for financial assistance, You will provide all

information that Southminster decides is necessary to assess Your eligibility for financial

assistance, and You will, when so requested by Southminster, obtain any other form of

financial assistance that might be available to You including family assistance or government

subsidy programs. You agree to notify Southminster immediately if you become aware that

You might reasonably expect to need financial assistance and to work cooperatively with

Southminster to make reasonable changes that might help delay or minimize any eventual

financial assistance need.

If You receive financial assistance from or arranged through Southminster, You agree to

comply with reasonable conditions which may include a Move to a different Residence. You

agree that Southminster will deduct from refunds due to You, or may seek to recover from

Your estate, any financial assistance that Southminster or any of its’ owned, controlled, or

affiliated organizations has provided to You.

XII. General

A. Assignment. Your rights and privileges under this Agreement are personal to You and

may not be transferred or assigned by You by any act by You, by legal proceeding, or in

any other manner.

B. Management of Southminster. The absolute rights of management are reserved by

Southminster. Southminster reserves the right to accept or reject any person for residency

as allowed by law.

C. Multiple Residents as Parties to this Agreement. When more than one (1) Resident is a

party to this Agreement, Date of Availability, Date of Occupancy, Date of Termination,

and Date of Vacancy applies to each Resident separately when such dates do not coincide

for all the Residents. This Agreement continues in force until the last Resident that is

party to this Agreement has a Date of Termination and a Date of Vacancy. All Residents

that are parties to this Agreement shall all be equally and fully responsible for the

payment of all fees and charges required under this Agreement.

D. Rights to Property/Subordination. This Agreement does not transfer or grant any interest

in the real or personal property owned or administered by Southminster other than the

rights and privileges as described in this Agreement. Nothing contained in this

Agreement shall be construed to create the relationship of landlord and tenant between

Southminster and You. Any rights, privileges, or benefits under this Agreement,

including Your right to a full or partial refund (except for escrowed Entrance Fee deposits

as described in Section III.B. and Schedule I), shall be subordinate to any existing or

subsequent mortgages or deeds of trust on any of the premises or to any other interest in

the real property of Southminster and to all amendments, modifications, replacements, or

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refinancing of any existing or subsequent mortgages or deeds of trust or to any liens or

security interests held by secured creditors of Southminster. This subordination provision

means that the claims of secured creditors, in the event of Southminster's bankruptcy or

default on its financial obligations, shall be paid before You are entitled to receive any

applicable refund. Upon request, You shall execute and deliver any document which may

be required by Southminster, or by the holder of any such mortgages or deeds of trust or

other encumbrances, to effect or confirm such subordination.

E. Severability and Forbearance. If any term or provision of this Agreement or the

application thereof to any person or circumstance shall to any extent be invalid or

unenforceable, the remainder of this Agreement or the application of such term or

provision to persons or circumstances other than those to which it is held invalid or

unenforceable shall not be affected thereby, and each term and provision of the

Agreement shall be valid and enforceable to the fullest extent permitted by law. No act

of forbearance or failure to insist upon prompt performance of any of the terms of this

Agreement by Southminster shall be construed as a waiver of rights granted to

Southminster, or limit Southminster’s ability to enforce all the provisions of this

Agreement.

F. Repair, Construction, or Destruction of Property. Southminster shall not be liable for any

damage, compensation or claim by reason of inconvenience or annoyance resulting from

the necessity of repairing Southminster buildings or property, from construction at

Southminster, or from displacement from property as the result of damage, destruction,

construction, or repair.

G. Third Party Injuries and Claims. You agree to indemnify, defend and hold Southminster

harmless from and against any and all claims, demands, liabilities, losses or damages

(including attorneys’ fees) arising out of any injury to or death of any person or any

damage to property occurring within the Southminster retirement community and caused

by Your acts or omissions or the acts or omissions of Your invitees, licenses, or guests.

H. Entire Agreement. All schedules and addenda attached to this Agreement are

incorporated herein and made a part hereof by reference. This Agreement, including any

schedules and addenda attached hereto, constitutes the entire agreement between

Southminster and You and supersedes all prior written or prior contemporaneous oral

understandings or agreements between Southminster and You. Southminster shall not be

liable or bound in any manner by any statements, representations, or promises made by

any person representing or assuming to represent Southminster, unless such statements,

representations, or promises are set forth in this Agreement or its Schedules and

Addenda.

I. Amendments and Modifications. This agreement shall not be altered, amended or

modified except in writing and duly executed by You and Southminster.

J. Successors and Assigns. Except as set forth herein, this Agreement shall bind and inure

to the benefit of the successors and assigns of Southminster and Your heirs, executors,

administrators, guardians, and assigns.

Version 4- 2/26/2021 Page 17 of 17

K. Gender. Throughout this Agreement, the use of the masculine or feminine gender shall

include either, and the use of the singular shall include the plural.

L. Notice Provisions. Any notices, consents, or other communications to Southminster

hereunder (collectively “notices”) shall be in writing and addressed as follows:

President

Southminster, Inc.

8919 Park Road

Charlotte, NC 28210

M. Governing Law. This Agreement shall be governed by the laws of the State of North

Carolina.

IN WITNESS WHEREOF the parties have hereunder set their hands and seals as of the day and

year first written above.

SOUTHMINSTER, INC. RESIDENT(S)

By:________________________ ______________________________

Title:_______________________ ______________________________

Version 2 - 2/23/2018 Schedule I, Page 1 of 2

A Continuing Care Retirement Community

8919 Park Road – Charlotte, NC 28210

Schedule I of the Residence and Services Agreement

I. Introduction

This Schedule I is a part of the Residence and Services Agreement entered into on this day of

, 20 , by and between Southminster, Inc., a North Carolina non-profit corporation

(hereinafter called “Southminster”), and (hereinafter called "Resident", “You”, or

“Your”).

II. Residence

You have reserved Residence number for occupancy by party (parties). This

Residence is the following type:

cottage apartment nursing assisted living assisted living – dementia.

This Residence is or is not constructed as of the Date of Agreement.

This Residence is unfurnished but is provided with standard features selected and provided by

Southminster. If You select options, upgrades, or request or accept other non-standard features

or if there are features that are provided as an additional charge, those are identified in Schedule

II. Following is a description of the reserved Residence:

III. Entrance Fee

A. Entrance Fee Amount: The Entrance Fee for the Residence that You have reserved,

based on the Entrance Fee refund plan that You have selected, is $ for the 1

st

person and $ for the 2

nd

person for a total of $ .

B. Entrance Fee Deposit: Your Entrance Fee deposit is $ . This is 10% of the total

Entrance Fee noted above. This deposit is or is not required by law to be placed

into an escrow account.

C. Entrance Fee Refund Plan: You have selected the Entrance Fee refund plan.

Based on the refund plan You selected, the method for calculating any Entrance Fee

refund for which You may be eligible in accordance with Section X is described

below. Note that when calculating the refundable portion for all plans, a month is

defined as a full or partial calendar month including the months of the Date of

Occupancy and of the Date of Vacancy and all months are counted from the Date of

Occupancy.

Version 2 - 2/23/2018 Schedule I, Page 2 of 2

Standard Entrance Fee Refund Plan. The refundable portion of the Entrance Fee is

the difference between the total Entrance Fee paid less 5% of that sum per month. No

refund of the Standard plan Entrance Fee is made after twenty (20) months.

50% Entrance Fee Refund Plan. The refundable portion of the Entrance Fee is the

difference between the total Entrance Fee paid less 5% of that sum per month through

the earlier of the tenth (10

th

) month or the Date of Vacancy. After the tenth (10

th

)

month, the refundable portion is 50% of the sum of Entrance Fees paid.

90% Entrance Fee Refund Plan. The refundable portion of the Entrance Fee is the

difference between the total Entrance Fee paid less 5% of that sum per month through

the earlier of the second (2

nd

) month or the Date of Vacancy. After the second (2

nd

)

month, the refundable portion is 90% of the sum of Entrance Fees paid.

D. Escrow of Entrance Fee Deposit. If Your Entrance Fee deposit is required to be

placed into an escrow account as indicated in this section, You acknowledge receipt

of a copy of the escrow agreement between Southminster and the escrow agent and

agree to the terms of that escrow agreement. The escrow agreement defines the

instruments into which the escrow may be invested to earn interest, and the terms and

conditions under which the escrow agent will release Your Entrance Fee deposit to

Southminster or to You. Southminster selects and may change the escrow agent.

IV. Service Fee

The Service Fee for the Residence that You have reserved is a monthly or daily fee. It

equals $ for the 1

st

person and $ for the 2

nd

person for a total of $ as of Date

of Agreement. NOTE that the Service Fee may change before and after the Date of

Occupancy in accordance with Section III and VI of the Agreement. The Service Fee at

the Date of Occupancy will be based on the rates in effect at that date.

V. Date of Occupancy

Your Date of Occupancy is . All parties to this Agreement acknowledge this Date of

Occupancy by initialing below:

Southminster:_________ Resident:_________ Resident: _________

VI. Non-refundable Fee

If You or Southminster terminate this Agreement as described in Section IX.C. or Section IX.E.

of the Agreement, You will owe Southminster a non-refundable fee of $ in addition to

any other obligations defined under the Agreement. As described in Section X of the

Agreement, the non-refundable fee, when owed, may be deducted from any refund due to You.

Version 1- 2/27/2006 Schedule II, Page 1 of 1

8919 Park Road – Charlotte, NC 28210

Schedule II of the Residence and Services Agreement

I. Introduction

This Schedule II is a part of the Residence and Services Agreement entered into on this

day of , 20 , by and between Southminster, Inc., a North Carolina non-profit

corporation (hereinafter called “Southminster”), and (hereinafter called

"Resident", “You”, or “Your”). The Residence that You have reserved is # .

II. Non-standard Features You Have Requested

You have selected the upgrades, options, or other non-standard features as described and

at the prices shown below in this section. Prices and payment term for these items are

also described. As described in Section X of the Agreement, You are required to pay for

these items even if termination occurs prior to the Date of Occupancy.

[Note: a chart is inserted to list the item, associated price, and payment terms.]

III. Non-standard Features from Previous Occupants

The Residence that You have reserved has the following features that were implemented

by a previous Resident:

[Note: a chart is inserted to list the item, associated price, and responsibility for

maintenance.]

IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the

day of , 20 .

SOUTHMINSTER, INC. RESIDENT(S)

By:________________________ ______________________________

Title:_______________________ ______________________________

ATTACHMENT 5 -

- Southminster's Mission Statement

SOUTHMINSTER, INC.

MISSION STATEMENT

At Southminster our mission is to embrace community, caring and collaboration

to enrich the lives of those we serve.

We are Southminster.

VISION STATEMENT

We are committed to being a thriving, inclusive culture celebrating innovative

living and person-centered care.

Meeting the region’s emerging needs through thoughtful growth and

collaboration, we will be the premier choice to live and work.

SOUTHMINSTER VALUES

Community

We create welcoming and resilient communities where we work and live.

Excellence

Teamwork and discipline guide us in our pursuit of excellence.

Compassion

We respond with support when challenged and faced with struggles.

Wellbeing

We holistically care for one another.

Do the Right Thing

We believe trust and integrity are paramount to doing what’s right even when no one is

watching.

ATTACHMENT 6 -

- Acknowledgment of Receipt of Disclosure Statement

ACKNOWLEDGEMENT OF RECEIPT

OF DISCLOSURE STATEMENT

Southminster, Inc.

8919 Park Road

Charlotte, NC 28210

Southminster (the “Facility”) has delivered a Disclosure Statement to me, a prospective resident,

prior to or at the time of executing a Residency Agreement to provide continuing care, or prior to or

at the time of the transfer of any money or other property to the facility, whichever occurred ﬁrst.

As a prospective resident, the facility’s representatives have encouraged me to read the Disclosure

Statement in its entirety before entering into any contract or written agreement or paying any fee.

I understand the facility, like all other continuing care facilities in the State of North Carolina, is

subject to an act concerning registration and disclosure by continuing care facilities (the “Act”).

Registration under the act does not constitute approval, recommendation, or endorsement of the

facility by the Department of Insurance or the State of North Carolina, nor does such registration

evidence the accuracy or completeness of the information in the Disclosure Statement.

I understand this matter involves a ﬁnancial commitment and associated risk as well as a legally

binding contract. In evaluating the Disclosure Statement and the Financial Statements prior to any

commitment, I was encouraged to consult with an attorney and/or ﬁnancial advisor who can review

these documents with me, if any matters contained herein are not clear, including an understanding

of solvency and deﬁcit fund balance levels for this and other continuing care facilities.

Prospective Resident

Southminster Representative

Date of Signature

ATTACHMENT 7 –

- Interim Financial Statements as of December 31, 2023

ACTUAL

BUDGET

VARIANCE

ACTUAL

BUDGET

VARIANCE

REVENUES, GAINS, AND OTHER SUPPORT

Independent Living Revenue

5,463,098

$

5,439,233

$

23,865

$

5,463,098

$

5,439,233

$

23,865

$

Healthcare Revenue

2,518,973

2,717,749

(198,776)

2,518,973

2,717,749

(198,776)

Home Care Revenue

1,172,369

1,031,460

140,909

1,172,369

1,031,460

140,909

Resident Assistance

(192,964)

(177,375)

(15,589)

(192,964)

(177,375)

(15,589)

Earned Entrance Fees

2,249,602

2,476,009

(226,407)

2,249,602

2,476,009

(226,407)

Investment Income, net

390,068

294,472

95,596

390,068

294,472

95,596

Realized Losses

(65,371)

-

(65,371)

-

(65,371)

Contributions

362,446

394,200

(31,754)

362,446

394,200

(31,754)

Net Assets Released from Restrictions for Operations

46,390

28,025

18,365

46,390

28,025

18,365

Other Income

165,038

105,826

59,212

165,038

105,826

59,212

Total Revenues, Gains, and Other Support

12,109,649

12,309,599

(199,950)

12,109,649

12,309,599

(199,950)

OPERATING EXPENSES

Salaries, Wages, and Employee Benefits

6,223,740

5,833,450

(390,290)

6,223,740

5,833,450

(390,290)

Maintenance, Housekeeping, and Utilities

821,192

770,033

(51,159)

821,192

770,033

(51,159)

Food and Related Supplies

508,523

509,234

711

508,523

509,234

711

Insurance

106,423

106,905

482

106,423

106,905

482

Information Technology, Consulting, and Professional Fees

257,447

263,894

6,447

257,447

263,894

6,447

Professional Development

78,085

79,279

1,194

78,085

79,279

1,194

Marketing

66,014

70,494

4,480

66,014

70,494

4,480

Other Operating Expenses

418,480

434,339

15,859

418,480

434,339

15,859

Depreciation and Amortization

3,053,504

3,138,521

85,017

3,053,504

3,138,521

85,017

Interest Expense

1,887,310

1,902,200

14,890

1,887,310

1,902,200

14,890

Loss on Disposal of Assets

13,438

12,000

(1,438)

13,438

12,000

(1,438)

Community Benefit

199,892

196,501

(3,391)

199,892

196,501

(3,391)

Total Operating Expenses

13,634,048

13,316,850

(317,198)

13,634,048

13,316,850

(317,198)

OPERATING LOSS

(1,524,399)

(1,007,251)

(517,148)

(1,524,399)

(1,007,251)

(517,148)

Change in Unrealized Gains on Investments

1,915,463

-

1,915,463

-

1,915,463

Net Assets Released from Restrictions for Payments

80,000

-

80,000

-

of Debt Service

CHANGE IN NET ASSETS (DEFICIT) WITHOUT

471,064

(927,251)

1,398,315

471,064

(927,251)

1,398,315

DONOR RESTRICTIONS

Contributions with Donor Restrictions

8,997

9,575

(578)

8,997

9,575

(578)

Net Assets Released from Restrictions

(126,390)

(108,025)

(18,365)

(126,390)

(108,025)

(18,365)

CHANGE IN NET ASSETS WITH DONOR RESTRICTIONS

(117,393)

(98,450)

(18,943)

(117,393)

(98,450)

(18,943)

CHANGE IN NET ASSETS (DEFICIT)

353,671

(1,025,701)

1,379,372

353,671

(1,025,701)

1,379,372

NET ASSETS (DEFICIT) AT BEGINNING OF PERIOD

(16,085,714)

-

(16,085,714)

-

NET ASSETS (DEFICIT) AT END OF PERIOD

(15,732,043)

$

(17,111,415)

$

1,379,372

$

(15,732,043)

$

(17,111,415)

$

1,379,372

$

SOUTHMINSTER, INC.

INTERIM STATEMENT OF OPERATIONS AND CHANGE IN NET DEFICIT

December 31, 2023

FIRST QUARTER YEAR TO DATE

2024 2023

Assets

Current Assets

Cash & Cash Equivalents 546,758$ 3,150,778$

Short-Term Investments 723,079 -

Trusteed Cash Assets 2,246,100 2,250,588

Accounts Receivable-Residents 591,276 454,985

Sales Tax Receivable 165,444 311,703

Pledges Receivable, Current 167,017 97,872

Other Current Assets 6,161,759 1,076,081

Total Current Assets 10,601,433 7,342,007

Property, Plant, & Equipment, At Cost

Land and Land Improvements 5,456,799 5,317,358

Buildings 290,833,345 284,982,702

Furniture, Fixtures and Equipment 10,873,671 10,380,424

Right of Use Asset 222,029 222,029

307,385,844 300,902,513

Less Accumulated Depreciation (106,423,740) (95,510,726)

200,962,104 205,391,787

Construction in Progress 301,857 1,250,359

Net Property, Plant, & Equipment 201,263,961 206,642,146

Other Assets

Operating Reserve 7,720,072 6,444,655

Southminster Community Fund 50,000 50,000

Capital Campaign Fund 79,854 270,516

Debt Service Reserves 9,135,435 8,770,535

Investment Securities, At Market 15,537,590 16,586,948

Pledges Receivable, Non-Current 124,798 345,753

Deferred Costs and Other Assets 436,620 392,270

Total Other Assets 33,084,369 32,860,677

Total Assets

244,949,763

$

246,844,830

$

Liabilities

Current Liabilities

Accounts Payable 655,539$ 2,128,979$

Retainage Payable 35,140 -

Accrued Payroll and Employee Benefits 1,869,691 1,704,255

Accrued Interest Expense 1,742,287 1,766,134

Line of Credit 2,941,397 -

Current Portion of Lease Liability 42,741 41,068

Current Portion of Long Term Debt 3,160,000 5,436,441

Total Current Liabilities 10,446,795 11,076,877

Long Term Debt

Series 2016 Bonds, Plus Unamortized Premium 48,052,542 50,873,228

Series 2018 Bonds, Plus Unamortized Premium 87,804,467 88,355,283

2021 Term Bank Loans 16,980,000 18,180,339

Unamortized Bond Issuance Costs (2,180,707) (2,313,263)

Total Long Term Debt, Net 150,656,302 155,095,587

Lease Liability 124,344 167,498

Advance Entrance Fee Deposits 1,152,369 1,084,249

Deferred Standard Entrance Fee Revenue 71,470,605 68,556,141

Refundable Entrance Fees 26,831,391 28,565,794

Total Liabilities 260,681,806 264,546,146

Net Assets (Deficit)

Net Assets with Donor Restrictions 401,722 737,422

Net Assets (Deficit) without Donor Restrictions (16,133,765) (18,438,738)

Total Net Assets (Deficit) (15,732,043) (17,701,316)

Total Liabilities and Net Assets (Deficit)

244,949,763

$

246,844,830

$

SOUTHMINSTER, INC.

INTERIM BALANCE SHEET

December 31, 2023

12/31/2023

12/31/2022

Cash Flows from Operating Activities

Change in Total Net Deficit

353,671

$

192,851

$

Adjustments:

Earned Entrance Fees

(2,249,602)

(2,056,532)

Depreciation

3,043,444

2,878,072

Amortization of Bond Premium

(132,181)

(141,691)

Amortization of Bond Issue Costs

29,374

31,499

Amortization of Deferred Marketing Costs

10,060

10,353

Loss on Disposal of Assets

13,438

10,993

Net Unrealized Gains on Investments

(1,915,463)

(979,396)

Realized Losses/(Gains) on Investments

65,371

(197,727)

(Increase)/Decrease In:

Accounts Receivable, Net

11,439

(72,125)

Other Current Assets

3,592,915

3,731,842

Deferred Assets

(45,797)

4,852

Increase/(Decrease) In:

Accounts Payable

(147,462)

(24,005)

Accrued Payroll and Employee Benefits

368,052

129,565

Accrued Interest Expense

(1,706,996)

(1,712,343)

Net Cash Provided by Operating Activities

1,290,263

1,806,208

Cash Flows From Investing Activities

Change of Assets Limited to Use

(201,023)

1,555,341

Sales of Investments

295,854

458,270

Purchases of Property and Equipment for Routine Additions

(962,245)

(1,827,140)

Purchases of Property and Equipment for Non-Routine/Expansion Projects

(510,775)

(1,934,261)

Net Cash Used in Investing Activities

(1,378,189)

(1,747,790)

Cash Flows from Financing Activities

Proceeds from Entrance Fees

2,988,565

2,243,403

Proceeds from Entrance Fees (Top of East First Generation)

-

4,902,560

Entrance Fees Refunded

(975,184)

(516,670)

Entrance Fees Refunded (Top of East and Terrace First Generation)

-

Deposits Received, Net of Refunds and Conversions to Entrance Fees

59,510

(54,210)

Deposits Received on Expansion Units, Net of Refunds and Conversion to Entrance Fees

-

(447,920)

Proceeds from 2021 Bank Loans

-

2,599,645

Proceeds from Line of Credit

8,975,000

-

Principal Payments on Series 2016 Bonds

(2,325,000)

(2,215,000)

Principal Payments on Series 2018 Bonds

(80,000)

(1,610,000)

Repayments of 2021 Bank Loans

(180,000)

(4,290,057)

Repayments of Line of Credit

(8,203,603)

-

Repayments of Lease Liabilities

(10,526)

(10,114)

Payment of Debt Issuance Costs

-

(4,000)

Net Cash Provided by Financing Activities

248,762

597,637

Net Increase in Cash and Cash Equivalents

160,836

656,055

Cash and Cash Equivalents, Beginning of Year

385,922

2,494,723

Cash and Cash Equivalents, End of Year

546,758

$

3,150,778

$

SOUTHMINSTER, INC.

INTERIM STATEMENT OF CASH FLOWS

December 31, 2023

For the three months ended,