10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 000-53969

SENTIO HEALTHCARE PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

MARYLAND	20-5721212
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
189 South Orange Avenue, Suite 1700, Orlando, FL	32801
(Address of principal executive offices)	(Zip Code)

407-999-7679

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one:

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

As of November 12, 2012, there were 12,835,755 shares of common stock of Sentio Healthcare Properties, Inc. outstanding.

Table of Contents

PART I — FINANCIAL INFORMATION

FORM 10-Q

SENTIO HEALTHCARE PROPERTIES, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December  31, 2011 (unaudited)	1
Condensed Consolidated Statements of Operations for the Three and Nine months ended September  30, 2012 (unaudited) and 2011 (unaudited)	2
Condensed Consolidated Statements of Equity for the Nine months ended September  30, 2012 (unaudited) and 2011 (unaudited)	3
Condensed Consolidated Statements of Cash Flows for the Nine months ended September  30, 2012 (unaudited) and 2011 (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	37
PART II. OTHER INFORMATION	38
Item 1A. Risk Factors	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 6. Exhibits	39
SIGNATURES	41

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30, 2012			December 31, 2011
ASSETS
Cash and cash equivalents	$	21,741,000		$	27,972,000
Investments in real estate:
Land		23,193,000			20,713,000
Buildings and improvements, net		158,880,000			100,687,000
Furniture, fixtures and equipment, net		3,473,000			2,562,000
Intangible lease assets, net		6,371,000			3,865,000
		191,917,000			127,827,000
Deferred financing costs, net		1,715,000			824,000
Investment in unconsolidated entities		3,499,000			3,387,000
Tenant and other receivables, net		1,677,000			1,366,000
Restricted cash		3,664,000			3,806,000
Deferred costs and other assets		1,686,000			1,938,000
Goodwill		5,965,000			5,965,000
Total assets	$	231,864,000		$	173,085,000
LIABILITIES AND EQUITY
Liabilities:
Notes payable	$	145,460,000		$	85,978,000
Accounts payable and accrued liabilities		3,174,000			3,899,000
Prepaid rent and security deposits		1,677,000			1,535,000
Distributions payable		807,000			814,000
Total liabilities		151,118,000			92,226,000
Commitments and contingencies
Equity:
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value per share; 20,000,000 shares authorized; no shares were issued or outstanding at September 30, 2012 and December 31, 2011		—			—
Common stock, $0.01 par value per share; 580,000,000 shares authorized; 12,840,319, and 12,916,612 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively		129,000			129,000
Additional paid-in capital		93,416,000			96,542,000
Accumulated deficit		(17,291,000	)		(17,054,000	)
Total stockholders’ equity		76,254,000			79,617,000
Noncontrolling interests		4,492,000			1,242,000
Total equity		80,746,000			80,859,000
Total liabilities and equity	$	231,864,000		$	173,085,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenue:
Rental revenue	$	8,422,000		$	7,942,000		$	24,525,000		$	23,013,000
Resident services and fee income		3,655,000			1,945,000			8,243,000			5,667,000
Tenant reimbursements and other income		312,000			362,000			1,121,000			876,000
		12,389,000			10,249,000			33,889,000			29,556,000
Expenses:
Property operating and maintenance		7,473,000			6,750,000			20,921,000			18,751,000
General and administrative expenses		423,000			1,243,000			1,632,000			3,201,000
Asset management fees and expenses		559,000			390,000			1,543,000			1,197,000
Real estate acquisition costs and contingent consideration		1,016,000			22,000			1,229,000			1,453,000
Depreciation and amortization		1,689,000			1,946,000			4,653,000			5,658,000
		11,160,000			10,351,000			29,978,000			30,260,000
Income (loss) from operations		1,229,000			(102,000	)		3,911,000			(704,000	)
Other income (expense):
Interest income		2,000			4,000			10,000			10,000
Interest expense		(1,790,000	)		(1,436,000	)		(4,818,000	)		(4,161,000	)
Other		—			—			(151,000	)		—
Equity in income (loss) from unconsolidated entities		14,000			121,000			(363,000	)		105,000
Fair value adjustment for equity method investment		—			—			1,282,000			—
Net loss		(545,000	)		(1,413,000	)		(129,000	)		(4,750,000	)
Net (loss) income attributable to noncontrolling interests		(16,000	)		(20,000	)		108,000			(66,000	)
Net loss attributable to common stockholders	$	(529,000	)	$	(1,393,000	)	$	(237,000	)	$	(4,684,000	)
Basic and diluted net loss per common share attributable to common stockholders	$	(0.04	)	$	(0.11	)	$	(0.02	)	$	(0.37	)
Weighted-average number of common shares		12,853,483			12,985,804			12,877,929			12,629,155
Distribution declared, per common share	$	0.06		$	0.06		$	0.19		$	0.44

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Nine Months Ended September 30, 2012 and 2011

(Unaudited)

	Common Stock
	Number of Shares			Common Stock Par Value		Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance — December 31, 2011		12,916,612		$	129,000	$	96,542,000		$	(17,054,000	)	$	79,617,000		$	1,242,000		$	80,859,000
Redeemed shares		(76,293	)		—		(719,000	)		—			(719,000	)		—			(719,000	)
Noncontrolling interest contribution																3,444,000			3,444,000
Distributions		—			—		(2,407,000	)		—			(2,407,000	)		(302,000	)		(2,709,000	)
Net (loss) income		—			—		—			(237,000	)		(237,000	)		108,000			(129,000	)
Balance — September 30, 2012		12,840,319		$	129,000	$	93,416,000		$	(17,291,000	)	$	76,254,000		$	4,492,000		$	80,746,000

	Common Stock
	Number of Shares			Common Stock Par Value			Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance — December 31, 2010		11,592,883		$	116,000		$	91,588,000		$	(11,722,000	)	$	79,982,000		$	1,709,000		$	81,691,000
Issuance of common stock		1,575,250			16,000			15,628,000			—			15,644,000			—			15,644,000
Redeemed shares		(195,998	)		(2,000	)		(1,889,000	)		—			(1,891,000	)		—			(1,891,000	)
Offering costs		—			—			(1,890,000	)		—			(1,890,000	)		—			(1,890,000	)
Distributions		—			—			(5,529,000	)		—			(5,529,000	)		—			(5,529,000	)
Net loss		—			—			—			(4,684,000	)		(4,684,000	)		(66,000	)		(4,750,000	)
Balance — September 30, 2011		12,972,135		$	130,000		$	97,908,000		$	(16,406,000	)	$	81,632,000		$	1,643,000		$	83,275,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net loss	$	(129,000	)	$	(4,750,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs		356,000			321,000
Depreciation and amortization		4,653,000			5,658,000
Straight-line rent amortization		(527,000	)		(375,000	)
Real estate acquisition costs and contingent consideration		110,000			535,000
Fair value adjustment for equity method investment		(1,282,000	)		—
Equity in loss (income) from unconsolidated entities		363,000			(121,000	)
Bad debt expense		40,000			—
Change in deferred taxes		(191,000	)		—
Changes in operating assets and liabilities:
Tenant and other receivables		205,000			180,000
Prepaid expenses and other assets		441,000			(1,091,000	)
Restricted cash		95,000			(774,000	)
Prepaid rent and tenant security deposits		142,000			737,000
Payable to related parties		—			(38,000	)
Accounts payable and accrued liabilities		3,172,000			2,509,000
Net cash provided by operating activities		7,448,000			2,791,000
Cash flows from investing activities:
Real estate acquisitions		(20,941,000	)		(19,751,000	)
Additions to real estate		(620,000	)		(342,000	)
Payments for construction in progress		—			(471,000	)
Purchase of an interest in an unconsolidated entity		(2,490,000	)		(896,000	)
Changes in restricted cash		47,000			(31,000	)
Acquisition deposits		—			100,000
Distributions from unconsolidated joint ventures		143,000			466,000
Net cash used in investing activities		(23,861,000	)		(20,925,000	)
Cash flows from financing activities:
Proceeds from issuance of common stock		—			14,160,000
Redeemed shares		(719,000	)		(1,891,000	)
Proceeds from notes payable		40,763,000			14,561,000
Repayments of notes payable		(25,529,000	)		(584,000	)
Offering costs		—			(1,917,000	)
Deferred financing costs		(1,247,000	)		(274,000	)
Noncontrolling interest contribution		603,000			—
Payment of real estate contingent consideration		(980,000	)		(1,000,000	)
Distributions paid to stockholders		(2,407,000	)		(3,950,000	)
Distributions paid to noncontrolling interests		(302,000	)		—
Net cash provided by financing activities		10,182,000			19,105,000
Net (decrease) increase in cash and cash equivalents		(6,231,000	)		971,000
Cash and cash equivalents — beginning of period		27,972,000			29,718,000
Cash and cash equivalents — end of period	$	21,741,000		$	30,689,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,694,000		$	3,761,000
Cash paid for income taxes		549,000			509,000
Supplemental disclosure of non-cash financing and investing activities:
Distributions declared not paid		807,000			817,000
Distribution reinvested		—			1,484,000
Notes payable assumed and non-cash equity contribution in connection with real estate acquisition in connection with real estate acquisition		47,082,000			—

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SENTIO HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(Unaudited)

1. Organization

Sentio Healthcare Properties, Inc., a Maryland corporation, was formed on October 16, 2006 under the Maryland General Corporation Law for the purpose of engaging in the business of investing in and owning commercial real estate. As used in this report, the “Company”, “we”, “us” and “our” refer to Sentio Healthcare Properties, Inc. and its consolidated subsidiaries, except where context otherwise requires. Effective January 1, 2012, subject to certain restrictions and limitations, our business is managed by Sentio Investments, LLC, a Florida limited liability company that was formed on December 20, 2011 (the “Advisor”). Sentio Investments, LLC is controlled by John Mark Ramsey, our Chief Executive Officer and formerly an owner of our prior sub-advisor, Servant Healthcare Investments, LLC. Prior to January 1, 2012, Cornerstone Leveraged Realty Advisors, LLC, a Delaware limited liability company that was formed on October 16, 2006, was our advisor (the “Prior Advisor”).

Sentio Healthcare Properties OP, LP, a Delaware limited partnership (the “Operating Partnership”), was formed on October 17, 2006. At September 30, 2012, we owned 100% of the interest in the Operating Partnership and HC Operating Partnership, LP, a subsidiary of the Operating Partnership. We anticipate that we will conduct all or a portion of our operations through the Operating Partnership. Our financial statements and the financial statements of the Operating Partnership and its subsidiaries are consolidated in the accompanying condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

For federal income tax purposes, we have elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended December 31, 2008. REIT status imposes limitations related to operating assisted-living properties. Generally, to qualify as a REIT, we cannot directly operate assisted-living facilities. However, such facilities may generally be operated by a taxable REIT subsidiary (“TRS”) pursuant to a lease with the Company. Therefore, we have formed Master HC TRS, LLC (“Master TRS”), a wholly owned subsidiary of HC Operating Partnership, LP, to lease any assisted-living properties we acquire and to operate the assisted-living properties pursuant to contracts with unaffiliated management companies. Master TRS and the Company have made the applicable election for Master TRS to qualify as a TRS. Under the management contracts, the management companies have direct control of the daily operations of these assisted-living properties.

2. Public Offering

Our charter authorizes the issuance of up to 580,000,000 shares of common stock with a par value of $0.01 per share and 20,000,000 shares of preferred stock with a par value of $0.01 per share.

On June 20, 2008, we commenced an initial public offering of up to 50,000,000 shares of our common stock, consisting of 40,000,000 shares for sale pursuant to a primary offering and 10,000,000 shares for sale pursuant to our distribution reinvestment plan. We stopped making offers under our initial public offering on February 3, 2011 after raising gross offering proceeds of $123.9 million from the sale of 12.4 million shares, including shares sold under the distribution reinvestment plan.

On February 4, 2011, the U.S. Securities and Exchange Commission (“SEC”) declared the registration statement for our follow-on offering effective and we commenced a follow-on offering of up to 55,000,000 shares of our common stock, consisting of 44,000,000 shares for sale pursuant to a primary offering and 11,000,000 shares for sale pursuant to our dividend reinvestment plan. As of September 30, 2012, we had sold a total of 12.7 million shares of our common stock pursuant to our initial and follow-on public offerings for aggregate gross proceeds of $127.0 million.

On April 29, 2011 we informed our stockholders that the Independent Directors Committee of our board of directors had directed us to suspend our follow-on offering, our dividend reinvestment program and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with our Independent Directors Committee consideration of various strategic alternatives to enhance our stockholders’ value. On October 18, 2011, we announced that the Independent Directors Committee had suspended its analysis of strategic alternatives for the Company and concluded that the Company was well positioned as an investment program with a continued focus on healthcare real estate. The Independent Directors

5

Committee identified strategies in its evaluation process that it believes will enhance this position and is implementing operating changes designed to increase portfolio cash flow and increase shareholder value. In particular, the Company is focused on enhancing portfolio performance by identifying investment and financing opportunities, implementing operational efficiencies and evaluating the potential for growth in the future. As of September 30, 2012, sales pursuant to our follow-on offering remained suspended.

3. Summary of Significant Accounting Policies

For more information regarding our significant accounting policies and estimates, please refer to “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2011.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In accordance with the guidance for the consolidation of variable interest entities (“VIEs”), we analyze our variable interests, including investments in partnerships and joint ventures, to determine if the entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews, based on our review of the design of the entity, its organizational structure including decision-making ability, risk and reward sharing experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions and financial agreements. We also use quantitative and qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary.

Investments in Unconsolidated Entities

We account for our investments in unconsolidated joint ventures under the equity method of accounting. We exercise significant influence, but do not control these entities or direct the activities that most significantly impact the venture’s performance. Investments in unconsolidated entities are recorded initially at cost and subsequently adjusted for cash contributions and distributions. We recognize our allocable share of the equity in earnings of our unconsolidated entities based on the respective venture’s structure and preferences.

Use of Estimates

The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted.

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2011-05, Comprehensive Income: Presentation of Comprehensive Income, which eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity and requires the presentation of components of net income and components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB deferred the requirement to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements.

As of September 30, 2012, the Company had no components of other comprehensive income. Accordingly, net loss is equal to comprehensive loss for all periods presented.

Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. Our accompanying interim condensed consolidated financial statements should be read in conjunction with our audited condensed consolidated financial statements and the notes thereto included on our 2011 Annual Report on Form 10-K, as filed with the SEC.

6

Fair Value of Financial Instruments and Fair Value Measurements

FASB Accounting Standards Codification (“ASC”) 825-10, “Financial Instruments”, requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of ASU 2011-04 on January 1, 2012 did not have a material impact on the Company’s consolidated financial position or results of operations. The impact on the Company’s disclosures was not material. Financial assets and liabilities recorded at fair value on the condensed consolidated balance sheets and disclosed in the financial statements are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical instruments.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets when such information is available or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our balance sheets include the following financial instruments: cash and cash equivalents, tenant and other receivables, restricted cash, security deposits, accounts payable and accrued liabilities, distributions payable, and notes payable. With the exception of an equity method investment the Company obtained control of in April 2012 and notes payable discussed below, we consider the carrying values of our financial instruments to approximate fair value because they generally expose the Company to limited credit risk and because of the short period of time between origination of the financial assets and liabilities and their expected settlement.

The fair market value of notes payable is estimated using lending rates available to us for financial instruments with similar terms and maturities and are classified as Level 2. As of September 30, 2012 and December 31, 2011, the fair value of notes payable was $147.1 million and $87.0 million, compared to the carrying values of $145.0 million and $86.0 million, respectively. Upon acquiring control of a previously unconsolidated entity, the Company recorded its equity method investment at fair value of $6.0 million, and recorded a gain of approximately $1.3 million. The fair value of the equity method investment was estimated using appraisals of the respective investment.

There were no transfers between Levels 1 or 2 during the three months and nine months ended September 30, 2012. The Company has no financial instruments classified using level 3 measurements as of September 30, 2012.

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4. Investment in Real Estate and Unconsolidated Entities

The following table provides summary information regarding our current property portfolio.

Property	Location	Date Purchased	Gross Square Feet	Purchase Price			Sept. 30, 2012 Debt			Sept. 30, 2012 % Occupancy
Caruth Haven Court	Highland Park, TX	01/22/09	74,647	$	20,500,000		$	9,707,000			95	%
The Oaks Bradenton	Bradenton, FL	05/01/09	18,172	$	4,500,000		$	4,085,000			97	%
GreenTree at Westwood (1)	Columbus, IN	12/30/09	50,249	$	5,150,000		$	3,865,000			98	%
Mesa Vista Inn Health Center	San Antonio, TX	12/31/09	55,525	$	13,000,000		$	6,981,000			100	%
Rome LTACH Project (2)	Rome, GA	01/12/10	52,944	$	18,900,000		$	13,461,000			100	%
Oakleaf Village Portfolio
Oakleaf Village at — Lexington	Lexington, SC	04/30/10	67,000	$	14,512,000		$	9,391,000			89	%
Oakleaf Village at — Greenville	Greer, SC	04/30/10	65,000	$	12,488,000		$	8,094,000			70	%
Global Rehab Inpatient Rehab Facility	Dallas, TX	08/19/10	40,828	$	14,800,000		$	7,373,000			100	%
Terrace at Mountain Creek (3)	Chattanooga, TN	09/03/10	109,643	$	8,500,000		$	5,453,000			95	%
Littleton Specialty Rehabilitation Facility	Littleton, CO	12/16/10	26,808		(4	)		(4	)		100	%
Carriage Court of Hilliard	Hilliard, OH	12/22/10	69,184	$	17,500,000		$	13,325,000			94	%
Hedgcoxe Health Plaza	Plano, TX	12/22/10	32,109	$	9,094,000		$	5,600,000			100	%
River’s Edge of Yardley	Yardley, PA	12/22/10	26,146	$	4,500,000		$	6,484,000			100	%
Forestview Manor	Meredith, NH	01/14/11	34,270	$	10,750,000		$	8,754,000			100	%
Woodland Terrace at the Oaks	Allentown, PA	04/14/11	50,400	$	9,000,000		$	6,276,000			93	%
Physicians Centre MOB	Bryan, TX	04/02/12	114,583		(5	)		(5	)		68	%
Amber Glen	Urbana, IL	08/31/12	26,146	$	13,440,000		$	8,650,000			97	%
Mill Creek	Springfield, IL	08/31/12	34,270	$	12,180,000		$	8,349,000			98	%
Sugar Creek	Normal, IL	08/31/12	50,400	$	11,880,000		$	7,836,000			95	%
Hudson Creek	Bryan, TX	08/31/12	114,583	$	11,500,000		$	7,997,000			70	%

⁽¹⁾ The earn-out agreement associated with this acquisition was estimated to have a fair value of $1.0 million as of December 31, 2011 and an earn-out payment of approximately $1.0 million was made in January of 2012. For the three month periods ended September 30, 2011, expense approximately $0.2 million related to the increased earn-out liability associated with the earn-out payment have been included in the condensed consolidated statements of operations under real estate acquisition costs and contingent consideration. For the nine month periods ended September 30, 2011, expense of approximately $0.5 million related to the increased earn-out liability associated with the earn-out payment have been included in the condensed consolidated statements of operations under real estate acquisition costs and contingent consideration.

⁽²⁾  Rome LTACH, a development project, was completed in February 2011 and its first tenant moved in on February 1, 2011. In April 2012, the Company acquired the interests of Cornerstone Private Equity Fund Operating Partnership, LP and the Cirrus Group affiliates in Rome LTH Partners, LP for a total payment of approximately $5.2 million. We previously held an equity method investment in this property. As of April 2012, the Company owned 100% of Rome LTH Partners, LP and consolidated its existing equity method investment and the acquired interest at fair value in the amount of $18.9 million. Refer to Note 5 and 14 for more information on the acquisition and preliminary purchase price allocation.

⁽³⁾  Under the purchase and sale agreement executed in connection with the acquisition, a portion of the purchase price for the property was to be calculated and paid to the seller as earn-out payments based upon the net operating income, as defined, of the property during each of the three years following our acquisition of the property. The earn-out value of $1.0 million was paid during the second quarter of 2011.

⁽⁴⁾  Littleton Specialty Rehabilitation Facility, a development project and unconsolidated entity accounted for on the equity method, was completed in April 2012, and the single tenant began paying rent in July 2012, in accordance with the terms of the lease. Tenant operations commenced upon licensure of the facility in July 2012. As of September 30, 2012, real estate asset costs for the property were approximately $7.1 million and we had invested a total of approximately $1.6 million in this project.

⁽⁵⁾ On April 2, 2012, through a wholly owned subsidiary, the Company invested $2.5 million to acquire an interest in the Physicians Centre MOB along with Caddis Partners and related affiliates and a group of physician investors. This investment is accounted for on the equity method and discussed further in Note 5.

8

As of September 30, 2012, cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements			Furniture, fixtures and equipment			Intangible lease assets
Cost	$	23,193,000	$	166,785,000		$	5,052,000		$	14,757,000
Accumulated depreciation and amortization		—		(7,905,000	)		(1,579,000	)		(8,386,000	)
Net	$	23,193,000	$	158,880,000		$	3,473,000		$	6,371,000

As of December 31, 2011, accumulated depreciation and amortization related to investments in real estate and related lease intangibles were as follows:

	Land		Buildings and improvements			Furniture, fixtures and equipment			Intangible lease assets
Cost	$	20,713,000	$	105,340,000		$	3,578,000		$	10,649,000
Accumulated depreciation and amortization		—		(4,653,000	)		(1,016,000	)		(6,784,000	)
Net	$	20,713,000	$	100,687,000		$	2,562,000		$	3,865,000

Depreciation expense associated with buildings and improvements, site improvements and furniture and fixtures for the three months ended September 30, 2012 and 2011 was approximately $1.2 million and $1.0 million, respectively. Depreciation expense associated with building and improvements, site improvements and furniture and fixtures for the nine months ended September 30, 2012 and 2011 was $3.2 million and $2.7 million, respectively.

Amortization associated with intangible assets for the three months ended September 30, 2012 and 2011 was $0.5 million and $1.0 million, respectively. Amortization associated with intangible assets for the nine months ended September 30, 2012 and 2011 was $1.5 million and $3.0 million, respectively. Estimated amortization for October 1, 2012 through December 31, 2012 and each of the subsequent years is as follows:

	Intangible assets
October 2012 — December 2012	$	407,000
2013	$	2,712,000
2014	$	330,000
2015	$	330,000
2016	$	329,000
2017	$	328,000
2018 and thereafter	$	1,935,000

The estimated useful lives for intangible assets range from approximately one to seventeen years. As of September 30, 2012, the weighted-average amortization period for intangible assets was seven years.

5. Investments in Consolidated Joint Ventures and Unconsolidated Entities

Consolidated Joint Ventures

Oakleaf Joint Venture

On April 30, 2010, we invested approximately $21.6 million to acquire 80% equity interests in Royal Cornerstone South Carolina Portfolio, LLC (“Portfolio LLC”) and Royal Cornerstone South Carolina Tenant Portfolio, LLC (“Tenant LLC”) (collectively, we refer to the Portfolio LLC and the Tenant LLC as the “Oakleaf Joint Venture”). In accordance with the joint venture agreement, the Company is deemed the managing member and consolidates these entities. The Oakleaf Joint Venture owns and operates two assisted-living properties located in Lexington and Greenville, South Carolina. As of September 30, 2012, total assets related to Oakleaf Joint Venture were approximately $25.6 million, which includes approximately $22.6 million of real estate assets, and total liabilities were approximately $17.9 million, which includes approximately $17.5 million of secured mortgage debt. We may be required to fund additional capital contributions, including funding of any capital expenditures deemed necessary to continue to operate the entity and any operating cash shortfalls that the entity may experience.

9

Rome LTACH Project

On January 12, 2010, we funded an investment in a joint venture with affiliates of The Cirrus Group, an unaffiliated entity, to develop a $16.3 million free-standing medical facility on the campus of the Floyd Medical Center in Rome, Georgia. We contributed approximately $2.7 million of capital to acquire a 75% limited partnership interest in Rome LTH Partners, LP (“Rome LTH”). Cornerstone Private Equity Fund Operating Partnership, LP, an affiliate of our Prior Advisor, contributed approximately $0.5 million of capital to acquire a 15% limited partnership interest in Rome LTH. Three affiliates of The Cirrus Group contributed an aggregate of approximately $0.3 million to acquire an aggregate 9.5% limited partnership interest in Rome LTH. A fourth affiliate of the Cirrus Group acted as the general partner and held the remaining 0.5% interest in Rome LTH. The terms of the Rome LTH operating agreement included provisions obligating the joint venture to monetize a portion of our partners’ interest in the appreciation of value in the joint venture property. The obligation was exercisable by our partners at their sole discretion between years two and four of the joint venture. In February 2011, construction of the Rome LTACH project was completed.

In December 2011, The Cirrus Group notified us of their intended exercise of the promote monetization provisions of the Rome LTH operating agreement. On April 6, 2012, we acquired the interests of Cornerstone Private Equity Fund Operating Partnership, LP in the Rome LTH for $1.1 million. On April 12, 2012, we acquired the interests of The Cirrus Group in Rome LTH for $4.1 million, which included a $3.0 million payment of the promote termination amount. As of April 12, 2012, we owned 100% of Rome LTH. Upon acquiring control of Rome LTH, the Company recorded a gain on the fair value adjustment of this previously recorded equity method investment in the amount of $1.3 million during the period ended June 30, 2012 which is presented as a fair value adjustment for equity method investment in our statement of operations. The acquisition of interests was funded by approximately $2.6 million of equity raised in our offerings and $2.6 million of debt proceeds.

As of September 30, 2012, total assets related to this project were $19.2 million, which includes $18.4 million of net real estate related assets. Total liabilities were $13.5 million at September 30, 2012, which includes $13.5 million of secured mortgage debt. As of December 31, 2011, total assets related to this project were $16.5 million, which included $15.6 million of net real estate related assets. Total liabilities were $14.1 million at December 31, 2011, which includes $10.9 million of secured mortgage debt. For the three and nine months ended September 30, 2011, Rome LTH recorded revenue of $0.6 million and $1.6 million, and net income of $0.1 million and $0.1 million, respectively.

Leah Bay Joint Venture

On August 31, 2012, we invested approximately $49.5 million, to acquire an 80% joint venture interest in Sentio Leah Bay Portfolio, LLC (“Landlord LLC”) and Sentio Leah Bay TRS Portfolio, LLC (“Tenant LLC”) (collectively, we refer to the Landlord LLC and the Tenant LLC as the “Leah Bay Joint Venture”). Through two wholly-owned subsidiaries, the Company controls Landlord LLC and Tenant LLC and consolidates these entities. The Leah Bay Joint Venture owns and operates four memory care facilities located in Urbana, IL (Amber Glen), Springfield, IL (Mill Creek), Normal, IL (Sugar Creek) and Bryan, TX (Hudson Creek). As of September 30, 2012, total assets related to Leah Bay joint venture were approximately $50.5 million, which includes approximately $49.1 million of real estate assets and total liabilities were approximately $33.8 million, which includes approximately $32.8 million of secured mortgage debt.

Unconsolidated Entities

Littleton Specialty Rehabilitation Facility

On December 16, 2010, we funded an investment in a joint venture with affiliates of The Cirrus Group, an unaffiliated entity, to develop a $7.3 million specialty rehabilitation facility in Littleton, CO. We agreed to contribute approximately $1.6 million of capital to acquire a 90.0% limited partnership interest in Littleton Med Partners, LP. Three affiliates of The Cirrus Group contributed an aggregate of approximately $0.2 million to acquire an aggregate 9.5% limited partnership interest in the Littleton Med Partners, LP. A fourth affiliate of the Cirrus Group acts as the general partner and holds the remaining 0.5% interest in the Littleton Med Partners, LP. As of September 30, 2012 and December 31, 2011, we owned a 90.0% limited partnership interest in Littleton Med Partners, LP. Our net investment in this property as of September 30, 2012 and December 31, 2011 was $1.6 million. For the three months ended September 30, 2012 and 2011, we recorded income from this unconsolidated entity of $0.1 million and $0, respectively. For the nine months ended September 30, 2012 and 2011, we recorded a loss from this unconsolidated entity of $0.1 million and $0, respectively. As of September 30, 2012, total assets related to this project were $7.3 million, which includes $7.0 million of net real estate related assets. Total liabilities were $5.6 million at September 30, 2012, which includes $5.5 million of secured mortgage debt. As of December 31, 2011, total assets related to this project were $6.0 million, which included $5.8 million of net real estate related assets. Total liabilities were $4.2 million at December 31, 2011, which includes $3.2 million of secured mortgage debt. The joint venture began operations in July 2012.

Under the terms of the joint venture agreement, the joint venture may be obligated to monetize a portion of our partners’ interest in the appreciation of value in the joint venture property. These obligations may be exercised by our partners at their sole discretion between years two and four of the joint venture. The amount that would be paid upon monetization is subject to change based on a number of

10

factors, including the value of the property, net income earned by the property and payment of preferred returns on equity, and, under certain circumstances, the Company may elect to satisfy the promote monetization obligation connection with a disposition of the property. If the promote monetization liability is satisfied other than in connection with a sale of the property, the Company would be required to fund additional capital into the partnership.

Physicians Centre MOB

On April 2, 2012, through a wholly-owned subsidiary, we entered into a joint venture with affiliates of Caddis Partners, an unaffiliated entity, and a group of unaffiliated physicians to acquire an on-campus medical office building (the “Physicians Centers MOB”) located in Bryan, Texas.

The Company invested approximately $2.5 million of capital to acquire a 71.9% limited partnership interest in Bryan MOB Partners, L.P the (“Bryan LP”). Affiliates of Caddis Partners contributed an aggregate of approximately $0.35 million to acquire an aggregate 10.1% limited partnership interest in the Bryan LP and another affiliate of the Caddis Partners acts as the Bryan LP general partner, but does not own a partnership interest. The physician partners contributed approximately $0.625 million to acquire a 18.0% interest in Bryan LP. The Company’s equity investment in the joint venture was funded from proceeds from its public offering.

For the three and nine months ended September 30, 2012, we recorded a loss from this unconsolidated entity of $0.1 million and $0.4 million, respectively. As of September 30, 2012, total assets related to this joint venture were approximately $10.3 million, which includes approximately $9.4 million of real estate assets and total liabilities were approximately $7.4 million, which includes approximately $7.1 million of secured mortgage debt. Under the terms of the joint venture agreement, the joint venture may be obligated to monetize a portion of our partners’ interest in the appreciation of value in the joint venture property. These obligations may be exercised by our partners at their sole discretion between years two and four of the joint venture. The amount that would be paid upon monetization is subject to change based on a number of factors, including the value of the property, net income earned by the property and payment of preferred returns on equity, and, under certain circumstances, the Company may elect to satisfy the promote monetization obligation connection with a disposition of the property. We may be required to fund additional capital contributions, including funding of any capital expenditures deemed necessary to continue to operate the entity, any operating cash shortfalls that the entity may experience and the promote monetization if not satisfied in connection with a sale of the property.

6. Allowance for Doubtful Accounts

As of September 30, 2012 and December 31, 2011, we had recorded $71,000 and $76,000, respectively, as allowances for doubtful accounts related to tenants and other receivables.

7. Concentration of Risks

Our senior living operations segment accounted for approximately 85.3% and 82.4% of total revenues for the three months ended September 30, 2012 and 2011, respectively and approximately 85.6% and 83.2% of total revenues for the nine months ended September 30, 2012 and 2011. The following table provides information about our senior living operation segment concentration for the three and nine months ended September 30, 2012:

	Three Months Ended						Nine Months Ended
Operators	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Good Neighbor Care		29.6	%		25.3	%		31.1	%		26.6	%
Royal Senior Care		17.1	%		14.6	%		18.3	%		15.7	%
Woodbine Senior Living		18.2	%		15.5	%		19.7	%		16.9	%
12 Oaks Senior Living		15.7	%		13.4	%		17.2	%		14.7	%
JEA Senior Living		10.3	%		8.7	%		3.7	%		3.2	%
Provision Living		4.8	%		4.1	%		5.3	%		4.5	%
Legend Senior Living		4.3	%		3.7	%		4.7	%		4.0	%
		100	%		85.3	%		100	%		85.6	%

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Our triple-net leased segment accounted for approximately 12.2% and 10.2% of total revenues for the three months ended September 30, 2012 and 2011, respectively and approximately 11.9% and 9.8% of total revenues for the nine months ended September 30, 2012 and 2011, respectively. The following table provides information about our triple-net leased segment for the three and nine months ended September 30, 2012:

	Three Months Ended						Nine Months Ended
Tenant	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Babcock PM Management		32.8	%		4.0	%		37.2	%		4.4	%
Global Rehab Hospitals		30.2	%		3.7	%		34.2	%		4.1	%
The Specialty Hospital		29.6	%		3.6	%		22.9	%		2.7	%
Floyd Healthcare Management		7.4	%		0.9	%		5.7	%		0.7	%
		100	%		12.2	%		100	%		11.9	%

Our medical office building segment accounted for approximately 2.5% and 2.4% of total revenues for the three months ended September 30, 2012 and 2011, respectively, and approximately 2.5% of total revenues for the nine months ended September 30, 2012 and 2011.

As of September 30, 2012, we owned or had joint venture interests in 20 properties, geographically located in ten states. The following table provides information about our geographic risks by operating segment for the three and nine months ended September 30, 2012:

	Three Months Ended						Nine Months Ended
State	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Senior living operations
South Carolina		17.2	%		14.6	%		18.4	%		15.7	%
Texas		17.7	%		15.1	%		17.9	%		15.4	%
Ohio		11.6	%		9.9	%		12.6	%		10.7	%
Pennsylvania		16.7	%		14.3	%		17.2	%		14.7	%
New Hampshire		9.9	%		8.5	%		10.7	%		9.1	%
Tennessee		9.6	%		8.2	%		10.3	%		8.8	%
Illinois		8.2	%		7.0	%		3.0	%		2.5	%
Indiana		4.8	%		4.1	%		5.3	%		4.5	%
Florida		4.3	%		3.6	%		4.6	%		4.2	%
Triple-net leased properties
Texas		63.0	%		7.7	%		71.4	%		8.5	%
Georgia		37.0	%		4.5	%		28.6	%		3.4	%
Medical office building
Texas		100	%		2.5	%		100	%		2.5	%

8. Income Taxes

For federal income tax purposes, we have elected to be taxed as a REIT, under Sections 856 through 860 of the Code beginning with our taxable year ended December 31, 2008, which imposes limitations related to operating assisted-living properties. As of September 30, 2012, we had acquired fourteen assisted-living facilities and formed eleven wholly owned taxable REIT subsidiaries, or TRSs, which includes a Master TRS that consolidates our wholly owned TRSs.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would not be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would establish a valuation allowance which would reduce the provision for income taxes.

The Master TRS recognized a $0.1 million expense and a $0.1 million expense for Federal and State income taxes in the three months ended September 30, 2012 and 2011, respectively, and a $0.1 million expense and benefit of $0.1 million for Federal and State income taxes in the nine months ended September 30, 2012 and 2011, respectively, which have been recorded in general and administrative expenses. Net deferred tax assets related to the TRS entities totaled approximately $1.3 million and $1.1 million at September 30, 2012 and December 31, 2011, respectively, related primarily to book and tax basis differences for straight-line rent and accrued

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liabilities. Realization of these deferred tax assets is dependent in part upon generating sufficient taxable income in future periods. These deferred tax assets are included in deferred costs and other assets in our condensed consolidated balance sheets. We have not recorded a valuation allowance against our deferred tax assets as of September 30, 2012 as we have determined that the future projected taxable income from the operations of the TRS entities are sufficient to cover the additional future expenses resulting from these book tax differences.

9. Segment Reporting

As of September 30, 2012, we operated in three reportable business segments: senior living operations, triple-net leased properties, and medical office building (“MOB”) properties. Our senior living operations segment primarily consists of investments in senior housing communities located in the United States for which we engage independent third-party managers. Our triple-net leased properties segment consists of investments in skilled nursing and hospital facilities in the United States. These facilities are leased to healthcare operating companies under long-term “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our medical office building operations segment primarily consists of investing in medical office buildings and leasing those properties to healthcare providers under long-term leases, which may require tenants to pay property-related expenses.

We evaluate performance of the combined properties in each segment based on net operating income. Net operating income is defined as total revenue less property operating and maintenance expenses. There are no intersegment sales or transfers. We use net operating income to evaluate the operating performance of our real estate investments and to make decisions concerning the operation of the property. We believe that net operating income is useful to investors in understanding the value of income-producing real estate. Net income is the GAAP measure that is most directly comparable to net operating income; however, net operating income should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes certain items such as depreciation and amortization, asset management fees and expenses, real estate acquisition costs, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

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The following tables reconcile the segment activity to consolidated net income for the three months and nine months ended September 30, 2012 and 2011:

	Three Months Ended September 30, 2012									Three Months Ended September 30, 2011
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated			Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenues	$	6,910,000	$	1,298,000	$	214,000	$	8,422,000		$	6,915,000	$	826,000	$	201,000	$	7,942,000
Resident services and fee income		3,655,000		—		—		3,655,000			1,945,000		—		—		1,945,000
Tenant reimbursements and other income		15,000		222,000		75,000		312,000			73,000		234,000		55,000		362,000
	$	10,580,000	$	1,520,000	$	289,000	$	12,389,000		$	8,933,000	$	1,060,000	$	256,000	$	10,249,000
Property operating and maintenance expenses		7,159,000		220,000		94,000		7,473,000			6,365,000		258,000		127,000		6,750,000
Net operating income	$	3,421,000	$	1,300,000	$	195,000	$	4,916,000		$	2,568,000	$	802,000	$	129,000	$	3,499,000
General and administrative expenses								423,000									1,243,000
Asset management fees and expenses								559,000									390,000
Real estate acquisition costs and contingent consideration								1,016,000									22,000
Depreciation and amortization								1,689,000									1,946,000
Interest income								2,000									4,000
Interest expense								(1,790,000	)								(1,436,000	)
Equity in (loss) income from unconsolidated entities								(14,000	)								121,000
Net loss							$	(545,000	)							$	(1,413,000	)
Net loss attributable to non controlling interests								(16,000	)								(20,000	)
Netloss attributable to common stockholders							$	(529,000	)							$	(1,393,000	)

	Nine Months Ended September 30, 2012									Nine Months Ended September 30, 2011
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated			Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenues	$	20,453,000	$	3,436,000	$	636,000	$	24,525,000		$	19,983,000	$	2,427,000	$	603,000	$	23,013,000
Resident services and fee income		8,243,000		—		—		8,243,000			5,667,000		—		—		5,667,0000
Tenant reimbursements and other income		294,000		593,000		234,000		1,121,000			248,000		462,000		166,000		876,000
	$	28,990,000	$	4,029,000	$	870,000	$	33,889,000		$	25,898,000	$	2,889,000	$	769,000	$	29,556,000
Property operating and maintenance expenses		20,084,000		594,000		243,000		20,921,000			18,023,000		468,000		260,000		18,751,000
Net operating income	$	8,906,000	$	3,435,000	$	627,000	$	12,968,000		$	7,875,000	$	2,421,000	$	509,000	$	10,805,000
General and administrative expenses								1,632,000									3,201,000
Asset management fees and expenses								1,543,000									1,197,000
Real estate acquisition costs and contingent consideration								1,229,000									1,453,000
Depreciation and amortization								4,653,000									5,658,000
Interest income								10,000									10,000
Interest expense								(4,818,000	)								(4,161,000	)
Other expense								(151,000	)								—
Equity in (loss) income from unconsolidated entities								(363,000	)								105,000
Fair value adjustment for equity method investment								1,282,000									—
Net loss							$	(129,000	)							$	(4,750,000	)
Net income (loss) attributable to the noncontrolling interests								108,000									(66,000	)
Net loss attributable to common stockholders							$	(237,000	)							$	(4,684,000	)

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The following table reconciles the segment activity to consolidated financial position as of September 30, 2012 and December 31, 2011.

	September 30, 2012		December 31, 2011
Assets
Investment in real estate:
Senior living operations	$	139,471,000	$	92,975,000
Triple-net leased properties		44,197,000		26,366,000
Medical office building		8,249,000		8,486,000
Total reportable segments	$	191,917,000	$	127,827,000
Reconciliation to consolidated assets:
Cash and cash equivalents		21,741,000		27,972,000
Deferred financing costs, net		1,715,000		824,000
Investment in unconsolidated entities		3,499,000		3,387,000
Tenant and other receivables, net		1,677,000		1,366,000
Deferred costs and other assets		1,686,000		1,938,000
Restricted cash		3,664,000		3,806,000
Goodwill		5,965,000		5,965,000
Total assets	$	231,864,000	$	173,085,000

As of September 30, 2012 and December 31, 2011, goodwill had a balance of approximately $6.0 million and $6.0 million, respectively, all related to senior the living operations segment. The Company historically has not recorded any impairment charges for goodwill.

10. Notes Payable

Notes payable were $145.5 million ($145.0 million, net of premium) and $86.0 million as of September 30, 2012 and December 31, 2011, respectively. As of September 30, 2012, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 4.45% to 6.50% per annum and a weighted average effective interest rate of 5.70% per annum. As of September 30, 2012, we had $113.8 million of fixed rate debt, or approximately 79% of notes payable, at a weighted average interest rate of 5.66% per annum and $31.1 million of variable rate debt, or approximately 21% of notes payable, at a weighted average interest rate of 5.83% per annum. As of December 31, 2011, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 3.45% to 6.50% per annum and a weighted-average effective interest rate of 5.91% per annum. As of December 31, 2011, we had $32.7 million of fixed rate debt, or 38% of notes payable, at a weighted average interest rate of 6.01% per annum and $53.3 million of variable rate debt, or 62% of notes payable, at a weighted average interest rate of 5.85% per annum.

On June 11, 2012, we entered into MultiFamily Loan and Securities Agreements (the “Loans”) with KeyCorp Real Estate Capital Markets, Inc., originated under Fannie Mae’s Delegated Underwriting and Servicing Product Line, to refinance our Terrace at Mountain Creek, River’s Edge at Yardley, Forestview Manor, GreenTree at Westwood and Windsor Oaks of Bradenton properties. The Loans are at a fixed rate of 4.45% for a term of seven years. Proceeds from the Loans of $32.0 million exceeded the debt repaid and loan fees and expenses by approximately $11.5 million. The Loans are secured by first priority liens on the refinanced properties. In connection with the documentation and closing of the Loans, we paid fees and expenses totaling approximately $791,000. In addition, the Company recognized a loss on debt extinguishment of approximately $148,000, which is included in other income/expense in the accompanying condensed consolidated statements of operations.

In November 2010, we entered into an agreement with KeyBank National Association, an unaffiliated financial institution (“KeyBank”), to obtain a $25,000,000 revolving credit facility. Effective August 2011, the KeyBank agreement was amended to convert the credit facility to a term loan, revised certain loan covenants and changed the maturity date to July 31, 2012, with an option to extend the maturity to October 30, 2012 subject to satisfaction of certain conditions. This option was exercised and the term was extended on July 31, 2012. On August 14, 2012, the Company repaid the final amount outstanding on the Key Bank credit facility. The amount outstanding under the credit facility was $0 and $16.3 million at September 30, 2012 and December 31, 2011, respectively.

We are required by the terms of the applicable loan documents to meet certain financial covenants, such as debt service coverage ratios, rent coverage ratios and reporting requirements. As of September 30, 2012, we were in compliance with all such covenants and requirements.

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The following table details the notes payable by property as of September 30, 2012 and December 31, 2011.

Property Name	Payment Type	Interest Rate	Outstanding Principal Balance as of September 30, 2012(1)		Outstanding Principal Balance as of December 31, 2011(1)			Maturity Date
Amber Glen	Principal and interest at a 30-year amortization rate	6.40%—fixed	$	8,650,000		(5	)	June 1, 2019
Carriage Court of Hilliard	Principal and interest at a 35-year amortization rate	5.40%—fixed	$	13,325,000	$	13,440,000		August 1, 2044
Caruth Haven Court	Principal and interest at a 30-year amortization rate	6.43%—fixed	$	9,707,000	$	9,793,000		December 16, 2019
Greentree (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	3,856,000		2,832,000		July 1, 2019
Forestview Manor (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	8,754,000		5,935,000		July 1, 2019
Global Rehab Inpatient Rehab Facility	Principal and interest at a 30-year amortization rate	6.25%—fixed for 3 years; thereafter the greater of 6.25% and 3yr LIBOR +3.25%	$	7,373,000	$	7,441,000		December 22, 2016
Hedgcoxe Health Plaza (3)	Principal and interest at a 30-year amortization rate	4.9%—fixed	$	5,600,000	$	5,060,000		August 14, 2022
Hudson Creek	Principal and interest at a 30-year amortization rate	6.11%—fixed	$	7,997,000		(5	)	June 1, 2019
Mesa Vista Inn Health Center	Principal and interest at a 20-year amortization rate	6.50%—fixed	$	6,981,000	$	7,136,000		January 5, 2015
Mill Creek	Principal and interest at a 30-year	6.40%—fixed	$	8,349,000		(5	)	June 1, 2019
Oakleaf Village Portfolio	Principal and interest at a 30-year amortization rate	5.45% plus the greater of 1% or the 3 month LIBOR	$	17,485,000	$	17,644,000		April 30, 2015
River’s Edge of Yardley (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	6,484,000	$	2,500,000		July 1, 2019
Rome LTACH Project	Principal and interest at a 25-year amortization rate	4.5%—fixed	$	13,461,000		(4	)	March 31, 2017
Sugar Creek	Principal and interest at a 30-year amortization rate	6.20%—fixed	$	7,836,000		(5	)	June 1, 2019
The Oaks Bradenton (2)	Principal and interest at a 30-year amortization rate.	4.45%—fixed	$	4,085,000	$	2,697,000		July 1, 2019
Terrace at Mountain Creek (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	8,754,000	$	5,700,000		July 1, 2019
Woodland Terrace at the Oaks	Months 1-22 interest only. Month 23 to maturity principal and interests at a 25-year amortization rate	3Mo LIBOR +3.75% with a floor of 5.75%	$	6,276,000	$	5,800,000		May 1, 2014
			$	144,973,000	$	85,978,000
Add: premium				487,000
Notes payable, net			$	145,460,000	$	85,978,000

(1) As of September 30, 2012 and December 31, 2011, all notes payable are secured by the underlying real estate.

(2) These loans were refinanced in June 2012 under the Multifamily Loan and Securities Agreement discussed above.

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(3) On August 14, 2012, this loan was refinanced with the KeyBank National Association.

(4) Not applicable because this entity was an unconsolidated joint venture at December 31, 2011.

(5) On August 31, 2012, the Company acquired an interest in the Leah Bay joint venture subject to existing indebtedness of approximately $32.9 million. These notes payable are secured by the underlying real estate.

Principal payments due on our notes payable for October 1, 2012 to December 31, 2012 and each of the subsequent years is as follows:

Year	Principal amount
October 1, 2012 to December 31, 2012	$	546,000
2013		2,318,000
2014		8,578,000
2015		25,439,000
2016		9,024,000
2017 and thereafter		99,068,000
	$	144,973,000

Interest Expense and Deferred Financing Cost

For the three months ended September 30, 2012 and 2011, the Company incurred interest expense, including amortization of deferred financing costs of $1.8 million and $1.4 million, respectively. For the nine months ended September 30, 2012 and 2011, the Company incurred interest expense, including amortization of deferred financing costs of $4.8 million and $4.2 million, respectively. As of September 30, 2012 and December 31, 2011, the Company’s net deferred financing costs were approximately $1.7 million and $0.8 million, respectively. All deferred financing costs are capitalized and amortized over the life of the respective loan agreement.

11. Stockholders’ Equity

Common Stock

Our charter authorizes the issuance of 580,000,000 shares of common stock with a par value of $0.01 per share and 20,000,000 shares of preferred stock with a par value of $0.01 per share. As of September 30, 2012, including distributions reinvested, we had issued approximately 13.3 million shares of common stock for a total of approximately $132.3 million of gross proceeds in our initial and follow-on public offerings.

Distributions

We have adopted a distribution reinvestment plan that allows our stockholders to have dividends and other distributions otherwise distributable to them invested in additional shares of our common stock at their election. We have registered 10,000,000 shares of our common stock for sale pursuant to the distribution reinvestment plan. The purchase price per share provided in the plan is 95% of the price paid by the purchaser for our common stock, but not less than $9.50 per share. As of September 30, 2012 and December 31, 2011, approximately 551,000 shares had been issued under the distribution reinvestment plan.

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our follow-on public offering, our dividend reinvestment plan and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with our Independent Directors Committee consideration of various strategic alternatives to enhance our stockholders’ value. As a result, we suspended our distribution reinvestment plan effective as of May 10, 2011.

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The following are the distributions declared during the nine months ended September 30, 2012 and 2011:

	Distribution Declared (1)
Period	Cash		Reinvested		Total
First quarter 2011	$	1,152,000	$	1,124,000	$	2,276,000
Second quarter 2011	$	2,436,000	$	—	$	2,436,000
Third quarter 2011	$	817,000	$	—	$	817,000
First quarter 2012	$	801,000	$	—	$	801,000
Second quarter 2012	$	799,000	$	—	$	799,000
Third quarter 2012	$	807,000	$	—	$	807,000

(1) Distributions declared represented a return of capital and taxable ordinary income for tax purposes. In order to meet the requirements for being treated as a REIT under the Internal Revenue Code, we must pay distributions to our stockholders each taxable year equal to at least 90% of our net ordinary taxable income. Some of our distributions have been paid from sources other than operating cash flow, such as offering proceeds. Until proceeds from our offering are fully invested and generating operating cash flow sufficient to fully cover distributions to stockholders, we intend to pay all or a portion of our distributions from the proceeds of our offerings or from borrowings in anticipation of future cash flow.

The declaration of distributions is at the discretion of our board of directors and our board will determine the amount of distributions on a regular basis. The amount of distributions will depend on our funds from operations, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors our board of directors deems relevant. On September 30, 2011, our board of directors resolved to lower our distributions to a current annualized rate of $0.25 per share (2.5% based on a share price of $10.00) from the prior annualized rate of $0.75 per share (7.5% based on a share price of $10.00), effective July 1, 2011 and continuing until and including September 30, 2012. Distributions are paid quarterly commencing with the third quarter distribution paid in October 2011. Effective October 1, 2012, our board of directors declared distributions for daily record dates occurring in the fourth quarter of 2012 in amounts per share that, if declared and paid each day for a 365-day period, would equate to an annualized rate of $.475 per share (4.75% based on share price of $10.00). The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

From our inception in October 2006 through September 30, 2012, we declared aggregate distributions of $17.0 million and our cumulative net loss during the same period was $17.3 million.

Stock Repurchase Program

We adopted a stock repurchase program for investors who have held their shares for at least one year, unless the shares are being repurchased in connection with a stockholder’s death. Under our stock repurchase program, the repurchase price varies depending on the purchase price paid by the stockholder and the number of years the shares are held. Our board of directors may amend, suspend or terminate the program at any time on 30 days prior notice to stockholders. Our board of directors may modify our stock repurchase program so that we can repurchase stock using the proceeds from the sale of our real estate investments or other sources, however, we have no obligation to repurchase our stockholders’ shares. Our board of directors waived the one-year holding period in the event of the death of a stockholder and adjusted the repurchase price to 100% of such stockholders purchase price if the stockholder held the shares for less than three years. Our board of directors reserves the right in its sole discretion at any time and from time to time, upon 30 days prior notice to our stockholders, to adjust the repurchase price for our shares of stock, or suspend or terminate our stock repurchase program.

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our offering, our dividend reinvestment program and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with our Independent Directors Committee consideration of various strategic alternatives to enhance our stockholder value. As a result, we suspended our stock repurchase program effective as of May 29, 2011. On December 22, 2011, our Board of Directors approved a net asset valuation of $9.02 per share, and revised the share repurchase price upon the death of a shareholder to this amount.

During the three and nine months ended September 30, 2012, we repurchased shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
January		33,008	$	9.98
February		—	$	—
March		—	$	—
First quarter 2012		33,008	$	9.98
April		9,203	$	9.00
May		17,582	$	9.00
June		—	$	—
Second quarter 2012		26,785	$	9.00
July		—	$	—
August		3,000	$	9.00
September		13,500	$	9.00
Third quarter 2012		16,500	$	—
		76,293

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During the three and nine months ended September 30, 2011, we repurchased 28,729 and 195,997 shares, respectively, pursuant to our stock repurchase program.

During the nine months ended September 30, 2012, we received requests to have an aggregate of 78,793 shares repurchased pursuant to our stock repurchase program. Of these requests 2,500 shares were not able to be repurchased due to the limitations contained in the terms of our stock repurchase program and the suspension of ordinary repurchases under our stock repurchase program as of May 29, 2011.

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12. Related Party Transactions

The Company has no employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the policies established by our board of directors. We have an advisory agreement that entitles the Advisor to specified fees upon the provision of certain services to us, as well as reimbursement for organizational and offering costs incurred by the Advisor on our behalf and reimbursement of certain costs and expenses incurred by the Advisor in providing services to us. Effective January 1, 2012, Sentio Investments, LLC became our Advisor under a new advisory agreement (the “2012 Advisory Agreement”). On July 29, 2011, the Company executed the Omnibus Agreement, which provided for a number of significant changes to the Company’s Advisory Agreement with the Prior Advisor (the “2011 Advisory Agreement”). The 2012 Advisory Agreement and the 2011 Advisory Agreement are collectively referred to as the “Advisory Agreements.”

Advisory Agreements

Under the terms of the 2012 Advisory Agreement, the Advisor is required to use commercially reasonable efforts to present to us investment opportunities to provide a continuing and suitable investment program consistent with the investment policies and objectives adopted by our board of directors. The 2012 Advisory Agreement calls for the Advisor to provide for our day-to-day management and to retain property managers and leasing agents, subject to the authority of our board of directors, and to perform other duties. The 2011 Advisory Agreement had similar provisions.

The fees and expense reimbursements payable to the Advisor and Prior Advisor (collectively, the “Advisors”) under the 2012 Advisory Agreement and the 2011 Advisory Agreement are described below.

Organizational and Offering Costs. Organizational and offering costs of our offerings paid by the Prior Advisor on our behalf were reimbursed to the Prior Advisor from the proceeds of our offerings. Organizational and offering costs consisted of all expenses (other than sales commissions and the dealer manager fee) to be paid by us in connection with our offerings, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and other accountable offering expenses, including, but not limited to, (i) amounts to reimburse the Advisor for all marketing related costs and expenses such as salaries and direct expenses of employees of the Advisor and its affiliates in connection with registering and marketing our shares; (ii) technology costs associated with the offering of our shares; (iii) our costs of conducting our training and education meetings; (iv) our costs of attending retail seminars conducted by participating broker-dealers; and (v) payment or reimbursement of bona fide due diligence expenses. At times during our offering stage, the amount of organization and offering expenses that we incur, or that the Advisor and its affiliates incur on our behalf, may exceed 3.5% of the gross offering proceeds then raised, but our Advisor is required to reimburse us to the extent that our organization and offering expenses exceed 3.5% of aggregate gross offering proceeds at the conclusion of our offering. In addition, the Advisor will also pay any organization and offering expenses to the extent that such expenses, plus sales commissions and the dealer manager fee (but not the acquisition fees or expenses) are in excess of 13.5% of gross offering proceeds. In no event will we have any obligation to reimburse the Advisor for organizational and offering costs totaling in excess of 3.5% of the gross proceeds from our primary offerings. As of September 30, 2012 and December 31, 2011, the Prior Advisor and its affiliates had incurred organizational and offering costs totaling approximately $5.1 million, including $0.1 million of organizational costs that have been expensed and $5.0 million of offering costs that reduce net proceeds of our offerings. Of this amount $4.0 million reduced the net proceeds of our initial public offering and $1.0 million reduced the net proceeds of our follow-on offering. Upon the execution of the Omnibus Agreement, we forgave $0.8 million of organization and offering costs in excess of the 3.5% of gross offering proceeds advanced to Prior Advisor pursuant to the 2011 Advisory Agreement. This amount reduced our offering proceeds and has therefore been treated as a reduction in additional paid-in capital in our condensed consolidated balance sheet.

Acquisition Fees and Expenses. The 2012 Advisory Agreement requires us to pay the Advisor acquisition fees in an amount equal to 1.0% of the investments acquired, including any debt attributable to such investments. In addition, we are required to reimburse the Advisor for direct costs the Advisor incurs and amounts the Advisor pays to third parties in connection with the selection and acquisition of a property, whether or not ultimately acquired. The 2011 Advisory Agreement required us to pay the Prior Advisor acquisition fees in an amount equal to 2.0% of the investments acquired, including any debt attributable to such investments. A portion of the acquisition fees were paid upon receipt of offering proceeds, and the balance were paid at the time we acquired a property. However, if the 2011 Advisory Agreement was terminated or not renewed, the Prior Advisor was obligated to return acquisition fees not yet allocated to one of our investments. In addition, we were required to reimburse the Prior Advisor for direct costs the Prior Advisor incurred and amounts the Prior Advisor paid to third parties in connection with the selection and acquisition of a property, whether or not ultimately acquired. For the three months and nine months ended September 30, 2012 the Advisor earned approximately $0.4 million and $0.5 million of acquisition fees. For the three months and nine months ended September 30, 2011, the Prior Advisor earned approximately $0.0 million and $0.5 million in acquisition fees, respectively. As of September 30, 2011, the amount of acquisition fees that had been paid to the Prior Advisor but not allocated to one of our investments was $0.9 million. That amount was expensed and included in real estate acquisition costs and earn out costs in our condensed consolidated statements of operations. Upon the execution of the Omnibus Agreement, we forgave the advance not earned through services rendered in connection with future acquisitions.

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Financing Coordination Fee. The 2012 Advisory Agreement requires us to pay the Advisor a financing coordination fee equal to 0.5% of the gross amount of any refinancing, provided, however, that the Advisor shall not be entitled to a financing coordination fee in connection with the refinancing of any debt obligations secured by any particular asset that was previously subject to a refinancing in which the Advisor received a financing coordination fee within the immediately preceding three year period. For the three months and nine months ended September 30, 2012 the Advisor earned approximately $28,000 and $0.3 million of financing coordination fees. The 2011 Advisory Agreement did not provide for a financing coordination fee.

Management Fees. The 2012 Advisory Agreement requires us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the greater of the (i) the average GAAP basis book carrying value of such asset before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period (or if such specified period is a single month, then the average of such values during such month), or (ii) an amount determined as follows: (A) if such property, loan, or other permitted investment has been appraised by an independent appraiser within the immediately preceding twelve month period, the appraised value of such property, loan, or other permitted investment, or (B) if such property, loan, or other permitted investment has not been appraised by an independent appraiser within the immediately preceding twelve month period, the estimated fair market value of such property, loan, or other permitted investment, as approved by the Independent Directors Committee. The value of each property, loan, or other permitted investment owned by a joint venture shall be the product of the Company’s pro rata ownership interest in such joint venture, multiplied by the greater of (i) the average GAAP basis book carrying value of such asset before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period (or if such specified period is a single month, then the average of such values during such month), or (ii) an amount determined as follows: (A) if such property, loan, or other permitted investment has been appraised by an independent appraiser within the immediately preceding twelve month period, the appraised value of such property, loan, or other permitted Investment, or (B) if such property, loan, or other permitted investment has not been appraised by an independent appraiser within the immediately preceding twelve month period, the estimated fair market value of such property, loan, or other permitted investment, as approved by the Independent Directors Committee. These fees and expenses are in addition to management fees that we expect to pay to third party property managers.

The Prior Advisory Agreement required us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the sum of the aggregate basis in book carrying values of our assets invested, directly or indirectly, in equity interests in and loans secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, calculated in accordance with GAAP. In addition, we reimbursed the Prior Advisor for the direct and indirect costs and expenses incurred by the Prior Advisor in providing asset management services to us, including personnel and related employment costs related to providing asset management services on our behalf and amounts paid by our Advisor to Servant Investments, LLC and Servant Healthcare Investments, LLC for portfolio management services provided on our behalf. These fees and expenses are in addition to management fees paid to third party property managers.

For the three months and nine months ended September 30, 2012, the Advisor earned approximately $0.6 million and $1.5 million of management fees, respectively. For the three months and nine months ended September 30, 2011, the Prior Advisor earned approximately $0.2 million and $0.6 million of management fees, respectively. These fees were expensed. For the three months and nine months ended September 30, 2011, the Prior Advisor also incurred approximately $0.2 million and $0.5 million of direct and indirect costs and expenses, which are included in asset management fees and expensed in the condensed consolidated statement of operations. No comparable charges were made by the Advisor in 2012.

Operating Expenses. The 2012 Advisory Agreement does not provide for the reimbursement of the Advisor’s direct or indirect costs of providing administrative services to us. Accordingly, there were no such charges for the three months and nine months ended September 30, 2012. The 2011 Advisory Agreement provided for reimbursement of the Prior Advisor’s direct and indirect costs of providing administrative and management services to us. For the three months and nine months ended September 30, 2011, approximately $0.2 million and $0.9 million of such costs were reimbursed and included in general and administrative expenses on our condensed consolidated statements of operations.

Consistent with limitations set forth in our charter, the Advisory Agreements further provide that, commencing four fiscal quarters after the acquisition of our first real estate asset, we shall not reimburse the Advisor at the end of any fiscal quarter management fees and expenses and operating expenses that, in the four consecutive fiscal quarters then ended exceed (the “Excess Amount”) the greater of 2% of our average invested assets or 25% of our net income for such year (the “2%/25% Guidelines”) unless the Independent Directors Committee of our board of directors determines that such excess was justified, based on unusual and nonrecurring factors which it deems sufficient. If the Independent Directors Committee does not approve such excess as being so justified, the advisory agreement requires that any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. In addition, our charter provides that, if the Independent Directors Committee does not determine that the Excess Amount is justified, the Advisor shall reimburse us the amount by which the aggregate annual expenses paid to the Advisor during the four consecutive fiscal quarters then ended exceed the 2%/25% Guidelines.

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For the three months ended September 30, 2012, our management fees and expenses and operating expenses did not exceed the greater of 2% of our average invested assets and 25% of our net income. For the four quarters ended September 30, 2012, our management fees and expenses and operating expenses totaled $4.4 million. This amount exceeded the greater of 2% of our average invested assets and 25% of our net loss by $0.7 million.

Disposition Fee. The 2012 Advisory Agreement provides that if the Advisor or an Affiliate provides a substantial amount of the services (as determined by a majority of the Directors, including a majority of the Independent Directors Committee) in connection with the sale of one or more properties, other than a sale in connection with a transaction in which the Company sells, grants, transfers, conveys or relinquishes its ownership of all or substantially all of the Company’s assets, the Advisor or such Affiliate shall receive at the closing of such sale a disposition fee equal to the lesser of (i) 1.0% of the sales price of such property or properties, or (ii) one-half of the Competitive Real Estate Commission for such property. Any disposition fee payable may be paid in addition to real estate commissions paid to non-Affiliates, provided that the total real estate commissions (including such disposition fee) paid to all persons by the Company for each property shall not exceed an amount equal to the lesser of (i) 6.0% of the aggregate contract sales price of each property or (ii) the competitive real estate commission for each property.

Subordinated Participation Provisions. The Advisor is entitled to receive a subordinated participation upon the sale of our properties, listing of our common stock or termination of the Advisor, as follows:

• After we pay stockholders cumulative distributions equal to their invested capital plus a 7% cumulative, non-compounded return, the Advisor will be paid a subordinated participation in net sale or refinancing proceeds of 10%. Following a listing, this fee will no longer be payable.

• Upon termination of the advisory agreement, other than for cause, the Advisor will receive the subordinated performance fee due upon termination in the form of a promissory note bearing simple interest at a rate of 5% per annum, in a principal amount equal to 10% the amount, if any, which the sum of the appraised value of our assets minus our liabilities on the date the advisory agreement is terminated plus total distributions (other than stock distributions) paid prior to termination of the advisory agreement exceeds the amount of invested capital plus annualized returns of 7%, less any prior payment to the Advisor of a subordinated share of cash from sales or refinancing’s.

• In the event we list our stock for trading, the Advisor will receive a subordinated incentive listing fee instead of a subordinated participation in net sales proceeds in an amount equal to 10% of the amount by which the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 7% less any prior payment to the Advisor of a subordinated share of cash from sales or refinancing’s.

Dealer Manager Agreements

Pacific Cornerstone Capital, Inc. (“PCC”), an affiliate of the Prior Advisor, was the dealer manager for our initial and follow-on public offerings, prior to the suspension of our follow-on offering on April 29, 2011. As such, PCC was entitled to receive a sales commission of up to 7% of gross proceeds from sales in the primary offerings. PCC is also entitled to receive a dealer manager fee equal to up to 3% of gross proceeds from sales in the primary offerings. PCC was also entitled to receive a reimbursement of bona fide due diligence expenses up to 0.5% of the gross proceeds from sales in the primary offerings. The 2011 Advisory Agreement required the Prior Advisor to reimburse us to the extent that offering expenses including sales commissions, dealer manager fees and organization and offering expenses (but excluding acquisition fees and acquisition expenses discussed above) were in excess of 13.5% of gross proceeds from our primary offerings. For the three months and nine months ended September 30, 2011, PCC earned sales commission and dealer manager fees of approximately $0.0 million and $1.6 million, respectively. Dealer manager fees and sales commissions paid to PCC are a cost of capital raised and, as such, are included as a reduction of additional paid in capital in the accompanying condensed consolidated balance sheets.

13. Commitments and Contingencies

We monitor our properties for the presence of hazardous or toxic substances. We are not currently aware of any environmental liability with respect to the properties that we believe would have a material effect on our financial condition, results of operations and cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Our commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In the opinion of management, these matters are not expected to have a material impact on our condensed consolidated financial position, cash flows and results of operations. We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against the Company which if determined unfavorably to us would have a material adverse effect on our cash flows, financial condition or results of operations.

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14. Business Combinations

On January 14, 2011, through a wholly-owned subsidiary, we purchased an assisted-living property, Forestview Manor, from 153 Parade Road, LLC a non-related party, for a purchase price of approximately $10.8 million. The acquisition was funded with our revolving credit facility from KeyBank National Association and with proceeds from our initial public offering.

On April 14, 2011, through a wholly-owned subsidiary, we purchased an assisted-living property, Sunrise of Allentown, from an affiliate of Sunrise Senior Living, Inc., for $9.0 million. The property has been rebranded as Woodland Terrace at the Oaks at the Oaks Senior Living. The acquisition of Woodland Terrace at the Oaks was funded with proceeds from our public offerings and a mortgage loan from an unaffiliated lender, post-closing.

On January 12, 2010, we funded an investment in a joint venture with affiliates of The Cirrus Group, an unaffiliated entity, to develop a $16.3 million free-standing medical facility on the campus of the Floyd Medical Center in Rome, Georgia. We contributed approximately $2.7 million of capital to acquire a 75% limited partnership interest in Rome LTH Partners, LP (“Rome LTH”). Cornerstone Private Equity Fund Operating Partnership, LP, an affiliate of our Prior Advisor, contributed approximately $0.5 million of capital to acquire a 15% limited partnership interest in Rome LTH. Three affiliates of The Cirrus Group contributed an aggregate of approximately $0.3 million to acquire an aggregate 9.5% limited partnership interest in Rome LTH. A fourth affiliate of the Cirrus Group acted as the general partner and held the remaining 0.5% in Rome LTH. In April 2012, we acquired the interest of Cornerstone Private Equity Fund Operating Partnership, LP and the Cirrus Group affiliates in Rome LTH for a total payment of approximately $5.2 million. As of September 30, 2012 and December 31, 2011, we owned a 100% and 75% limited partnership interest in Rome LTH. We began consolidating Rome LTH when we obtained control of this venture in April 2012.

On August 31, 2012, through wholly-owned subsidiaries, we invested approximately $49.5 million, to acquire an 80% interest in the Leah Bay joint venture from non-related parties. The joint venture owns four memory care facilities in Illinois and Texas (the “Leah Bay Portfolio”). The acquisition was funded with proceeds from our public offerings and mortgage loans from unaffiliated lenders.

As of September 30, 2012, the Leah Bay purchase price allocation to the fair value of assets acquired and liabilities assumed is not yet complete. Accounting and valuation activity that could impact the opening balance estimates shown below is expected to be complete by the end of 2012.

The following summary provides the allocation of the acquired assets and liabilities as of the acquisition date. We have accounted for the acquisitions as business combinations under U.S. GAAP. Under business combination accounting, the assets and liabilities of the acquired properties were recorded as of the acquisition date, at their respective fair values, and consolidated in our financial statements. The detail of the purchase price of the acquired property is set forth below:

	Forestview Manor		Sunrise of Allentown		Rome LTACH Project		Leah Bay Portfolio
Land	$	1,320,000	$	1,000,000	$	—	$	2,481,000
Buildings & improvements		6,803,000		6,395,000		17,800,000		41,364,000
Site improvements		1,040,000		350,000		—		1,539,000
Furniture & fixtures		350,000		220,000		—		1,199,000
Intangible assets		960,000		590,000		1,100,000		2,904,000
Goodwill		277,000		445,000		—		—
Real estate acquisition	$	10,750,000		9,000,000		18,900,000		49,487,000
Acquisition expenses	$	160,000	$	142,000	$	182,000	$	908,000

The following unaudited pro forma information for the three and nine months ended September 30, 2012 and 2011 have been prepared to reflect the incremental effect of the Forestview Manor, Sunrise of Allentown, Rome LTACH Project and the Leah Bay Portfolio acquisitions as if such acquisitions had occurred on January 1, 2011. We have not adjusted the proforma information for any items that may be directly attributable to the business combination or non-recurring in nature.

	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011
Revenues	$	14,532,000		$	13,040,000
Net (loss) income	$	(81,000	)	$	114,000
Basic and diluted net (loss) income per common share attributable to common stockholders	$	(0.01	)	$	0.01

23

	Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Revenues	$	42,920,000	$	38,496,000
Net income (loss)	$	1,341,000	$	(3,752,000	)
Basic and diluted net income (loss) per common share attributable to common stockholders	$	0.10	$	(0.30	)

The Company recorded revenues of $1.0 million and $2.8 million for the three and nine months ended September 30, 2011, respectively, and net loss of $0.3 million and $0.5 million for the three and nine months ended September 30, 2011 and revenues of $1.1 million and $3.1 million for the three and nine months ended September 30, 2012, respectively, and net income of $0.2 million and $0.1 million for the three and nine months ended September 30, 2012, respectively, for Forestview Manor.

The Company recorded revenues of $0.7 million and $1.3 million for the three and nine months ended September 30, 2011, respectively, and net loss of $0.1 million and $0.5 million for the three and nine months ended September 30, 2011 and revenues of $0.9 million and $2.4 million for the three and nine months ended September 30, 2012, respectively, and net loss of $0.1 million and $0.3 million for the three and nine months ended September 30, 2012, respectively, for Sunrise of Allentown.

The Company recorded revenues of $0.6 million and $1.2 million for the three and nine months ended September 30, 2012 and net income of $0.2 million and $1.5 million for the three and nine months ended September 30, 2012, respectively, for the Rome LTACH Project. Prior to April of 2012, the Rome LTACH Project was being accounted for under the equity method.

The Company recorded revenues of $1.1 million and a net loss of $0.9 million for the three and nine months ended September 30, 2012, for the Leah Bay Portfolio.

15. Subsequent Events

On October 25, 2012, the Company completed a refinancing of the loan on the Carriage court of Hilliard with HUD. This loan has a thirty five year term with the rate of interest fixed at 2.8% and payments of principal on a 35 year amortization rate.

24

16. Immaterial Corrections to Prior Period Financial Statements

Subsequent to the issuance of our consolidated financial statements for the year ended December 31, 2011, the Company determined that it should have been accounting for certain investments in joint ventures on the equity method rather than by consolidating these investments. The Company reviewed the impact of these errors on the prior period financial statements and determined that the errors were not material to the financial statements. However, the Company has corrected the accompanying condensed consolidated financial statements and related footnotes to reflect these joint venture investments on the equity method of accounting.

A summary of the effects of the correction of these immaterial errors on our consolidated financial statements for the three and nine month periods ended September 30, 2011 and as of December 31, 2011 are presented in the tables below:

	December 31, 2011
	As Previously Reported			As Corrected
ASSETS
Cash and cash equivalents	$	28,258,000		$	27,972,000
Investments in real estate
Land		21,270,000			20,713,000
Buildings and improvements, net		114,584,000			100,687,000
Furniture, fixtures and equipment, net		2,562,000			2,562,000
Construction in progress		5,218,000			—
Intangible lease assets, net		5,581,000			3,865,000
Total		149,215,000			127,827,000
Deferred financing costs, net		1,121,000			824,000
Investments in unconsolidated entities		—			3,387,000
Tenant and other receivables		1,808,000			1,366,000
Deferred costs and other assets		1,948,000			1,938,000
Restricted cash		3,873,000			3,806,000
Goodwill		5,965,000			5,965,000
Total assets	$	192,188,000		$	173,085,000
LIABILITIES AND EQUITY
Liabilities:
Notes payable	$	100,059,000		$	85,978,000
Accounts payable and accrued liabilities		7,683,000			3,899,000
Prepaid rent and security deposits		1,740,000			1,535,000
Dividends payable		814,000			814,000
Total liabilities		110,296,000			92,226,000
Stockholders’ equity (deficit):
Common stock		129,000			129,000
Additional paid-in capital		96,542,000			96,542,000
Accumulated deficit		(17,054,000	)		(17,054,000	)
Total controlling stockholders’ equity (deficit)		79,617,000			79,617,000
Noncontrolling interest		2,275,000			1,242,000
Total equity (deficit)		81,892,000			80,859,000
Total liabilities and equity	$	192,188,000		$	173,085,000

25

	2011 Three months ended September 30						2011 Nine months ended September 30
	As Previously Reported			As Corrected			As Previously Reported			As Corrected
Revenues:
Rental revenues	$	8,458,000		$	7,942,000		$	24,389,000		$	23,013,000
Resident fees and services		1,945,000			1,945,000			5,667,000			5,667,000
Tenant reimbursements and other income		433,000			362,000			1,064,000			876,000
		10,836,000			10,249,000			31,120,000			29,556,000
Expenses:
Property operating and maintenance expenses		6,821,000			6,750,000			18,973,000			18,751,000
General and administrative expenses		1,240,000			1,243,000			3,201,000			3,201,000
Asset management fees and expenses		390,000			390,000			1,197,000			1,197,000
Real estate acquisition costs and contingent consideration		22,000			22,000			1,663,000			1,453,000
Depreciation and amortization		2,100,000			1,946,000			6,090,000			5,658,000
		10,573,000			10,351,000			31,124,000			30,260,000
Income/(loss) from operations		263,000			(102,000	)		(4,000	)		(704,000	)
Other income (expense):
Interest income		4,000			4,000			10,000			10,000
Interest expense		(1,640,000	)		(1,436,000	)		(4,719,000	)		(4,161,000	)
Equity in income from unconsolidated entities		—			121,000			—			105,000
Net loss		(1,373,000	)		(1,413,000	)		(4,713,000	)		(4,750,000	)
Net income (loss) attributable to noncontrolling interests		20,000			(20,000	)		(29,000	)		(66,000	)
Net loss attributable to common stockholders	$	(1,393,000	)	$	(1,393,000	)	$	(4,684,000	)	$	(4,684,000	)
Basic and diluted net loss per common share attributable to common stockholders	$	(0.11	)	$	(0.11	)	$	(0.37	)	$	(0.37	)

26

	2011 Nine Months ended September 30
	As Previously Reported			As Corrected
Cash flows from operating activities:
Net loss	$	(4,713,000	)	$	(4,750,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs		414,000			321,000
Depreciation and amortization		6,090,000			5,658,000
Straight-line rent amortization		(695,000	)		(375,000	)
Real estate earn out costs		745,000			535,000
Equity loss from an unconsolidated entity		—			(121,000	)
Bad debt expense		—			—
Change in operating assets/liabilities:
Tenant and other receivables		440,000			180,000
Prepaid expenses and other assets		(1,030,000	)		(1,091,000	)
Restricted cash		(774,000	)		(774,000	)
Prepaid rent and security deposits		763,000			737,000
Payable to related parties		(38,000	)		(38,000	)
Accounts payable and accrued liabilities		2,403,000			2,509,000
Receivable from related parties		—			—
Net cash provided by operating activities		3,605,000			2,791,000
Cash flows from investing activities:
Real estate acquisitions		(19,751,000	)		(19,751,000	)
Additions to real estate		(342,000	)		(342,000	)
Payments for construction in progress		—			(471,000	)
Purchase of an interest in an unconsolidated entity		—			(896,000	)
Changes in Restricted cash		(98,000	)		(31,000	)
Development of real estate		(4,024,000	)		—
Acquisition deposits		100,000			100,000
Distributions from unconsolidated joint ventures		—			466,000
Net cash used in investing activities		(24,115,000	)		(20,925,000	)
Cash flows from financing activities:
Proceeds from issuance of common stock		14,160,000			14,160,000
Redeemed shares		(1,891,000	)		(1,891,000	)
Proceeds from issuance of notes payable		17,251,000			14,561,000
Repayment of notes payable		(584,000	)		(584,000	)
Payment of real estate earn out costs		(1,000,000	)		(1,000,000	)
Offering costs		(1,917,000	)		(1,917,000	)
Deferred financing costs		(324,000	)		(274,000	)
Distributions paid to stockholders		(3,950,000	)		(3,950,000	)
Distributions paid to noncontrolling interest		(133,000	)		—
Net cash provided by financing activities		21,612,000			19,105,000
Net increase in cash and cash equivalents		1,102,000			971,000
Cash and cash equivalents - beginning of period		29,819,000			29,718,000
Cash and cash equivalents - end of period	$	30,921,000		$	30,689,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,226,000		$	3,761,000
Cash paid for income taxes		509,000			509,000
Supplemental disclosure of non-cash financing and investing activities:
Distribution declared not paid		817,000			817,000
Distribution reinvested		1,484,000			1,484,000
Accrued real estate development costs		1,404,000			—
Accrued promote monetization liability		2,018,000			—
Deferred financing amortization capitalized to real estate development		27,000			—

27

	2011
	As Previously Reported			As Corrected
Retained Earnings (Accumulated Deficit)
Beginning of period – December 31, 2010	$	(11,722,000	)	$	(11,722,000	)
End of period – September 30, 2011		(16,406,000	)		(16,406,000	)

The Company notes that certain balances within the condensed consolidated statement of equity from December 31, 2010 and September 30, 2011 were corrected as a result of the correction of the immaterial error noted above. The noncontrolling interest balance at December 31, 2010 was reported as $2.8 million and has been adjusted to $1.7 million, which changed total equity from a reported balance of $82.8 million to an adjusted balance of $81.7 million. The noncontrolling interest balance at September 30, 2011 was reported as $2.6 million and has been adjusted to $1.6 million, which changed total equity from a reported balance of $84.3 million to an adjusted balance of $83.3 million. There were no other changes in the condensed consolidated statement of equity as a result of the correction of the above noted immaterial error.

28

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report. The 2011 financial information reflects the effects of the corrections described in Note 16, Immaterial Corrections to Prior Period financial statements included in Item 1. financial statements of this report. This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to update or revise publicly any forward —looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements should be read in light of the risks identified in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2011 as filed with the SEC, and the risks identified in Part II, Item 1A of this quarterly report.

Our actual future results and trends may differ materially from expectations depending on a variety of factors discussed in our filings with the SEC. These factors include without limitation:

• Macroeconomic conditions, such as a prolonged period of weak economic growth, and volatility in capital markets.

• changes in national and local economic conditions in the real estate and healthcare markets specifically;

• legislative and regulatory changes impacting the healthcare industry, including the implementation of the healthcare reform legislation enacted in 2010;

• legislative and regulatory changes impacting real estate investment trusts, or REITs, including their taxation;

• the availability of debt and equity capital;

• changes in interest rates;

• competition in the real estate industry;

• the supply and demand for operating properties in our proposed market areas;

• changes in accounting principles generally accepted in the United States of America, or GAAP; and

• the risk factors in our Annual Report for the year ended December 31, 2011 and this quarterly report on Form 10-Q.

Overview

We were incorporated on October 16, 2006 for the purpose of engaging in the business of investing in and owning commercial real estate. We intend to invest the net proceeds from our offerings primarily in investment real estate including health care properties and other real estate related assets located in markets in the United States. As of September 30, 2012, we had raised approximately $127.0 million of gross proceeds from the sale of approximately 12.7 million shares of our common stock in our initial and follow-on public offerings.

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our follow-on offering, our dividend reinvestment program and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with our Independent Directors Committee evaluation of various strategic alternatives to enhance our stockholders’ value. One of the alternatives under consideration was the hiring of a new dealer manager for our follow-on offering, however the Independent Directors Committee has made no determination regarding whether or when our follow-on offering may be recommenced.

Effective January 1, 2012, our business is managed by Sentio Investments, LLC (the “Advisor”), under the terms of the 2012 Advisory Agreement. Prior to January 1, 2012, Cornerstone Leveraged Realty Advisors, LLC was our advisor (the “Prior Advisor”) under the terms of the Company’s Advisory Agreement with the Prior Advisor (the “2011 Advisory Agreement”).

Our revenues, which are comprised largely of rental income, include rents reported on a straight-line basis over the initial term of the lease. Our growth depends, in part, on our ability to (i) increase rental income and other earned income from leases by increasing rental rates and occupancy levels; (ii) maximize tenant recoveries given the underlying lease structures; and (iii) control operating and other expenses. Our operations are impacted by property specific, market-specific, general economic and other conditions.

29

Market Outlook — Real Estate and Real Estate Finance Markets

In recent years, both the national and most global economies have experienced substantially increased unemployment and a downturn in economic activity. Despite certain recent more positive economic indicators and improved stock market performance, the economic environment continues to be unpredictable and to present challenges that may delay the implementation of our business strategy or force us to modify it.

Despite the economic conditions discussed above, the demand for health care services is projected to continue to grow for the foreseeable future. The Centers for Medicare and Medicaid Services estimates national health expenditures at 17.9% of GDP and projects that healthcare expenditures will increase at a rate of 4.2% in 2012, 3.8% in 2013, 7.4% in 2014 and an average of 6.2% from 2015 to 2019. The elderly are an important component of health care utilization, especially independent living services, assisted-living services, skilled nursing services, inpatient and outpatient hospital services and physician ambulatory care. The elderly population aged 65 and over is projected to increase to approximately 16% of the total population by 2019 from approximately 13% of the total population in 2009.

Critical Accounting Policies

There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC.

Results of Operations

As of September 30, 2012, we operated in three reportable business segments: senior living operations, triple-net leased properties, and medical office building (“MOB”) properties. Our senior living operations segment invests in and directs the operations of assisted-living, memory care and other senior housing communities located in the United States. We engage independent third party managers to operate these properties. Our triple-net leased properties segment invests in healthcare properties in the United States leased under long-term “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our MOB segment invests in medical office buildings and leases those properties to healthcare providers under long-term “full service” leases which may require tenants to reimburse property related expenses to us.

We began accepting subscriptions for shares under our initial public offering on June 20, 2008. We purchased our first property in January 2009, and as of September 30, 2012, we owned 20 properties. These properties included fourteen assisted-living facilities which comprise our senior housing segment, one medical office building, which comprises our MOB segment, three operating healthcare facilities, which comprise our triple-net leased segment and one medical office building and one development healthcare facility held in unconsolidated entities. One of the senior living properties, Woodland Terrace at the Oaks, was acquired in April 2011 and four senior living properties, the Leah Bay portfolio, were acquired at the end of August 2012. Physicians Centre MOB, which is held in an unconsolidated entity, was acquired in April 2012. In April 2012, we also acquired our partners’ interests in the Rome LTACH investment, and as a result of the acquisition, the investment is consolidated in our September 30, 2012 condensed consolidated financial statements. The Rome LTACH investment is presented under the equity method in periods prior to the April 2012 acquisition. As of September 30, 2011, we owned 15 properties, including ten assisted-living facilities, one medical office building and four operating healthcare facilities including one development healthcare facility, held in an unconsolidated joint venture. Accordingly, the results of our operations for the three and nine months ended September 30, 2012 and 2011 are impacted by our acquisitions and consolidations that have occurred during the presented periods.

30

Comparison of the Three Months Ended September 30, 2012 and 2011

	Three Month Ended September 30,
	2012			2011			$ Change			% Change
Net operating income, as defined (1)
Senior living operations	$	3,421,000		$	2,568,000		$	853,000			33	%
Triple-net leased properties		1,300,000			802,000			498,000			62	%
Medical office building		195,000			129,000			66,000			51	%
Total portfolio net operating income	$	4,916,000		$	3,499,000		$	1,417,000			41	%
Reconciliation to net loss:
Net operating income, as defined (1)	$	4,916,000		$	3,499,000		$	1,417,000			41	%
Unallocated (expenses) income:
General and administrative expenses		(423,000	)		(1,243,000	)		(820,000	)		(66	)%
Asset management fees and expenses		(559,000	)		(390,000	)		169,000			43	%
Real estate acquisitions costs and earn out costs		(1,016,000	)		(22,000	)		994,000			4,518	%
Depreciation and amortization		(1,689,000	)		(1,946,000	)		(257,000	)		(13	)%
Interest income		2,000			4,000			(2,000	)		(50	)%
Interest expense		(1,790,000	)		(1,436,000	)		354,000			25	%
Equity in (loss) income from unconsolidated entities		(14,000	)		121,000			(107,000	)		(88	)%
Net loss	$	(545,000	)	$	(1,413,000	)	$	868,000			61	%

(1) Net operating income, a non-GAAP supplemental measure, is defined as total revenue less property operating and maintenance expenses. We use net operating income to evaluate the operating performance of our consolidated real estate investments and to make decisions concerning the operation of the property. We believe that net operating income is useful to investors in understanding the value of our consolidated income-producing real estate. Net income is the GAAP measure that is most directly comparable to net operating income; however, net operating income should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes certain items such as a gain or loss from investments in unconsolidated entities depreciation and amortization, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

Senior Living Operations

Total revenue for senior living operations includes rental revenue and resident fees and service income. Property operating and maintenance expenses include labor, food, utilities, marketing, management and other property operating costs. Net operating income for the three months ended September 30, 2012 increased to $3.3 million from $2.6 million for the three months ended September 30, 2011. The increase is primarily due to the acquisition and consolidation of the Leah Bay joint venture in August of 2012,

	Three Months Ended September 30,
	2012			2011			$ Change			% Change
Senior Living Operations — Net operating income
Total revenues
Rental revenue	$	6,910,000		$	6,915,000		$	(5,000	)		(1	)%
Resident services and fee income		3,655,000			1,945,000			1,710,000			88	%
Tenant reimbursement and other income		15,000			73,000			(58,000	)		(79	)%
Less:
Property operating and maintenance expenses		(7,159,000	)		(6,365,000	)		794,000			12	%
Total portfolio net operating income	$	3,421,000		$	2,568,000		$	853,000			33	%

31

Triple-Net Leased Properties

Total revenue for triple-net leased properties includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include insurance and property taxes and other operating expenses reimbursed by our tenants. Net operating income increased to $1.3 million for the three months ended September 30, 2012 compared to $0.8 million for the three months ended September 30, 2011, due to the acquisition of a controlling interest in the Rome LTACH in April 2012. As a result of this acquisition, Rome LTACH operations are consolidated in our condensed consolidated financial statements and included in the operations of our triple-net leased segment for the three months ended September 30, 2012. In the comparable period of 2011, Rome LTACH was accounted for as an equity method investment and its operating results were not included in our triple-net leased properties segment.

	Three Months Ended September 30,
	2012			2011			$ Change			% Change
Triple-Net Leased Properties — Net operating income
Total revenues
Rental revenue	$	1,298,000		$	826,000		$	472,000			57	%
Tenant reimbursement and other income		222,000			234,000			(12,000	)		(5	)%
Less:
Property operating and maintenance expenses		(220,000	)		(258,000	)		(38,000	)		(15	)%
Total portfolio net operating income	$	1,300,000		$	802,000		$	498,000			62	%

Medical Office Buildings

Total revenue for medical office buildings includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include utilities, repairs and maintenance, insurance and property taxes. Net operating income for the three months period ended September 30, 2012 of $0.2 million was favorably affected by a reduction in property taxes, compared to net operating income for the three months ended June 30, 201l.

	Three Months Ended September 30,
	2012			2011			$ Change			% Change
Medical Office Buildings — Net operating income
Total revenues
Rental revenue	$	214,000		$	201,000		$	13,000			6	%
Tenant reimbursement and other income		75,000			55,000			20,000			36	%
Less:
Property operating and maintenance expenses		(94,000	)		(127,000	)		(33,000	)		(26	)%
Total portfolio net operating income	$	195,000		$	129,000		$	66,000			51	%

Unallocated (expenses) income

General and administrative expenses decreased to $0.4 million for the three months ended September 30, 2012 from $1.2 million for the three months ended September 30, 2011. The decrease was due to lower legal, other professional fees and board of director fees (approximately $0.6 million) and the elimination of reimbursement of direct or indirect costs of providing administrative services to the Prior Advisor (approximately $0.4 million). Direct and indirect expenses incurred by the Prior Advisor were reimbursed by the Company under the terms of that 2011 Advisory Agreement. The 2012 Advisory Agreement does not have such a provision. Legal, professional and board of director fees were higher in the third quarter of 2011 as a result of consideration of strategic alternatives in that period. These reductions in expenses were partially offset by higher recurring expenses in 2012, principally income taxes, tax services and insurance.

As a result of the change in calculation of asset management fees provided for in the 2012 Advisory Agreement, asset management fees for the three months ended September 30, 2012 and 2011 increased to $0.6 million from $0.4 million. Depreciation and amortization for the same periods decreased to $1.7 million from $1.9 million, as a result of lower in-place lease and tenant relationship amortization costs, partially offset by increases in depreciation of buildings, improvements and tenant improvements, resulting from acquisitions. In-place lease and tenant relationship costs, which relate to the allocation of the purchase price, were completely amortized in 2011 for several properties and partially offset by the in-place lease value assigned in the Leah Bay purchase price allocation. For the three months ended September 30, 2012 and 2011, real estate acquisition costs and earn out costs were $0.9 million and $0.1 million, respectively. Real estate acquisition costs in 2012 consisted primarily of costs associated with the acquisition of the Leah Bay Joint Venture and the minority interest in the Rome LTACH property, while 2011 real estate acquisition costs consisted of fees paid to the Prior Advisor for the acquisition of Woodland Terrace at the Oaks and

32

upon the receipt of offering proceeds, acquisition costs paid directly to third-parties and, an earn out provision related to GreenTree at Westwood. A portion of the acquisition fees due to our Prior Advisor were paid upon receipt of offering proceeds and the balance was paid at the time of investment acquisition.

Interest expense for the three months ended September 30, 2012 increased to $1.8 million from $1.4 million for the three months ended September 30, 2011 principally due to higher debt levels associated with refinanced debt, and the acquisitions of the Rome LTACH and Leah Bay properties which were completed during the third quarter of 2012.

The loss from unconsolidated entities of approximately $14,000 for the three months ended September 30, 2012 was primarily due to the acquisition of the Physicians Centre MOB in April 2012 and consolidation of the Rome LTACH property in the same period. Third quarter 2011 income of approximately $0.1 million related to the operations of the Rome LTACH joint venture, in which we acquired a controlling interest in April 2012 and which, as a result, was consolidated in the 2012 period.

Comparison of the Nine months Ended September 30, 2012 and 2011

	Nine Months Ended September 30,
	2012			2011			$ Change			% Change
Net operating income, as defined (1)
Senior living operations	$	8,906,000		$	7,875,000		$	1,031,000			13	%
Triple-net leased properties		3,435,000			2,421,000			1,014,000			42	%
Medical office building		627,000			509,000			118,000			23	%
Total portfolio net operating income	$	12,968,000		$	10,805,000		$	2,163,000			20	%
Reconciliation to net loss:
Net operating income, as defined (1)	$	12,968,000		$	10,805,000		$	2,163,000			20	%
Unallocated (expenses) income:
General and administrative expenses		(1,632,000	)		(3,201,000	)		(1,569,000	)		(49	)%
Asset management fees and expenses		(1,543,000	)		(1,197,000	)		346,000			29	%
Real estate acquisitions costs and earn out costs		(1,229,000	)		(1,453,000	)		(224,000	)		15	%
Depreciation and amortization		(4,653,000	)		(5,658,000	)		(1,005,000	)		18	%
Interest income		10,000			10,000			(0	)		0	%
Interest expense		(4,818,000	)		(4,161,000	)		657,000			16	%
Other income/expense		(151,000	)		0			151,000			100	%
Equity in (loss) income from unconsolidated entities		(363,000	)		105,000			(468,000	)		(446	)%
Fair value adjustment for equity method investment		1,282,000			0			1,282,000			100	%
Net loss	$	(129,000	)	$	(4,750,000	)	$	4,621,000			97	%

(1) Net operating income, a non-GAAP supplemental measure, is defined as total revenue less property operating and maintenance expenses. We use net operating income to evaluate the operating performance of our consolidated real estate investments and to make decisions concerning the operation of the property. We believe that net operating income is useful to investors in understanding the value of our consolidated income-producing real estate. Net income is the GAAP measure that is most directly comparable to net operating income; however, net operating income should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes certain items such as a gain or loss from investments in unconsolidated entities, depreciation and amortization, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

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Senior Living Operations

Total revenue for senior living operations includes rental revenue and resident fees and service income. Property operating and maintenance expenses include labor, food, utilities, marketing, management and other property operating costs. Net operating income for the nine months ended September 30, 2012 increased to $8.8 million from $7.9 million for the nine months ended September 30, 2011. This increase is primarily due to lease up of a new memory care floor at Woodland Terrace, higher occupancy at Forestview Manor, the acquisition of the Leah Bay properties in August 2012 and rate and occupancy increases in the 2012 period.

	Nine Months Ended September 30,
	2012			2011			$ Change		% Change
Senior Living Operations — Net operating income
Total revenues
Rental revenue	$	20,453,000		$	19,983,000		$	470,000		2	%
Resident services and fee income		8,243,000			5,667,000			2,576,000		45	%
Tenant reimbursement and other income		294,000			248,000			46,000		19	%
Less:
Property operating and maintenance expenses		(20,084,000	)		(18,023,000	)		2,061,000		11	%
Total portfolio net operating income	$	8,906,000		$	7,875,000		$	1,031,000		13	%

Triple-Net Leased Properties

Total revenue for triple-net leased properties includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include insurance and property taxes and other operating expenses reimbursed by our tenants. Net operating income increased to $3.4 million for the nine months ended September 30, 2012, compared to $2.4 million for the nine months ended September 30, 2011, due to the acquisition of a controlling interest in the Rome LTACH in April 2012. As a result of this acquisition, Rome LTACH operations are consolidated in our consolidated condensed financial statements and included in the operations of our triple-net leased segment for the nine months ended September 30, 2012. In the comparable period of 2011, Rome LTACH was presented as an equity method investment and its operating results were not included in our triple-net leased properties segment.

	Nine Months Ended September 30,
	2012			2011			$ Change		% Change
Triple-Net Leased Properties — Net operating income
Total revenues
Rental revenue	$	3,436,000		$	2,427,000		$	1,009,000		42	%
Tenant reimbursement and other income		593,000			462,000			131,000		28	%
Less:
Property operating and maintenance expenses		(594,000	)		(468,000	)		126,000		27	%
Total portfolio net operating income	$	3,435,000		$	2,421,000		$	1,014,000		42	%

Medical Office Buildings

Total revenue for medical office buildings includes rental revenue and expense reimbursements from tenants. Property operating and maintenance expenses include utilities, repairs and maintenance, insurance and property taxes. Net operating income for the nine months ended September 30, 2012 was comparable to the nine months ended September 30, 2011.

	Nine Months Ended September 30,
	2012			2011			$ Change			% Change
Medical Office Buildings — Net operating income
Total revenues
Rental revenue	$	636,000		$	603,000		$	33,000			5	%
Tenant reimbursement and other income		234,000			166,000			68,000			41	%
Less:
Property operating and maintenance expenses		(243,000	)		(260,000	)		(17,000	)		(7	)%
Total portfolio net operating income	$	627,000		$	509,000		$	118,000			23	%

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Unallocated (expenses) income

General and administrative expenses decreased to $1.6 million for the nine months ended September 30, 2012 from $3.2 million for the nine months ended September 30, 2011. The decrease was due to lower legal, other professional fees and board of director fees (approximately $0.6 million) and the elimination of direct or indirect costs of providing administrative services reimbursed to the Prior Advisor (approximately $0.8 million). Legal, professional and board of director fees were higher in the third quarter of 2011 as a result of consideration of strategic alternatives in that period. Direct and indirect expenses incurred by the Prior Advisor were reimbursed by the Company under the terms of that 2011 Advisory Agreement. The 2012 Advisory Agreement does not have such a provision. These reductions in expenses were partially offset by higher recurring expenses in 2012, principally income taxes, audit fees and insurance. The Company recognized a non recurring tax benefit in the second quarter of 2011, which decreased income tax expense.

As a result of the change in calculation of asset management fees provided for in the 2012 Advisory Agreement, asset management fees for the nine months ended September 30, 2012 increased to $1.5 million from $1.2 million for the comparable period of 2011. Depreciation and amortization for nine months ended September 30, 2012 decreased to $4.7 million from $5.7 million for the comparable period of 2011, as a result of lower in-place lease and tenant relationship amortization costs. These costs, which relate to the allocation of property purchase price, were completely amortized in 2011 for several properties, and partially offset by the in-place lease value assigned in the Leah Bay purchase price allocation.

For the nine months ended September 30, 2012 and 2011, real estate acquisition costs and contingent consideration were $1.1 million and $1.5 million, respectively. Real estate acquisition costs in 2012 consisted primarily of costs associated with the acquisition of the Rome LTACH minority interests and the Leah Bay joint venture, while 2011 real estate acquisition costs consisted of costs and fees associated with the acquisition of the Forestview and Woodland Terrace properties as well as acquisition fees advanced to the Prior Advisor on equity raised in the Company’s offering ($0.2 million), and an earn out provision related to GreenTree at Westwood ($0.7 million). A portion of the acquisition fees due to our Prior Advisor were paid upon receipt of offering proceeds and the balance was paid at the time of investment acquisition.

Interest expense for the nine months ended September 30, 2012 increased to $4.8 million from $4.2 million for the nine months ended September 30, 2011 principally due to higher debt levels associated with refinanced debt, the acquisition of a controlling interest in the Rome LTACH property and the acquisition of the Leah Bay joint venture which was completed during the third quarter of 2012.

Our equity interest in the Rome LTACH joint venture was revalued in connection with the acquisition of our partners’ joint venture interests resulting in a $1.3 million gain.

Loss from unconsolidated entities increased to $0.4 million for the nine months ended September 30, 2012 from income from an unconsolidated entity of $0.1 million in the comparable period of the prior year. The 2012 loss related primarily to the operations of the Physicians Centre MOB joint venture purchased in April 2012, while the 2011 income related to the operations of Rome LTACH joint venture in which we acquired a controlling interest in April 2012 and which, as a result, was consolidated in the second quarter of 2012.

Liquidity and Capital Resources

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our offering, our dividend reinvestment program and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with their consideration of various strategic alternatives to enhance our stockholders’ value. One of the alternatives under consideration was the hiring of a new dealer manager for our follow-on offering, however the Independent Directors Committee has made no determination regarding whether or when our follow-on offering may be recommenced, if at all. In addition to uncertainties associated with potentially engaging a new dealer manager and possibly restarting our public offering, financial markets continue to experience volatility and uncertainty. Our ability to fund property acquisitions or development projects, as well as our ability to repay or refinance debt maturities, could be adversely affected by an inability to successfully raise additional capital and to secure financing at reasonable terms, if at all.

We expect that primary sources of capital over the long-term will include net proceeds from the sale of our capital stock, debt financing, and net cash flows from operations. We expect that our primary uses of capital will be for property acquisitions, including promote monetization payments, for the payment of tenant improvements and capital improvements for the payment of operating expenses, including interest expense on any outstanding indebtedness, reducing outstanding indebtedness and for the payment of distributions.

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As of September 30, 2012, a total of approximately 12.7 million shares of our common stock had been sold in our initial and follow-on public offerings for aggregate gross proceeds of approximately $127.0 million. We intend to own our core plus properties with low to moderate levels of debt financing. We will incur moderate to high levels of indebtedness when acquiring our value-added and opportunistic properties and possibly other real estate investments. For our stabilized core plus properties, our long-term goal will be to use low to moderate levels of debt financing with leverage ranging from 50% to 65% of the value of the asset. For the value-added and opportunistic properties, our goal will be to acquire and develop or redevelop these properties using moderate to high levels of debt financing with leverage ranging from 65% to 75% of the cost of the asset. Once these value-added and opportunistic properties are developed, redeveloped and stabilized with tenants, we plan to reduce the levels of debt to fall within target debt ranges appropriate for core plus properties. While we seek to fall within the outlined targets on a portfolio basis, for any specific property we may exceed these estimates. To the extent sufficient proceeds from our public offering, debt financing, or a combination of the two are unavailable to repay acquisition debt financing down to the target ranges within a reasonable time as determined by our board of directors, we will endeavor to raise additional equity or sell properties to repay such debt so that we will own our properties with low to moderate levels of permanent financing. In the event that we are unable to raise additional equity, our ability to diversify our investments may be diminished.

As of September 30, 2012, we had approximately $21.7 million in cash and cash equivalents on hand. Our liquidity will increase if additional subscriptions for shares are accepted in our follow-on public offering and if refinancing results in excess loan proceeds and decrease as net offering proceeds are expended in connection with the acquisition, operation of properties and distributions made in excess of cash available from operating cash flows.

On November 19, 2010, we entered into an agreement with KeyBank National Association, an unaffiliated financial institution, to obtain a $25.0 million revolving credit facility (the “Facility”). In August 2011, the terms of the agreement were amended to convert the Facility from a revolving loan commitment to a term loan and reduced the maximum amount of the commitment from $25.0 million to $16.3 million. The amendment also changed the maturity date of the Facility from November 18, 2012 to July 31, 2012 (subject to one ninety-day extension option). On June 11, 2012, we entered into MultiFamily Loan and Securities Agreements (the “Loans”) with KeyCorp Real Estate Capital Markets, Inc., originated under Fannie Mae’s Delegated Underwriting and Servicing Product Line, to refinance five properties, including three of the properties previously on the facility. On August 14, 2012, the Company repaid the KeyBank credit facility with refinancing proceeds of a $5.6 million loan from KeyBank National Association.

We expect to have sufficient cash available from cash on hand and operations to fund capital improvements and principal payments due on our borrowings in the next twelve months. We expect to fund stockholder distributions from the excess of cash on hand and from the excess of cash provided by operations over required capital improvements and debt payments. This excess may be insufficient to make distributions at the current level or at all.

We will not rely on advances from our Advisor to acquire properties but our Advisor and its affiliates may loan funds to special purposes entities that may acquire properties on our behalf pending our raising sufficient proceeds from our offerings to purchase the properties from the special purpose entity.

There may be a delay between the sale of our shares and the purchase of properties. During this period, our public offering net proceeds may be temporarily invested in short-term, liquid investments that could yield lower returns than investments in real estate.

Potential future sources of capital include proceeds from future equity offerings, proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of properties and undistributed funds from operations.

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Distributions

Through June 30, 2011, we made cash distributions to our stockholders at an annualized rate of 7.5%, based on a $10.00 per-share purchase price. On September 30, 2011, our board of directors resolved to lower our distributions to a current annualized rate of $0.25 per share (2.5% based on a share price of $10.00) to more closely align distributions to funds available from operations at that date. The distribution rate was effective July 1, 2011. This distribution rate is expected to more closely align distributions to funds available from operations. Effective October 1, 2012, our board of directors declared distributions for daily record dates occurring in the fourth quarter of 2012 in amounts that, if declared and paid each day for a 365-day period, would equate to an annualized rate of $.475 per share (4.75% based on share price of $10.00). The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

Historically, we have used a portion of the proceeds from our distribution reinvestment plan for general corporate purposes, including capital expenditures on our real estate investments, tenant improvement costs and leasing costs related to our investments in real estate properties; reserves required by financings of our investments in real estate properties; and the repayment of debt. Because our distribution reinvestment plan was suspended on May 10, 2011, we will no longer have distribution reinvestment plan proceeds available for such general corporate purposes. Because such funds will not be available from the distribution reinvestment plan offering, we may have to use a greater proportion of our cash flow from operations to meet our general cash requirements, which would reduce cash available for distributions.

	Distributions Declared						Cash Flow from Operations
Period	Cash		Reinvested		Total
First quarter 2011	$	1,152,000	$	1,124,000	$	2,276,000	$	1,583,000
Second quarter 2011		2,436,000		—		2,436,000		92,000
Third quarter 2011		817,000		—		817,000		1,106
First quarter 2012		801,000		—		801,000		1,544,000
Second quarter 2012		799,000		—		799,000		2,374,000
Third quarter 2012		807,000		—		807,000		3,530

From our inception through September 30, 2012, we had declared aggregate distributions of $17.0 million and our cumulative net loss during the same period was $17.3 million.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. We invest our cash and cash equivalents in government-backed securities and FDIC-insured savings accounts, which, by their nature, are subject to interest rate fluctuations. However, we believe that the primary market risk to which we will be exposed is interest rate risk relating the variable portion of our debt financing. As of September 30, 2012, we had approximately $31.1 million of variable rate debt, the majority of which is at a rate tied to the 3-month LIBOR. A 1.0% change in 3-Month LIBOR would result in a change in annual interest expense of approximately $0.3 million per year. Our interest rate risk management objectives will be to monitor and manage the impact of interest rate changes on earnings and cash flows by using certain derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on variable rate debt. We will not enter into derivative or interest rate transactions for speculative purposes.

In addition to changes in interest rates, the fair value of our real estate is subject to fluctuations based on changes in the real estate capital markets, market rental rates for healthcare facilities, local, regional and national economic conditions and changes in the credit worthiness of tenants. All of these factors may also affect our ability to refinance our debt if necessary.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our senior management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our disclosure controls and procedures and have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1A. Risk Factors

The following risk supplements the risks disclosed in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2011.

We have paid, and may in the future pay, distributions from sources other than cash provided from operations.

Until proceeds from our offerings are invested and generating operating cash flow sufficient to support distributions to stockholders, we may pay a portion of our distributions from the proceeds of our offerings or from borrowings in anticipation of future cash flow. Our organizational documents do not limit the amount of distributions we can fund from sources other than from operating cash flow. To the extent that we use offering proceeds to fund distributions to stockholders, the amount of cash available for investment in properties will be reduced. For the four quarters ended September 30, 2012, our cash flow from operations was approximately $8.5 million. During that period we paid distributions to investors of approximately $3.2 million, all of which was paid to investors in cash.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) We did not sell any equity securities that we did not register under the Securities Act of 1933 during the period covered by this Form 10-Q.

(b) On August 10, 2007, our Registration Statement on Form S-11 (File No. 333-139704), covering a public offering of up to 40,000,000 shares of common stock for an aggregate offering amount of $400.0 million, was declared effective under the Securities Act of 1933 (the “IPO”). We stopped making offers under our IPO on February 3, 2011 after raising gross offering proceeds of approximately $123.9 million from the sale of approximately 12.4 million shares, including shares sold under the distribution reinvestment plan. On February 4, 2011, our Registration Statement on Form S-11 (File No. 333-168013), covering a public offering of up to 55,000,000 shares of our common stock for an aggregate offering amount of $550.0 million, was declared effective under the Securities Act of 1933 (the “Follow-on Offering”). The Follow-on Offering has not terminated yet although as of September 30, 2012 we had suspended sales pursuant to this offering. As of September 30, 2012, we had sold an aggregate of 12.7 million shares of common stock in our IPO and the Follow-on Offering and raised aggregate gross proceeds of $127.0 million. From this amount, we incurred $12.3 million in selling commissions and dealer manager fees payable to our dealer manager and $4.2 million in acquisition fees payable to the Prior Advisor. As of March 31, 2011, we had also incurred organizational and offering costs related to the IPO and the Follow-on Offering totaling $5.1 million. We had acquired 18 properties and two investments that are unconsolidated entities as of September 30, 2012.

(c) During the nine months ended September 30, 2012, we repurchased shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
January		33,008	$	9.98
February		—	$	—
March		—	$	—
April		9,203	$	9.00
May		17,582	$	9.00
June		—	$	—
July		—	$	—
August		3,000	$	9.00
September		13,500	$	9.00
		76,293

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Item 6. Exhibits

Ex.	Description
3.1	Articles of Amendment and Restatement of the Registrant, as amended on December 29, 2009 and January 24, 2012 (incorporated by reference to Exhibit 3.1 to the Registrant’s annual report on Form 10-K for the year ended December 31, 2011).
3.2	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s current report on Form 8-K filed January 25, 2012).
3.3	Amended and Restated Limited Partnership Agreement of Sentio Healthcare Properties OP, L.P., dated January 25, 2012 (incorporated by reference to Exhibit 3.2 to the Registrant’s current report on Form 8-K filed January 25, 2012).
4.1	Subscription Agreement (incorporated by reference to Appendix A to the Registrant’s prospectus filed on February 7, 2011).
4.2	Statement regarding restrictions on transferability of the Registrant’s shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-139704) filed on June 15, 2007 (“Pre-Effective Amendment No. 2”).
4.3	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix B to the Registrant’s prospectus filed on February 7, 2011).
10.1	Second Amendment dated as of July 25, 2012 to Purchase and Sale Agreement dated as of May 7, 2012 by and among Sentio Leah Bay, LLC, as Buyer, and Urbana Care Group LLC, Springfield Care Group LLC, Bryan Care Group, LP and Erwin Family Properties I, L.L.C., as Seller, and Fidelity National Title Agency, Inc., as Escrow Agent.
10.2	Limited Liability Company Agreement of Sentio Leah Bay Portfolio, LLC, a Delaware limited liability company, by and between Sentio Leah Bay, LLC, a Delaware limited liability company, as a member and Erwin Family Properties I, LLC, a Washington limited liability company, as a member, dated August 31, 2012.
10.3	Limited Liability Company Agreement of Sentio Leah Bay TRS Portfolio, LLC, a Delaware limited liability company, by and between Sentio Leah Bay TRS, LLC, a Delaware limited liability company, as a member and Erwin Family Properties I, LLC, a Washington limited liability company, as a member, dated August 31, 2012.
10.4	Assumption and Release Agreement dated August 31, 2012 by and among Urbana Care Group, LLC, Craig Spaulding, Amber Glenn Landlord, LLC and Jerry Erwin Associates, Inc., with Schedule disclosing other essentially similar Assumption and Release Agreements.
10.5	Subordination, Assignment and Security Agreement August 31, 2012 by and between Amber Glenn Landlord, LLC, Fannie Mae, Amber Glenn TRS, LLC and Jerry Erwin Associates, Inc., with Schedule disclosing other essentially similar Subordination, Assignment and Security Agreements.
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

39

Ex.	Description
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

40

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized this 14th day of November 2012.

SENTIO HEALTHCARE PROPERTIES, INC.
By:	/s/ JOHN MARK RAMSEY
	John Mark Ramsey, President and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ SHARON C. KAISER
	Sharon C. Kaiser, Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT

This Second Amendment to Purchase and Sale Agreement (this “2^nd Amendment”) is entered into as of July 25, 2012 by and among: SENTIO LEAH BAY PORTFOLIO, LLC, a Delaware limited liability company, or its successors or assigns (“Buyer”); URBANA CARE GROUP, LLC, an Illinois company, SPRINGFIELD CARE GROUP, LLC, an Illinois limited liability company; NORMAL CARE GROUP, LLC, an Illinois limited liability company and BRYAN CARE GROUP, LP, a Texas limited partnership (each a “Current Owner”) and collectively (“Current Owners”), ERWIN FAMILY PROPERTIES I, L.L.C., a Washington limited liability company (“EFP” and together with each Current Owner, a “Seller” and collectively with all Current Owners, “Sellers”); and FIDELITY NATIONAL TITLE AGENCY, INC., a Texas corporation (“Escrow Agent”).

RECITALS

A. Sentio Leah Bay, LLC, a Delaware limited liability company (“Original Buyer”), Sellers and Escrow Agent entered into that certain Purchase and Sale Agreement May 7, 2012, and that certain First Amendment to Purchase and Sale Agreement dated June 21, 2012 (collectively, the “Agreement”) with respect to the purchase and sale of certain real property described in the Agreement.

B. Original Buyer subsequently assigned all Original Buyer’s right, title and interest in and to the Agreement to Buyer pursuant to that certain Assignment and Assumption of Purchase and Sale Agreement dated June 28, 2012.

C. Buyer, Sellers and Escrow Agent desire to amend the Agreement as set forth in this 2^nd Amendment.

AGREEMENT

For valuable consideration, the receipt and sufficiency of which are acknowledged, Buyer, Sellers and Escrow Agent agree as follows:

1. Definitions. Except as expressly set forth in this Agreement, all terms defined in the Agreement will have the same meaning in this 2^nd Amendment.

2. Closing Date and Place. Section 9.1 of the Agreement shall be deleted in its entirety and replaced with the following:

Closing Date and Place. The Closing shall take place on the date which is five (5) business days following the satisfaction of all conditions to Closing contained in ARTICLE VII and ARTICLE VIII but in no event later than August 31, 2012, or at such earlier or later date and time as may be expressly agreed upon in writing by the Buyer and Seller (the “Initial Closing Date”). The Closing shall be accomplished by the Buyer and Seller depositing the Closing Documents into escrow with the Title Insurer and Buyer and Seller issuing their respective instructions to the Title Insurer without the need for attending in person unless the parties mutually agree otherwise.

3. Exhibit E. For avoidance of doubt, the provisions of this 2^nd Amendment shall serve as an extension of the closing date contemplated by Article III, Section D of the Management Agreement attached as Exhibit E to the Agreement.

4. No Other Changes. Except as expressly set forth in this 2^nd Amendment, the Agreement will remain unmodified and will otherwise continue in full force and effect as written. In the event of any conflict between the terms of this 2^nd Amendment and the terms of the Agreement, the terms of this 2^nd Amendment will control.

5. Counterparts. This 2^nd Amendment may be executed in counterparts, all of which taken together will constitute one and the same instrument, and any party executing this 2^nd Amendment may do so by signing any such counterpart.

(signature page to follow)

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SELLERS URBANA CARE GROUP, LLC, an Illinois limited liability company
By:
	Craig Spaulding, its manager
SPRINGFIELD CARE GROUP, LLC, an Illinois limited liability company
By:
	Craig Spaulding, its manager
NORMAL CARE GROUP, LLC, an Illinois limited liability company
By:
	Craig Spaulding, its manager
BRYAN CARE GROUP, LP, a Texas limited partnership
By:	BCG Texas Group, LLC, a Texas limited liability company, its general partner
By:
	Craig Spaulding, its manager
ERWIN FAMILY PROPERTIES I, LLC, an Washington limited liability company
By:
	Gerald L. Erwin, Manager

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BUYER

SENTIO LEAH BAY PORTFOLIO, LLC, a Delaware limited liability company

By:

Name:

Title:

ESCROW AGENT

The undersigned Escrow Agent hereby accepts the foregoing 2^nd Amendment.

FIDELITY NATIONAL TITLE AGENCY, INC.

By:

Name:

Title:

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

of

SENTIO LEAH BAY PORTFOLIO, LLC,

a Delaware limited liability company,

by and between

SENTIO LEAH BAY, LLC,

a Delaware limited liability company,

as a member

and

ERWIN FAMILY PROPERTIES I, L.L.C.,

a Washington limited liability company,

as a member

Dated as of August 31, 2012

TABLE OF CONTENTS

		Page
ARTICLE I. FORMATION AND OTHER ORGANIZATION MATTERS			2
Section 1.1	Formation; Changes		2
Section 1.2	Name		2
Section 1.3	Term		2
Section 1.4	Business		2
Section 1.5	Names and Addresses of Members		2
Section 1.6	Registered Office and Principal Place of Business		3
Section 1.7	Certain Definitions		3
ARTICLE II. CERTAIN TAX AND ACCOUNTING MATTERS			3
ARTICLE III. CONTRIBUTIONS BY MEMBERS; FINANCING			3
Section 3.1	Capital Contributions		3
Section 3.2	Additional Capital Contributions		3
Section 3.3	Recoupment for Contributions		4
Section 3.4	Execution and Compliance with Senior Loan Documents		5
ARTICLE IV. DISTRIBUTIONS TO MEMBERS			5
Section 4.1	Distributions of Available Cash from Operations		5
Section 4.2	Distributions of Net Capital Transaction Proceeds		6
Section 4.3	Distributions shall be Aggregated with those of Tenant Portfolio		7
Section 4.4	Shortfall in Preferred Return		7
Section 4.5	Allocation of Purchase Price		7
Section 4.6	Withholding Taxes with Respect to Members		7
Section 4.7	Violation of Law		8
Section 4.8	Termination of JEA Manager under JEA Management Agreement		8
ARTICLE V. MANAGEMENT OF THE COMPANY			8
Section 5.1	Authority of Managing Member		8
Section 5.2	Management Agreements		9
Section 5.3	Limited Reimbursement of Expenses		10
ARTICLE VI. STATUS OF MEMBERS; INDEMNIFICATION			10
Section 6.1	Role of Non-Managing Members		10
Section 6.2	Liability of Members		10
Section 6.3	Bankruptcy of Member		10
Section 6.4	Relationship of Members		11
Section 6.5	Other Activities; Affiliates; Non-Compete		11
Section 6.6	Indemnification		12
Section 6.7	Right of First Offer		14
ARTICLE VII. TRANSFER OF MEMBERSHIP INTERESTS			15
Section 7.1	General		15
Section 7.2	Permitted Transferees		15

Section 7.3	Right of First Refusal	15
Section 7.4	Effect of Assignment	17
Section 7.5	Substitute Member	17
Section 7.6	Further Requirements	17
Section 7.7	Transfer Taxes	18
Section 7.8	Managing Member’s Call Right	18
Section 7.9	Corporate Change of Control of Non-Managing Member	18
ARTICLE VIII. CERTAIN REMEDIES		19
Section 8.1	No Partition	19
Section 8.2	Litigation Without Termination	19
Section 8.3	Attorneys’ Fees	19
Section 8.4	Cumulative Remedies	19
Section 8.5	No Waiver	19
ARTICLE IX. DISSOLUTION OF COMPANY		20
Section 9.1	Events Giving Rise to Dissolution	20
Section 9.2	Procedure	21
ARTICLE X. MISCELLANEOUS		22
Section 10.1	Notices	22
Section 10.2	Entire Agreement	23
Section 10.3	Amendments	23
Section 10.4	Governing Law	23
Section 10.5	Successors and Assigns	23
Section 10.6	Interpretation	23
Section 10.7	Severability	24
Section 10.8	Legal Counsel	24
Section 10.9	Advice from Independent Counsel/Voluntary Agreement	24
Section 10.10	Counterparts	25
Section 10.11	Benefits of Agreement; No Third-Party Rights	25
Section 10.12	WAIVER OF JURY TRIAL	25
Section 10.13	Special Purpose Provisions	25
Section 10.14	Patriot Act Representation	26
Section 10.15	OFAC Compliance and Source of Funds	26
ARTICLE XI. BOOKS AND RECORDS		28
Section 11.1	Books and Records; Periodic Reporting	28
Section 11.2	Right to Inspection; Delivery of Information	29
Section 11.3	Notices of Default or Litigation	29
ARTICLE XII. RIGHTS AND OBLIGATIONS OF MANAGING MEMBER		29
Section 12.1	Rights and Obligations of Managing Member	29

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

SENTIO LEAH BAY PORTFOLIO, LLC

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) of SENTIO LEAH BAY PORTFOLIO, LLC, a Delaware limited liability company, dated as of August 31, 2012 (the “Effective Date”) by and among SENTIO LEAH BAY, LLC, a Delaware limited liability company (“Managing Member”), as the Managing Member, and ERWIN FAMILY PROPERTIES I, L.L.C.,, a Washington limited liability company (“Non-Managing Member”), as the Non-Managing Member.

WITNESSED:

WHEREAS, Managing Member and Non-Managing Member formed the Company as a limited liability company under the provisions of the Delaware Limited Liability Company Act, as amended from time to time (the “Delaware Act”);

WHEREAS, Managing Member has entered into that certain Purchase and Sale Agreement dated as of May 7, 2012 (the “Purchase Agreement”), pursuant to which, among other things, the Managing Member has the right to acquire Amber Glen of Urbana, IL – a 38 unit memory care facility located at 1704 East Amber Lane, Urbana, Illinois, (the “Urbana Property”); Mill Creek of Springfield, IL – a 38 unit memory care facility located at 3319 Ginger Creek Drive, Springfield, Illinois (the “Springfield Property”); Sugar Creek of Normal, IL – a 38 unit memory care facility located at 505 East Vernon Avenue, Normal, Illinois, (the “Normal Property”); and Hudson Creek of Bryan, TX – a 38 unit memory care facility located at 3850 Coppercrest Drive, Bryan, Texas, (the “Bryan Property”).

WHEREAS, Managing Member has assigned its rights to acquire the property described in the Purchase Agreement to the Company;

WHEREAS, the Managing Member and Non-Managing Member previously entered into that certain Limited Liability Company Agreement dated as of June 28, 2012 (the “Previous Agreement”) and now desire to (and hereby do) amend and restate the Previous Agreement in its entirety, as more particularly set forth below.

WHEREAS, Managing Member and Non-Managing Member desire to enter into this Agreement to set forth their respective rights and obligations with respect to the Company.

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NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

FORMATION AND OTHER ORGANIZATION MATTERS

Section 1.1 Formation; Changes. The Company was formed under the Delaware Act on June 20, 2012 (the “Formation Date”) by the execution, delivery and filing with the Secretary of the State of Delaware, of the Certificate of Formation of the Company.

Section 1.2 Name.

The business of the Company shall be conducted under the name “SENTIO LEAH BAY PORTFOLIO, LLC.”

Section 1.3 Term.

The term (“Term”) of the Company shall be from the Formation Date terminated as hereinafter provided. The existence of the Company as a separate legal entity shall continue until cancellation of the Company as provided in the Delaware Act.

Section 1.4 Business.

The business of the Company is solely to (a) own, hold, finance, pledge and manage the sole equity interest in each of the Operating Companies and (b) take any and all actions and make any and all decisions (i) in its capacity as the sole member of each of the Operating Companies which owns or leases the Property, including, without limitation, in connection with the acquisition, management, financing, refinancing, ownership, vacating, renovating, leasing, insuring, selling, assigning, transferring and prosecuting or defending any and all legal proceedings relating to the Property and (ii) in connection with the ownership, financing, refinancing, selling, assigning, transferring and prosecuting or defending any and all legal proceedings relating to the interests of the Company in each of the Operating Companies; and do any and all other acts or things that may be necessary or incidental to carry on the business of the Company as described in clauses (a) and (b) above. The Company is not authorized to, and shall not, engage in any business other than as described in this Section 1.4.

Section 1.5 Names and Addresses of Members.

The names and addresses of the Members are as follows:

SENTIO LEAH BAY, LLC

Attn: Scott Larche

189 S. Orange Ave., Suite 1700

Orlando, Florida 32801

Telephone No.: 407.999.7679

Telecopy No.: 407.999.5210

ERWIN FAMILY PROPERTIES I, L.L.C.

12115 NE 99th Street

Suite 1800

Vancouver, Washington

Telephone No.: 800.254.9442

Telecopy No.: 360.254.1770

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Section 1.6 Registered Office and Principal Place of Business.

The registered office of the Company in the State of Delaware shall be 2711 Centerville Road, Suite 400, Wilmington, Delaware and its registered agent for service of process on the Company at such office shall be Corporation Service Company. The principal place of business of the Company shall be 189 S. Orange Ave., Suite 1700, Orlando, Florida, 32801, or such other location hereafter determined by the Managing Member.

Section 1.7 Certain Definitions.

Certain capitalized words and phrases used in this Agreement and not otherwise defined in the body hereof are defined in Exhibit A and shall have the meanings set forth therein.

ARTICLE II.

CERTAIN TAX AND ACCOUNTING MATTERS

The Members intend that the Company shall be taxed as a partnership for federal and state income tax purposes and shall not take any action that may result in the Company being taxed as other than a partnership for such purposes. Each and all of the provisions of Exhibit B annexed hereto and made a part hereof are incorporated herein and shall constitute part of this Agreement. Exhibit B provides for, among other matters, the maintenance of Capital Accounts, the allocation of profits and losses, and the maintenance of books and records.

ARTICLE III.

CONTRIBUTIONS BY MEMBERS; FINANCING

Section 3.1 Capital Contributions.

(a) Non-Managing Member has (i) agreed to contribute its rights to receive an equity interest of 21.5963% in the applicable purchasing entities of the Urbana Property, the Springfield Property and the Normal Property, as more particularly described in the Purchase Agreement and (ii) has contributed $98,000 to the Company.

(b) Managing Member has contributed (i) its rights to acquire one hundred percent (100%) of the fee interests in the Urbana Property, Springfield Property, Normal Property and Bryan Property, as more particularly described in the Purchase Agreement and (ii) $392,000 to the Company.

Section 3.2 Additional Capital Contributions.

(a) The Managing Member may from time to time request that the Members make additional Capital Contributions by providing written notice to the Members of the aggregate amount of such Capital Contribution and the date upon which such amount shall be due. Each Member shall contribute its pro-rata share of such Capital Contribution based on its respective Membership Percentage.

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(b) If Managing Member or Non-Managing Member (in such instance, a “Non-Contributing Member”) does not contribute all of an additional Capital Contribution that is requested under Section 3.2(a) within the time period described in Section 3.2(a), then the contributing Member (the “Contributing Member”) may, but shall not be obligated to, fund the amount the Non-Contributing Member does not contribute. In the event the Non-Contributing Member funds no portion of its share of additional capital with respect to a request under Section 3.2(a), the entire amount funded with respect to such request by the Contributing Member shall be treated as a loan to the Company. In the event the Non-Contributing Member funds only a portion of its share of additional capital with respect to a request under Section 3.2(a), such portion so funded shall be treated as a Capital Contribution and a portion of the amount funded by the Contributing Member with respect to such request shall be treated as a Capital Contribution such that Capital Contributions with respect to such request shall be in proportion to Membership Percentages. The balance of the amount funded by the Contributing Member with respect to such request shall be treated as a loan to the Company. For example, assume the Managing Member makes a $100,000 capital call pursuant to Section 3.2(a), and that Membership Percentages are 80% (Managing Member): 20% (Non-Managing Member). Assume further that the Managing Member contributes its $80,000 share of the capital call, the Non-Managing Member contributes only $10,000 of its $20,000 share of the capital call, and the Managing Member funds the shortfall of $10,000. The Non-Managing Member (i.e., the Non-Contributing Member) will be treated as making a Capital Contribution of $10,000, and the Managing Member (i.e., the Contributing Member) will be treated as making a Capital Contribution of $40,000 thereby resulting in Capital Contributions with respect to such capital call being made in proportion to Membership Percentages. The balance of the amount funded by the Contributing Member (i.e., $50,000) will be treated as a loan to the Company. Any amount funded and classified as a loan under this Section shall be referred to as a “Member Loan”. A Member Loan shall not be deemed to be a Capital Contribution for purposes of this Agreement. Each Member Loan shall bear interest at a rate equal to the lower of twelve percent (12%) per annum, compounded monthly, or the maximum rate of interest permitted by applicable law. If a Member makes a Member Loan pursuant to this Section 3.2(b), then such Member shall receive payments with respect to such Member Loan as described in Sections 4.1 and 4.2 before any distributions are made with respect to Capital Contributions made by the Members pursuant to Sections 3.1 and 3.2(a). The remedies provided in this Section 3.2(b) for the failure of a Member to fund its share of a requested Capital Contribution shall be the sole remedies available with respect thereto. Nothing in this Section 3.2 shall be deemed to obligate any Member to cause any of its Affiliates to incur any Recourse Liabilities.

Section 3.3 Recoupment for Contributions.

Except as expressly provided herein, (a) no Member shall receive any recoupment or payment on account of or with respect to the Capital Contributions made by it pursuant to this Agreement, (b) no Member shall be entitled to interest on or with respect to any Capital Contributions, (c) no Member shall be entitled to withdraw any part of such Member’s Capital Contributions, and (d) no Member shall be entitled to receive any distributions from the Company except as otherwise set forth herein.

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Section 3.4 Execution and Compliance with Senior Loan Documents.

The Members hereby approve and ratify (i) the Senior Loans, as assumed by the Operating Companies from the Senior Lender pursuant to the Senior Loan Documents, as modified by those certain Assumption and Release Agreements and Subordination, Assignment and Security Agreements to be dated as of the closing of the transactions contemplated by the Purchase Agreement (as it may now or hereafter be amended from time to time, the “Senior Loan Terms”) and (ii) execution and delivery of all documents and instruments necessary and appropriate to modify the Senior Loan Documents substantially in accordance with the provisions thereof. No Member shall be required to make additional Capital Contributions or loans to the Company so that the Company, the Tenants and the Operating Companies can comply with those terms and conditions.

ARTICLE IV.

DISTRIBUTIONS TO MEMBERS

Section 4.1 Distributions of Available Cash from Operations.

Subject to the provisions of the Senior Loan Documents (or any other loan documents entered into in accordance with the provisions of Section 5.1(b)(ii)), the Annual Budget, the Company shall make distributions of Available Cash from Operations quarterly; provided, notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to the Members if such distribution would violate Section 18-607 of the Delaware Act or any other applicable law. Except as provided in Section 4.2, the Company, in any given quarter, may not make any distributions which would cause the amount of working capital to be less than the Threshold Working Capital Amount. If such distribution shall inadvertently be made, the Members agree to immediately return such excess amount distributed to the Company (and such returned excess amount shall not be treated as a Capital Contribution). Distributions of Available Cash From Operations shall be made in the following order of priority:

(a) First, to the Members who have made Member Loans in accordance with Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective unpaid Member Loans until each of them has received cumulative payments pursuant to this Section 4.1(a) equal to all interest due in respect of such Member Loans.

(b) Second, to the Members who have made Member Loans pursuant to Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective Member Loans until each of them has received cumulative payments pursuant to this Section 4.1(b) equal to the outstanding principal amounts of its respective Member Loans.

(c) Third, to the Managing Member, until the Managing Member has achieved a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution (as hereinafter defined) of the Managing Member (the “Managing Member Preferred Return”).

(d) Fourth, to the Non-Managing Member, until the Non-Managing Member has achieved a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of the Non-Managing Member (the “Non-Managing Member Preferred Return”).

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(e) Fifth, until the Managing Member and Non-Managing Members have each achieved a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, to the Members on a pro rata basis in accordance with their respective Membership Percentages.

(f) Thereafter, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five (65%) to Managing Member.

Section 4.2 Distributions of Net Capital Transaction Proceeds.

Distributions of Net Capital Transaction Proceeds shall be made promptly following the Company’s receipt thereof. All such distributions shall be made in the following order of priority:

(a) First, to the Members who have made Member Loans in accordance with Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective unpaid Member Loans until each of them has received cumulative distributions pursuant to Section 4.1(a) and this Section 4.2(a) equal to all interest due in respect of such Member Loans.

(b) Second, to the Members who have made Member Loans pursuant to Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective Member Loans until each of them has received cumulative distributions pursuant to Section 4.2(b) and this Section 4.2(b) equal to the outstanding principal amounts of its respective Member Loans.

(c) Third, to the Managing Member, until the Managing Member has received and achieved the Managing Member Preferred Return.

(d) Fourth, to the Non-Managing Member, until the Non-Managing Member has received and achieved the Non-Managing Member Preferred Return.

(e) Fifth, to the Managing Member, until the Managing Member has been repaid its entire Unreturned Capital Contribution.

(f) Sixth, to the Non-Managing Member, until the Non-Managing Member has been repaid its entire Unreturned Capital Contribution, to the Non-Managing Member.

(g) Seventh, until the Managing Member and Non-Managing Members have each achieved a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, to the Members on a pro rata basis in accordance with their respective Membership Percentages.

(h) Thereafter, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member.

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Section 4.3 Distributions shall be Aggregated with those of Tenant Portfolio

In determining and calculating the cumulative, non-compounding annual returns at any given point of time in connection with Section 4.1 and Section 4.2 herein, the Distributions of Available Cash from Operations and Distributions of Net Capital Transaction Proceeds (as each such term is defined in the Tenant Portfolio Agreement) at such given point of time, to (1) Managing Member under the provisions of this Agreement shall be aggregated with such distributions to Sentio Leah Bay, LLC under the provisions of the Tenant Portfolio Agreement and (ii) to Non-Managing Member under the provisions of this Agreement shall be aggregated with such distributions to Erwin Family Properties I, L.L.C. under the provisions of the Tenant Portfolio Agreement. For purposes hereof, distributions hereunder shall be made in accordance with the order of priority contained in Section 4.1 and Section 4.2 hereof, as applicable, as if such distributions were distributions of additional Available Cash from Operations and Net Capital Transaction Proceeds, as applicable, for the same measurement period pursuant to the Tenant Portfolio Agreement after all distributions of actual Available Cash from Operations and Net Capital Transaction Proceeds have been made pursuant to the Tenant Portfolio Agreement for such measurement period.

Section 4.4 Shortfall in Preferred Return.

For purposes of Sections 4.1 and 4.2 of this Agreement, and Section 1.3 of Exhibit B hereto, if the Company shall fail to achieve the Managing Member Preferred Return and/or the Non-Managing Member Preferred Return in any given year, such shortfall must be made up in future years if and to the extent that the Company then has sufficient Available Cash From Operations or Net Income, as the case may be. However, if, in any given year, the Company achieves a return in excess of the Managing Member Preferred Return and/or the Non-Managing Member Preferred Return, such excess shall not be taken into account for purposes of determining whether or not the Company achieved the Managing Member Preferred Return and the Non-Managing Member Preferred Return in any subsequent year.

Section 4.5 Allocation of Purchase Price.

For purposes of Section 4.2 of this Agreement, and Section 1.3 of Exhibit B hereto, in the case of a sale of all of the Membership Interests of the Company or substantially all of its assets, and the sale of all of the membership interest of Tenant Portfolio or substantially all of its assets, the parties agree the portion of the purchase price allocable to Tenant Portfolio or its assets shall be nominal and that the Company can take whatever actions may be necessary to support that position, including the termination of the Leases.

Section 4.6 Withholding Taxes with Respect to Members.

The Company shall comply with any withholding requirements under federal, state and local law that the Managing Member determines is required, and shall remit any amounts withheld to, and file required forms with, the applicable jurisdictions. All amounts withheld from Company revenues or distributions by or for the Company pursuant to the Code or any provision of any federal, state or local law, and any taxes, fees or assessments levied upon the Company, shall be treated for purposes of this Article 4 as having been distributed (as an advance) to those Members who received a credit for tax or other benefit with respect to the withheld amounts, or whose identity or status caused the withholding obligations, taxes, fees or assessments to be

7

incurred. If the amount withheld exceeded the affected Member’s actual share of cash available for distribution, such Member shall reimburse the Company for such excess withholding or other amounts paid (as described above). Each Member agrees to furnish the Company with such representations, forms, or other information as the Managing Member shall reasonably request to assist it in determining the extent of, and in fulfilling, the Company’s withholding obligations, if any. As soon as practicable after becoming aware that any withholding requirement may apply to a Member, the Managing Member shall advise such Member of such requirement and the anticipated effect thereof. Such Member shall pay or reimburse to the Company all identifiable costs or expenses of the Company caused by or resulting from withholding taxes (including expenses incurred to reduce withholding taxes) with respect to such Member.

Section 4.7 Violation of Law.

Notwithstanding any other provision contained in this Agreement, the Company shall not make a distribution to a Member in respect of its interest in the Company if such distribution would violate the Delaware Act or other applicable law.

Section 4.8 Termination of JEA Manager under JEA Management Agreement.

If any JEA Management Agreement shall terminate by reason of the exercise by any Tenant, as the case may be, of its right to terminate for default by the applicable JEA Manager pursuant to Sections III(A) or III(C) of the Management Agreement attached hereto as Exhibit C, or any substantially similar provisions in any subsequent JEA Management Agreement, then the distributions to Non-Managing Member hereunder in Section 4.1(e) and Section 4.2 (h) shall be automatically redetermined and adjusted to reduce the proportion of such distributions to Non-Managing Member in Sections 4.1(e) and Section 4.2(h) from thirty-five percent (35%) to twenty percent (20%) and increase the proportion of such distributions to Managing Member in Sections 4.1(e) and Section 4.2(h) from sixty-five percent (65%) to eighty percent (80%).

ARTICLE V.

MANAGEMENT OF THE COMPANY

Section 5.1 Authority of Managing Member.

(a) The Managing Member shall have the sole and exclusive authority to manage and implement the policies, operations and affairs of the Company and to make all decisions regarding the major policy decisions and over-all direction of the Company and the Operating Company and their respective businesses, including, without limitation causing the Operating Company to take any action in furtherance thereof; provided, however, that the Managing Member shall not have the authority to make any Major Decisions with respect to the Company or the Operating Company without the prior written consent of Non-Managing Member. (b) Each of the following matters (each a “Major Decision” and collectively, the “Major Decisions”) shall require the prior written approval of the Managing Member and Non-Managing Member:

(i) the sale, refinance or other disposition of all or any material portion of the Company Property or the Property other than the sale or disposition of personal property being replaced in the ordinary course of business;

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(ii) causing or permitting the Company or Operating Company to prepay (in whole or in part), refinance, amend, modify or extend any loan obligation of the Company or any Operating Company or to cause or permit any loan obligation of the Company or any Operating Company to be guaranteed in whole or in part other than pursuant to the Non-Recourse Carveout Guarantees;

(iii) entering into, terminating or causing or permitting the termination of a Management Agreement, except if the same is a JEA Management Agreement, (to avoid all doubt, the Members acknowledge and agree that, if applicable, subject to its terms or as otherwise provided herein, Managing Member may terminate or cause or permit an JEA Management Agreement to be terminated pursuant to Sections III(A) or III(C) without the consent of the Non-Managing Member and the engagement of the initial replacement manager in such event is not a Major Decision, all pursuant to the provisions of Section 5.2 hereof); and

(iv) any merger or consolidation of the Company or material change in use of any of the Properties.

(b) Each of the Managing Member and Non-Managing Member may propose to adopt, modify or revoke a Major Decision at any time. Whenever a Member proposes to adopt, modify or revoke a Major Decision, it shall deliver a written notice (a “Major Decision Notice”) to the other Member (i) describing the proposal in sufficient detail and (ii) containing sufficient information to permit the other Member to make an informed decision on the proposal and shall subsequently provide to the other Member such additional information as the other Member may reasonably request.

(c) The Non-Managing Member acknowledges that neither the acquisition of the Property or the acceptance of an assignment of debt facilitating such acquisition, or any actions of the Company related thereto, constitutes a Major Decision for the purposes of Section 5.1 of this Agreement or otherwise requires the consent of the Non-Managing Member.

Section 5.2 Management Agreements.

The Tenants shall enter into management agreements with property managers with respect to each Property (each, a “Management Agreement”). The Members do not object to and hereby authorize to the extent applicable, Jerry Erwin Associates, Inc., a Washington corporation d/b/a JEA Senior Living (“JEA Manager”) being engaged as property manager of the Properties pursuant to Management Agreements substantially in the from attached hereto and incorporated by reference as Exhibit C. JEA Manager may serve as the property manager for the Properties; subject to the applicable termination provisions of the Management Agreement, as long as the Non-Managing Member is Controlled by the JEA Principals, JEA Manager or an entity Controlled by the JEA Principals. Each of the Management Agreements attached hereto as Exhibit C and any other Management Agreement with JEA Manager is referred to as a “JEA Management Agreement”). In the event that JEA Manager, or any other Affiliate of JEA Manager or the JEA Principals is removed or otherwise ceases to serve as the property manager for the Properties the Managing Member shall choose the replacement property manager in its sole discretion.

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Section 5.3 Limited Reimbursement of Expenses.

The Company shall, or shall cause the Operating Company to reimburse the Members and their respective agents or representatives for all direct, actual, reasonable, verifiable, out-of-pocket incidental costs and expenses incurred by them with Third Parties which are incurred by the Members in connection with the acquisition and financing of the Property and the preparation and negotiation of this Agreement and the documents required hereunder, which shall not exceed $600,000 for Managing Member and $200,000 for Non-Managing Member, or (b) are directly attributable to the business of the Company and/or the Operating Company and are incurred for and on behalf of the Company and/or the Operating Company, in accordance with an Approved Budget. It is expressly understood that the Company shall not be responsible for, or reimburse any of, the salaries or other compensation of such Member’s employees, or any general or administrative overhead of any Member, including, but not limited to, rent. Without waiving the effect of the foregoing provisions, the Members hereby authorize and direct the Company to cause the following to be paid or reimbursed, as costs and expenses of the Company: (i) the fees and costs of the law firms of Foley & Lardner LLP, and DLA Piper and the accounting firm of Deloitte and Touche LLP, which represented the interest of Managing Member in connection with this transaction; (ii) the fees and costs of the law firms of Cherry Petersen Landry Albert LLP and Bryan Cave, which represented the interests of the Non-Managing Member in connection with this transaction.

ARTICLE VI.

STATUS OF MEMBERS; INDEMNIFICATION

Section 6.1 Role of Non-Managing Members.

Except as expressly provided herein, the Non-Managing Member shall not participate in the management or control of the Company’s business, nor shall it transact any business for the Company, but such Member’s consent shall be required whenever this Agreement provides for the consent or approval of all Members or such Member.

Section 6.2 Liability of Members.

Except as otherwise expressly required by law, each Member shall have no personal liability whatsoever, whether to the Company, to the other Members or to the creditors of the Company, for the debts of the Company or any of its losses. The foregoing shall not, however, limit the personal liability of a Member for its obligations to the Company or any Indemnitee under this Agreement or to the Company or any other Person under any other agreement to which such Member may be a party. In no event shall any partner, member, manager, officer, director, stockholder, shareholder or owner of either Member or any affiliate thereof be liable for the obligations of the Members hereunder.

Section 6.3 Bankruptcy of Member.

Notwithstanding any other provision of this Agreement, the Bankruptcy of any Member shall not cause such Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution. In the event of the Bankruptcy of Managing Member, Non-Managing Member shall have the right, but not the obligation, to be Managing Member upon written notice of such election. If Non-Managing Member does not so

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elect to become Managing Member within ninety (90) days after the Bankruptcy of Managing Member, or if Non-Managing Member does elect to become Managing Member and in the event of a Bankruptcy of Non-Managing Member, then the Company may only act with the joint consent of Managing Member and Non-Managing Member.

Section 6.4 Relationship of Members.

Each Member agrees that, to the fullest extent permitted by Section 18-1101 and other provisions of the Delaware Act and except to the extent expressly stated in this Agreement or in any other agreement to which a Member is a party:

(a) Except as expressly provided in this Agreement, no Member shall have any authority to bind or act for, or assume any obligation or responsibility on behalf of, any other Member, the Company or to act as the agent, representative or attorney-in-fact for any other Member.

(b) Except as expressly provided herein, any consent, approval, determination or other action by a Member shall be given or taken in the sole and absolute discretion of that Member in its own best interests and without regard to the best interests of another Member, the Company or the financial, tax or other effect on another Member or the Company. Each Member acknowledges and agrees that (i) to the extent a Member is acting or proposing to act on behalf of the Company, such Member shall be acting in the capacity as a fiduciary of the Company and the other Members (subject to the provisions of Section 6.5) and (ii) to the extent a Member is determining whether to initiate or approve a Major Decision, such Member is entitled to act in a manner deemed by such Member to be in its own best interest.

Section 6.5 Other Activities; Affiliates; Non-Compete.

(a) The Company and the Non-Managing Member expressly acknowledge and agree that Managing Member and Affiliates of Managing Member and other Persons related to Managing Member and Affiliates of Managing Member (collectively the “Managing Member Related Persons”) have direct and/or indirect interests in investing in, owning, operating, transferring, managing, leasing and otherwise using, real property and interests therein for profit, and engaging in any and all activities related or incidental thereto and/or that such Managing Member Related Persons will make other investments consistent with such interests. Except to the extent expressly provided herein or in other agreements among one or more of the parties hereto: (i) neither the Company nor the Non-Managing Member shall have any right by virtue of this Agreement or the Company relationship created hereby in or to any other ventures or activities in which any Managing Member Related Person is involved or to the income or proceeds derived therefrom; (ii) the pursuit of other ventures and activities by any Managing Member Related Person, even if competitive with the business of the Company, is hereby consented to by the Company and the Non-Managing Member and shall not be deemed wrongful or improper under this Agreement; and (iii) no Managing Member Related Person shall be obligated to present any particular investment opportunity to the Company or to the Non-Managing Member, even if such opportunity is of a character which, if presented to the Company, could be taken by the Company.

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(b) Non-Managing Member recognizes and acknowledges that by virtue of accepting membership hereunder, Non-Managing Member will acquire valuable training and knowledge, and learn proprietary trade secrets and confidential information of the Company. In consideration of the foregoing and this Agreement, Non-Managing Member hereby agrees that during the period in which either (i) Non-Managing Member is a Member of the Company and for one (1) year thereafter; or (ii) JEA Manager is managing the Property and for one (1) year thereafter (the “Non-Compete Period”), Non-Managing Member will not, other than within the scope of Non-Managing Member’s membership with the Company, directly or indirectly (whether as employee, manager, owner, member, consultant, independent contractor, partner (limited or general) or otherwise) own, manage, control, participate in, consult with, render services for or in any manner engage in a business which involves the ownership or operation of any facility with licensed Alzheimer’s or Memory Care units within five (5) miles of the Property; nor shall Non-Managing Member knowingly request, induce, solicit or attempt to influence any Company client or Company referral source to curtail any business they are currently or have been transacting with the Company during the Non-Compete Period. Furthermore, during the Non-Compete Period, Non-Managing Member shall not, without the Managing Member’s prior written consent, directly or indirectly, knowingly solicit or encourage or attempt to influence any Company employee, agent or independent contractor to leave the employment of or agent/independent contractor relationship with the Company. Non-Managing Member hereby agrees that the restraint imposed under this Section 6.5 is reasonable and not unduly harsh or oppressive.

Section 6.6 Indemnification.

(a) The Company shall indemnify and hold each Member and its Affiliates, and each of the direct and indirect members, partners, principals, officers, directors, managers and employees of each of the Members and each of their Affiliates (each, an “Indemnitee”), harmless from and against any Losses (including without limitation Losses arising from Recourse Liabilities) suffered or sustained by it by reason of the Recourse Liabilities or by reason of any acts, omissions or alleged acts or omissions by such Indemnitee on behalf of the Company within the scope of authority conferred on it by this Agreement, including, any judgment, award, settlement, reasonable attorneys’ fees and other costs and expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim; provided that no Person shall be entitled to indemnification hereunder to the extent that the Losses incurred by such Person arose out of or were the result of such Person’s fraud, gross negligence or willful misconduct, the failure of such Person to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2), or such Person’s obligations to indemnify any other Person pursuant to the provisions of the Purchase Agreement.

(b) No Indemnitee shall be liable, responsible or accountable in damages or otherwise to the Company or any Member for any action taken or failure to act on behalf of the Company unless such action or omission constituted fraud, gross negligence or willful misconduct or the failure of such Indemnitee to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2). Each Member shall indemnify, protect, defend and hold the Company, each other Member and each such other Member’s related Indemnitees harmless from and against any and all Losses

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suffered or sustained by it by reason of any act or omission constituting fraud, gross negligence or willful misconduct by such Member or any related Indemnitee of such Member or failure of such Member to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2); provided, however, that no Person shall be entitled to indemnification hereunder to the extent that the Losses incurred by such Person arose out of or were the result of such Person’s fraud, gross negligence or willful misconduct or the failure of such Person to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2).

(c) If a claim or assertion of liability is made or asserted by a third party against an Indemnitee that, if prevailed upon by any such third party, would result in such Indemnitee being entitled to indemnification pursuant to this Section 6.56, such Indemnitee will forthwith give to the applicable indemnitor written notice of the claims or assertion of liability and request the indemnitor to defend the same. Failure to so notify the indemnitor will not relieve the indemnitor of any liability that the indemnitor might have to such Indemnitee except to the extent that such failure actually prejudices the indemnitor’s legal position. The indemnitor will have the obligation to defend the Indemnitee against such claim or assertion (if such Indemnitee is entitled to indemnification pursuant to this Section 6.6) and the indemnitor will give written notice to the Indemnitee of acceptance of the defense of such claim and the name of the counsel (who shall be reasonably acceptable to the Indemnitee) selected by the indemnitor to defend such claim. The Indemnitee will be entitled to participate with the indemnitor at the expense of the indemnitor in such defense and also will be entitled at its option (and at the expense of the Company) to employ separate counsel for such defense; provided, however, that if and to the proportionate extent the Indemnitee is found (by a final judgment of a court of competent jurisdiction) not to be entitled to indemnification hereunder, the Indemnitee shall reimburse the indemnitor for such expense). The indemnitor and the Indemnitee will cooperate with each other in the defense of any such action and the relevant records of each will be made available to the other with respect to such defense.

(d) No Indemnitee will be entitled to indemnification under this Section 6.6 if it has entered into any settlement or compromise of any claim giving rise to any indemnifiable loss without the written consent of the indemnitor. If a bona fide settlement offer is made with respect to a claim and the indemnitor desires to accept and agree to such offer, the indemnitor will give written notice to the Indemnitee to that effect (the “Settlement Notice”). If the settlement offer includes a full release of the Indemnitee and the Indemnitee fails to consent to the settlement offer within ten calendar days after receipt of the Settlement Notice, then the Indemnitee will be deemed to have rejected such settlement offer and will be responsible for continuing the defense of such claim and, in such event, the maximum liability of the indemnitor as to such claim will not exceed the amount of such settlement offer plus any and all reasonable costs and expenses paid or incurred by the Indemnitee up to the date of the Settlement Notice and which are otherwise the responsibility of the indemnitor pursuant to this Section. If the settlement offer does not include a full release of the Indemnitee and the Indemnitee fails to consent to the settlement offer, the indemnitor shall continue to remain liable to the Indemnitee to the full extent set forth in this Section 6.6.

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(e) Any indemnification permitted under subsection (a) shall be made only out of the assets of the Company, and no Member shall be obligated to contribute to the capital of, or loan funds to, the Company to enable the Company to provide such indemnification.

(f) The indemnification provided by this Section 6.6 shall be in addition to any other rights to which each Indemnitee may be entitled as a matter of law or otherwise, as to action in the Indemnitee’s capacity as a Managing Member, Member, as a director, officer, employee, constituent partner, shareholder or other Affiliate of a Member and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Indemnitee.

(g) To the extent provided in the Annual Budget, the Company may purchase and maintain insurance on behalf of any one or more Indemnitees. If insurance is obtained for any Indemnitee, it shall be obtained on the same basis for all other Indemnitees who have comparable risks.

(h) In no event may an Indemnitee subject an Affiliate or other related Indemnitee of a Member to personal liability by reason of the indemnification provisions of this Agreement.

(i) The provisions of this Section 6.6 are for the benefit of the Indemnitees and the heirs, successors, assigns, administrators and personal representatives of the Indemnitees and shall not be deemed to create any rights for the benefit of any other Persons. The indemnification obligations under this Section 6.6 shall survive the sale of the Membership Interests by any Member, the sale of the Property by the Company or the dissolution of the Company.

(j) Notwithstanding anything to the contrary contained herein, all indemnification obligations of the Company are fully subordinated to any obligations relative to the Senior Loans or respecting the Properties and such indemnification obligations shall in no event constitute a claim against the Company if cash flow in excess of amounts necessary to pay obligations under the Senior Loans are insufficient to pay such indemnification obligations.

Section 6.7 Right of First Offer

For so long as the Non-Managing Member is a Member of the Company, Managing Member shall have a right of first offer (“ROFO”) to invest or otherwise participate in all joint ventured investments of Non-Managing Member with any Real Estate Investment Trust (REIT) which also involve the ownership or operation of assisted living or memory care facilities (an “Investment Opportunity”). Non-Managing Member shall deliver written notice to Managing Member of any Investment Opportunity, which details the terms and conditions of the Investment Opportunity. Managing Member shall have fifteen (15) Business Days from receipt of such notice to notify the Non-Managing Member of Managing Member’s intent to exercise the ROFO with respect to the Investment Opportunity. Failure to respond to the Non-Managing Member within the fifteen (15) Business Day period referenced in the immediately preceding sentence shall terminate Managing Member’s ROFO with respect to that Investment Opportunity, at which point the Non-Managing Member shall be entitled to offer the Investment Opportunity to any and all third parties on terms and conditions substantially similar to those presented to the Managing Member.

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Notwithstanding Managing Members failure to exercise the ROFO with respect to an Investment Opportunity, in no event shall the Non-Managing Member be entitled to pursue an Investment Opportunity which otherwise violates the non-compete provisions of Section 6.5 of this Agreement.

Notwithstanding the foregoing, Managing Member acknowledges that Non-Managing Member’s obligations under this Section 6.7 shall be subject to its obligations to SHACT Group, LLC, a California limited liability company (“Senior ROFO Party”) existing prior to May 7, 2012 and, with respect thereto and any Investment Opportunities (but only such Investment Opportunities) which must first be presented to Senior ROFO Party, Managing Members’ rights under this Section 6.7 shall only apply to such Investment Opportunities that Senior ROFO Party elects not to participate in. The preceding sentence in no way effects Managing Member’s rights otherwise provided in this Section 6.7 with respect to any Investment Opportunities that are not the subject of Non-Managing Member’s obligations to Senior ROFO Party. The provisions of this Section 6.7 shall not apply following a Change of Control of Managing Member.

ARTICLE VII.

TRANSFER OF MEMBERSHIP INTERESTS

Section 7.1 General.

No Member may Transfer or permit the Transfer of all or any portion of its Membership Interest or any direct interest in such Member without the prior written consent of the other Member, which consent may be withheld at the sole and absolute discretion of such other Member, unless the Transfer is to either a Permitted Managing Member Transferee or a Permitted Non-Managing Member Transferee and unless and until all requirements and conditions stated in this Article, which shall be read and construed as a whole, have been satisfied in full or have been waived by the non-transferring Member. Any Transfer in violation of this Article shall be invalid, ineffective and not enforceable for any purpose. No authorization, consent or waiver applicable to one Transfer shall apply or be deemed to apply to any other Transfer or requested Transfer.

Section 7.2 Permitted Transferees.

(a) A “Permitted Managing Member Transferee” means any Person Controlling, Controlled by or under common Control with Managing Member.

(b) A “Permitted Non-Managing Member Transferee” means any Person Controlling, Controlled by or under common Control with Non-Managing Member.

Section 7.3 Right of First Refusal.

(a) Third Party Offer. Any Member (“Selling Member”) who has received a Bona Fide Offer from a Third Party prospective purchaser (“Qualified Purchaser”), to purchase all (but not less than all) of the Selling Member’s Membership Interest, before selling any of its Membership Interest, shall first offer the sale thereof to the other Member (the “Remaining

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Member”) upon the same terms and conditions stated in such Bona Fide Offer (“Right of First Refusal”). To avoid all doubt, any sale of less than all of the Membership Interest of a Member is subject to the prior written consent of the other Member (which may be withheld at the sole and absolute discretion of such other Member), except to the extent any exception contained in Section 7.2 applies, that is, the Transfer is to either a Permitted Managing Member Transferee or a Permitted Non-Managing Member Transferee. Notwithstanding the foregoing or anything else in this Agreement to the contrary no Member may Transfer or permit the Transfer of all or any portion of its Membership Interest or any direct or indirect interest in such Member while any such Transfer previously initiated by another Member is continuing and have not yet been completed or terminated in accordance with the applicable provisions of this Agreement.

(b) Remaining Member’s Right to Purchase. The Remaining Member shall have the right to purchase all, but not part, of the Membership Interest of the Selling Member. If the Remaining Member does not exercise its right by written notice forwarded no later than thirty (30) days after receipt of such offer, then: a) the Selling Member may sell all (but not less than all) or its Membership Interest to the Qualified Purchaser under the same terms and conditions as are set forth in the original Bona Fide Offer and b) the Qualified Purchaser’s Unreturned Capital Contribution shall be the same as the Unreturned Capital Contribution of the Selling Member immediately before the sale. The sale to the Qualified Purchaser must be consummated within thirty (30) days from the last date on which the Remaining Member had the right to accept the offer to purchase, subject to reasonable extensions (not to exceed ninety (90) days) to (i) obtain an agreement with the holder(s) of any mortgage encumbering the Property and/or any mezzanine loan encumbering the Membership Interest to permit the Qualified Purchaser (and its designees, if applicable) to assume such loan(s), and release the Selling Member (and its designees, if applicable) from all liability with respect to such loan(s) arising from and after the closing with the Qualified Purchaser, and (ii) if applicable, transfer the licenses issued with respect to the facilities operated pursuant to the Leases. Evidence that the sale has been so consummated shall be supplied in writing by the Selling Member and the Qualified Purchaser to the Company and the Remaining Member. If the sale has not been consummated within said thirty (30) day period, as it may be extended, the rights of the Remaining Members to purchase shall again attach to the Membership Interest of the Selling Member and no sale may be made to any purchaser without again complying with the provisions of this Section 7.3 and the remainder of Article 7.

(c) Closing. The purchase referred to in Section 7.3 shall be closed (the “ROFR Closing”) within forty-five (45) days following acceptance by the Remaining Member (the “ROFR Closing Date”), subject to reasonable extensions (not to exceed ninety (90) days) to (i) obtain an agreement with the holder(s) of any mortgage encumbering the Property and/or any mezzanine loan encumbering the Membership Interest to if applicable, to permit the Remaining Member (and its designees, if applicable) to assume such loan(s), release the Selling Member (and its designees, if applicable) from all liability with respect to such loan(s) arising from and after the ROFR Closing Date, and (iii) if applicable, transfer the licenses issued with respect to the facilities operated pursuant to the Leases. The ROFR Closing shall be held at the offices of Foley & Lardner LLP, 111 North Orange Avenue, Suite 1800, Orlando, Florida 32801, at 10:00 a.m. on the ROFR Closing Date, or at such other time or place as parties may agree. At the ROFR Closing: (i) the Selling Member shall deliver (A) an assignment of Membership Interest representing the Membership Interest sold by the Selling Member, subject to no pledge, lien or other encumbrance and (B) any and all other documents that may be reasonably required by the purchaser thereof, and (ii) the Remaining Member shall pay the agreed upon consideration.

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Section 7.4 Effect of Assignment.

(a) In the event of any sale, assignment or transfer permitted hereunder, the Company shall not be dissolved or wound up, but shall continue. No such sale, assignment or transfer shall relieve the assignor from any of its obligations under this Agreement accruing prior to such sale, assignment or transfer. Notwithstanding the foregoing, as a condition to any sale, transfer or assignment by a Member, the transferee or assignee must execute this Agreement (as amended) and agree to be bound by all of its terms and provisions.

(b) Upon the Transfer of its entire Membership Interest in the Company and the admission of such Member’s transferee(s) as a substitute Member pursuant to this Article, a Member shall be deemed to have withdrawn from the Company.

(c) If a Member Transfers less than all of its Membership Interest in the Company or if all or part of the direct or indirect ownership or other interests in a Member are Transferred such Member shall continue to have the sole and exclusive right to approve Major Decisions and to take other actions required or permitted under this Agreement, to the extent such Member had such right prior to the Transfer.

Section 7.5 Substitute Member.

The transferee of a Membership Interest shall be automatically admitted to the Company as a substitute Member, upon its compliance with this Article. Unless a transferee of a Membership Interest is admitted as a substitute Member under this Section 7.5, it shall have none of the powers of a Member hereunder and shall have only such rights of an assignee under the Delaware Act as are consistent with the other terms and provisions of this Agreement.

Section 7.6 Further Requirements.

In addition to the other requirements of this Article, and unless waived or modified in whole or in part by Non-Managing Member (if the transfer is by Managing Member or one of its transferees) or Managing Member (if the transfer is by Non-Managing Member or one of its transferees), no transfer of all or any portion of a Membership Interest may be made unless the following conditions are met:

(a) The delivery to the Company of a fully executed copy of all transfer documents relating to the transfer, including (but without limitation) this Agreement, an instrument of transfer and the agreement in writing of the transferee to (i) be bound by the terms of this Agreement and (ii) pay all costs and expenses of the Company incident to the transfer.

(b) The representation of the transferring Member and the transferee, and the delivery of an opinion of counsel reasonably acceptable to the non-transferring Members, that (i) the transfer will not cause the Company to be treated as an association taxable as a corporation for Federal income tax purposes, (ii) the transfer will not cause the Company to be treated as a “publicly traded Company” within the meaning of Section 7704 of the Code and (iii) the transfer will not violate the Securities Act of 1933, as amended, or any other applicable Federal or state securities laws, rules or regulations.

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Section 7.7 Transfer Taxes.

The transferor of any Membership Interest shall be responsible for the payment of any transfer taxes payable in connection therewith unless the transferee shall otherwise agree.

Section 7.8 Managing Member’s Call Right.

At any time after the third anniversary of the Effective Date of this Agreement, the Managing Member shall have the right and option, but not the obligation, to purchase the Membership Interest from the Non-Managing Member for a sum equal to such amount as would be distributed to the Non-Managing Member pursuant to Section 4.2 if the Property were sold for the Option Price. The “Option Price” shall mean a mutually agreed upon price for the Property, or such other price as may be determined in the manner set forth by this Section 7.8. Managing Member shall exercise the call option by written notice to the Non-Managing Member (the “Call Option”). Thereafter, the Members shall act in a commercially reasonable, good faith manner to complete the repurchase of the Membership Interest within thirty (30) days after receipt of the Call Option by the Non-Managing Member. If, at the end of such thirty (30) days following the date of delivery of the Call Option, all parties are in agreement as to the fair market value of the Property, then the Non-Managing Member shall transfer its Membership Interest to the Managing Member in exchange for the payment in immediately available funds at closing provided in this Section 7.8, utilizing such agreed upon valuation, less actual transaction costs in accordance with the provisions of Section 4.2. If the Members have failed to agree upon the fair market value of the Property, each Member shall have a further ten (10) Business Days in which to hire an appraiser of their choice. If either the Managing Member or the Non-Managing Member fails to appoint their respective appraiser within the ten (10) Business Day period referenced in the immediately preceding sentence, the determination of the appraiser appointed by the other Member (if so appointed within such period) shall be conclusive and binding on the Members. If the appraisers appointed by the Managing Member and the Non-Managing Member are unable to agree upon the fair market value of the Property being valued within thirty (30) days after the appointment of the second of such appraisers, the two appraisers shall appoint a third appraiser. In such case, the average of the determinations of the three appraisers shall be conclusive and binding on the Members, unless the determination of one independent appraiser is disparate from the middle determination by more than twice the amount by which the third determination is disparate from the middle determination, in which case the determination of the most disparate appraiser shall be excluded, and the average of the remaining two determinations shall be conclusive and binding on the Members.

Section 7.9 Corporate Change of Control of Non-Managing Member

In the event of a Corporate Change of Control of Non-Managing Member which occurs without the consent of the Managing Member, the Non-Managing Member shall be deemed to have made an offer to sell of the Non-Managing Member’s Membership Interest immediately prior to the effectuation of the Corporate Change of Control. The purchase price for the Non-Managing Member’s Membership Interest shall be determined in the manner set forth in Section 7.8 hereinabove.

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ARTICLE VIII.

CERTAIN REMEDIES

Section 8.1 No Partition.

Each Member hereby irrevocably waives any and all rights that it may have to maintain any action for partition of the Company Property.

Section 8.2 Litigation Without Termination.

Each Member shall be entitled to maintain, on its own behalf or on behalf of the Company, any action or proceeding against any other Member or the Company (including, without limitation, any action for damages, specific performance or declaratory relief) for or by reason of the breach by such party of this Agreement or any other agreement entered into in connection with this Agreement, notwithstanding the fact that any or all of the parties to such proceeding may then be Members in the Company.

Section 8.3 Attorneys’ Fees.

In the event of any dispute hereunder, or in connection with the execution of this Agreement, or otherwise relating to the relationship of the Members contemplated hereby, the prevailing party in any legal proceeding brought to resolve such dispute shall be entitled to recover from the non-prevailing party in any such proceeding, all of such prevailing party’s reasonable attorneys’ fees and disbursements, at both trial and appellate levels and in any administrative proceeding or bankruptcy proceeding. The provisions of this Section 8.3 shall survive the sale of the Membership Interests by any Member, the sale of the Property by the Company or the dissolution of the Company.

Section 8.4 Cumulative Remedies.

No remedy conferred upon the Company or any Member pursuant to this Agreement is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity or by statute (subject, however, to the limitations expressly herein set forth).

Section 8.5 No Waiver.

No waiver by a Member or the Company of any breach of this Agreement shall be deemed to be a waiver of any other breach of any kind or nature, and no acceptance of payment or performance by a Member or the Company after any such breach shall be deemed to be a waiver of any breach of this Agreement, whether or not such Member or the Company knows of such breach at the time it accepts such payment or performance. Subject to any applicable statutes of limitation and any provisions in this Agreement to the contrary, no failure or delay on the part of a Member or the Company to exercise any right it may have under this Agreement shall prevent the exercise thereof by such Member or the Company, and no such failure or delay shall operate as a waiver of any breach of, or default under, this Agreement.

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ARTICLE IX.

DISSOLUTION OF COMPANY

Section 9.1 Events Giving Rise to Dissolution.

No act, thing, occurrence, event or circumstance shall cause or result in the dissolution of the Company, except that the happening of any one of the following events shall work an immediate dissolution of the Company:

(a) The sale of all or substantially all of the Company Property;

(b) Approval by a majority of the Members to dissolve the Company;

(c) The termination of the legal existence of the last remaining Member of the Company or the occurrence of any other event which terminates the continued membership of the last remaining Member of the Company in the Company unless the Company is continued without dissolution in a manner permitted by this Agreement or the Delaware Act; or

(d) The entry of a decree of judicial dissolution under Section 18-802 of the Delaware Act, provided, however, that to the fullest extent permitted by law, the Members waive the right to seek and shall not seek or acquiesce in the entry of a decree of judicial dissolution.

(e) Failure of the transaction described in the Purchase Agreement to close by July 31, 2012, as such date may be extended by the parties thereto.

Upon the occurrence of any event that causes the last remaining Member of the Company to cease to be a member of the Company, to the fullest extent permitted by law, the personal representative of such Member is hereby authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such Member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute Member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining Member in the Company.

Without limitation on the other provisions hereof, neither the assignment of all or any part of a Membership Interest permitted hereunder nor the admission of a substitute member nor the bankruptcy, insolvency or dissolution of a Member shall, in and of itself, work the dissolution of the Company. Except as otherwise provided in this Agreement, each Member agrees that a Member may not withdraw or resign from or, to the fullest extent permitted by law, cause a voluntary dissolution of the Company.

Notwithstanding any other provision of this Agreement, the Bankruptcy of a Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution.

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Notwithstanding any other provision of this Agreement, each of the Members waives any right it might have to dissolve the Company upon the Bankruptcy of a Member or the occurrence of an event that causes a Member to cease to be a member of the Company.

Section 9.2 Procedure.

(a) Upon the dissolution of the Company, the Managing Member or, if Managing Member or its Affiliate is not the Managing Member, then such Person as the remaining Members or if there are no remaining Members, their personal representatives or other successors, shall select to wind up the Company’s affairs (the Managing Member or such other Person being referred to herein as the “Liquidating Trustee”) shall wind up the affairs of the Company. The Members shall continue to receive allocation of Net Income and Net Losses and distributions of Available Cash from Operations during the period of liquidation of the Company in the same manner and proportion as though the Company had not dissolved. The Liquidating Trustee shall, exercising due and prudent business judgment, determine the time, manner and terms of any sale or sales of Company Property pursuant to such liquidation, having due regard to the activity and condition of the relevant market and general financial and economic conditions.

(b) Following the satisfaction of all debts and liabilities of the Company and all expenses of liquidation (whether by payment or reasonable provision for payment thereof), the proceeds of the liquidation and any other funds of the Company shall be distributed in accordance with Section 4.2.

(c) Each Member shall look solely to the assets of the Company for all distributions that such Member may be entitled to under this Agreement and shall have no recourse therefor (in the event of any deficit in an Member’s Capital Account or otherwise) against any other Member; provided that nothing herein contained shall relieve any Member of such Member’s obligation to pay any liability or indebtedness owing the Company by such Member and any reimbursements required to be made to the Company (including, without limitation, pursuant to Section 4.2) and the Company and the Members shall be entitled at all times to enforce such obligations of such Member. No Member shall have any right to demand or receive property other than cash upon dissolution and termination of the Company.

(d) Notwithstanding any other provision of this Agreement to the contrary, upon liquidation of a Membership Interest (whether or not in connection with a liquidation of the Company), no Member shall have any liability to restore any deficit in its Capital Account. In addition, no allocation to any Member of any loss, whether attributable to depreciation or otherwise, shall create any asset of or obligation to the Company, even if such allocation reduces a Member’s Capital Account or creates or increases a deficit in such Member’s Capital Account; it is also the intent of the Members that no Member shall be obligated to pay any such amount to or for the account of the Company or any creditor of the Company. The obligations of the Members to make contributions pursuant to Article 3 are for the exclusive benefit of the Company and not of any creditor of the Company; and no such creditor is intended as a third party beneficiary of this Agreement nor shall any such creditor have any rights hereunder, including, but without limitation, the right to enforce any Capital Contribution obligations of the Members.

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(e) Upon the completion of the liquidation of the Company and the distribution of all Company assets and if the Certificate of Formation of the Company shall have been cancelled in the manner required by the Delaware Act, the Company shall terminate.

ARTICLE X.

MISCELLANEOUS

Section 10.1 Notices.

All notices, consents or waivers shall be in writing and shall be deemed to have been duly given:

(a) when delivered personally; or

(b) seventy-two (72) hours after being mailed, registered or certified mail, return receipt requested, postage prepaid, to the respective addresses set forth below; or

(c) one (1) Business Day after being delivered to a nationally-recognized overnight courier service, prepaid, marked for next day delivery, addressed to the addressee at its address set forth below; or

(d) on the Business Day of receipt if received during normal business hours and, if received after the close of business, the first Business Day after receipt, if delivered by facsimile transmission to the fax number (if any) of the receiving party listed below, if receipt is confirmed in writing by the sending facsimile machine.

(e) The addresses for notice are:

If to the Company, to its address set forth in Section 1.6 hereof:

If to Managing
Member:	SENTIO LEAH BAY, LLC
	Attn: Scott Larche
	189 S. Orange Ave., Suite 1700
	Orlando, Florida 32801
	Telephone No.: 407.999.7679
	Telecopy No.: 407.999.5210
With a copy to:	Foley & Lardner LLP
	111 North Orange Avenue
	Suite 1800
	Orlando, Florida 32801
	Attention: Michael A. Okaty, Esq.
	Telephone: 407.244.3229
	Facsimile: 407.648.1743

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If to Non-Managing
Member:	12115 NE 99th Street
	Suite 1800
	Vancouver, Washington
	Telephone No.: 800.254.9442
	Telecopy No.: 360.254.1770
With copies to:	Cherry Petersen Landry Albert LLP
	8350 N. Central Exwy., Suite 1500
	Dallas, Texas 75206
	Attention: Terry Landry
	Telephone No.: 214.265.9174
	Telecopy No.: 214.265.7008

Section 10.2 Entire Agreement.

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof, except for the Tenant Portfolio Agreement. This Agreement supersedes any prior agreement or understandings between the parties and/or their Affiliates with respect to the subject matter hereof and shall not amend or modify or in any way affect any other agreement or understanding between the parties hereto that are not related to the subject matter hereof.

Section 10.3 Amendments.

This Agreement may be amended by written agreement of amendment executed by all Members, but not otherwise.

Section 10.4 Governing Law.

This Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to its conflict of law provisions.

Section 10.5 Successors and Assigns.

Except as limited by this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and permitted assigns.

Section 10.6 Interpretation.

The section headings and captions contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. As used herein, the neuter gender shall include the masculine and feminine genders, and vice versa, and the singular, the plural, and vice versa, as the context demands. The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive. References herein to this Agreement shall be deemed to refer to this Agreement as of the date of such Agreement and as it may be amended thereafter, unless otherwise specified. The parties

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hereto agree that this Agreement is the product of negotiation between sophisticated parties, all of whom were represented by counsel, and each of whom had an opportunity to participate in and did participate in the drafting of each provision hereof. In the event any court or other adjudicative body of competent jurisdiction is called upon to interpret this Agreement, the language of this Agreement shall be construed as a whole, according to its fair meaning and intent, and not strictly for or against any party, regardless of which party drafted or was principally responsible for drafting the Agreement or any specific term or condition hereof. The Settlement Agreement has been circulated for editing to all parties. As such, the Agreement shall be deemed to have been drafted by all parties jointly, and no party shall be deemed to have drafted this Agreement, or any of its individual terms or conditions. No party may offer in evidence or otherwise use, for purposes of suggesting any interpretation of this Settlement Agreement, any prior drafts of this Agreement.

Section 10.7 Severability.

If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to other Persons or circumstances, shall not be affected thereby.

Section 10.8 Legal Counsel.

Legal counsel for a Member or one of its Affiliates (“Counsel”) may represent the Company in connection with legal work or issues arising in connection with the Company and/or the Operating Company (each, a “Matter”). Each Member recognizes and acknowledges that any such Counsel will be acting as legal counsel for the Company and/or the Operating Company with respect to each Matter and shall not be acting as the legal counsel of any individual Member. Each Member further recognizes and accepts that its interest with respect to any Matter may be adverse to the interests of the other Members and of the Company and/or the Operating Company. Each Member nevertheless consents to the representation of the Company and/or the Operating Company by such Counsel with respect to each Matter and waives for the benefit of each other Member and of such Counsel any potential or actual conflict of interest between or among such Members and between any such Members and the Company and/or the Operating Company. Each Member acknowledges that in the event of any future dispute or litigation between or among the Members and/or between any of the Members and the Company and/or the Operating Company, the Counsel may continue to represent its Member client, notwithstanding any such dispute and its prior representation of the Company and/or the Operating Company.

Section 10.9 Advice from Independent Counsel/Voluntary Agreement.

Notwithstanding the provisions of Section 10.8, the Members represent and warrant that (a) each of them is represented by legal and tax counsel of its choice, (b) each of them has consulted with such counsel regarding this Agreement, (c) each of them is fully aware of the meaning and the tax and other consequences of the provisions contained herein, (d) each of them has not relied in any way on any representation or other statement made by any other Member or its legal or tax counsel or by any other Person and (e) each of them has entered into this Agreement voluntarily and without coercion or duress of any kind.

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Section 10.10 Counterparts.

This Agreement may be executed in any number of counterparts, and/or by facsimile and/or by electronic mail, each of which counterpart shall be deemed to be an original and all such counterparts taken together shall be deemed to constitute one and the same instrument. The signatories hereto confirm that any facsimile or electronic copy of another signatory’s executed counterpart of this Agreement (or its signature page) will be deemed to be an executed original.

Section 10.11 Benefits of Agreement; No Third-Party Rights.

None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of a Member, and nothing in this Agreement shall be deemed to create any right in any Person not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person, provided, however, that the Indemnitees and their respective successors and assigns are intended third-party beneficiaries of this applicable indemnification provisions set forth in this Agreement.

Section 10.12 WAIVER OF JURY TRIAL.

EACH MEMBER AND THE COMPANY HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE MEMBERS AND THE COMPANY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. THE MEMBERS AND THE COMPANY ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.

Section 10.13 Special Purpose Provisions.

(a) Notwithstanding anything to the contrary set forth herein, the Company and the Members hereby agree that at all times:

(i) The Company shall not own any asset or property other than (A) the membership interests in each of the Operating Companies and (B) incidental personal property necessary for the ownership of such interests. The Company shall not allow the Operating Company to own any asset or property other than (x) the Property and (y) incidental personal property (including intangible personal property) necessary for the ownership or operation of the Property.

(ii) The Company shall not allow the Operating Company to engage in any business other than as stated in Section 2 of each of the Operating Companies LLC Agreement. The Company will not engage in any business other than as stated in Section 1.4.

(iii) The Company will maintain, and the Company shall cause the Operating Company to maintain, an arms-length relationship with their Affiliates,

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constituent parties and any other Persons furnishing services to them, and the Company will not enter, nor shall the Company allow the Operating Company to enter, into any contract or agreement or engage in any material transaction (as transferor or transferee) with any Affiliate of each of the Operating Companies or the Company or any constituent party of each of the Operating Companies or the Company, except for fair value and upon terms and conditions that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arms-length basis with third parties other than any such party. The Company will not engage, nor shall the Company allow the Operating Company to engage, in any transaction with any Affiliate of the Company, the Operating Company, any constituent party of the Company, any guarantors of the obligations of the Company or the Operating Company or any Affiliate of any constituent party, owner or guarantor (individually, a “Related Party” and collectively the “Related Parties”) involving any intent to hinder, delay or defraud any Person.

(iv) The Company will be, and the Company shall cause the Operating Company to be, and at all times hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate or any constituent party thereof) except that the Operating Company shall be treated as a disregarded entity for federal, and to the extent applicable, state and local income tax purposes only.

The Members acknowledge that this Section 10.13 may be modified to include additional special purpose provisions if such provisions are required by a third party lender with respect to a transaction involving the Company.

Section 10.14 Patriot Act Representation. Each Member hereby represents and warrants that on the date hereof and throughout the term of this Agreement (a) none of the funds or other assets or any Member, or any principal of any of them, constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. Law, including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq., the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001 (Public Law 107-56), the Trading with the Enemy Act, 50 U.S.C. App 1 et seq., and any Executive Orders or regulation promulgated under any such legislation with the result that the investment in the Company is prohibited by law or is in violation of law (any such person, entity or government being referred to herein as an “Embargoes Person”), and (b) none of the funds of any Member or any such principal, as applicable have been derived from any unlawfully activity with the result that the investment in the Company or in any principal, as applicable, whether directly or indirectly, is prohibited by law or is in violation of law.

Section 10.15 OFAC Compliance and Source of Funds. Each Member represents and warrants that such Member is not now nor shall it be at any time hereafter an individual, corporation, partnership, joint venture, association, joint stock company, trust, trustee, estate, limited liability company, unincorporated organization, real estate investment trust, government or any agency or political subdivision thereof, or any other form of entity with whom a United States citizen, entity organized under the laws of the United States or its territories or entity

26

having its principal place of business within the United States or any of its territories (collectively, a “U.S. Person”), is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under United States law, regulation, executive orders and lists published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”) (including those executive orders and lists published by OFAC with respect to Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC “Specially Designated Nationals and Blocked Persons”) or otherwise. Neither Member nor any Person who owns an interest in Member (collectively, a “Purchaser Party”) is now nor shall be at any time hereafter a Person with whom a U.S. Person, including a “financial institution” as defined in 31 U.S.C. § 5312(a)(2) (“Financial Institution”), is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under United States law, regulation, executive orders and lists published by the OFAC (including those executive orders and lists published by OFAC with respect to Specially Designated Nationals and Blocked Persons) or otherwise.

(b) Member’s Funds. Each Member represents and warrants that such Member has taken, and shall continue to take hereafter, such measures as are required by law to assure that the funds used to pay to the Company the Capital Contribution are derived from: (i) transactions that do not violate United States law nor, to the extent such funds originate outside the United States, do not violate the laws of the jurisdiction in which they originated; and (ii) permissible sources under United States law and to the extent such funds originate outside the United States, under the laws of the jurisdiction in which they originated.

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(c) Anti-Money Laundering Laws. Each Member represents and warrants that to the best of such Member’s knowledge after making due inquiry, neither Member nor any Purchaser Party, nor any Person providing funds to Member: (i) is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti Money Laundering Laws (as hereinafter defined in this Section 10.15(c)); (ii) has been assessed civil or criminal penalties under any Anti-Money Laundering Laws; or (iii) has had any of its funds seized or forfeited in any action under any Anti Money Laundering Laws. For purposes of this Subsection (i), the term “Anti-Money Laundering Laws” shall mean laws, regulations and sanctions, state and federal, criminal and civil, that: (w) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (x) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States; (y) require identification and documentation of the parties with whom a Financial Institution conducts business; or (z) are designed to disrupt the flow of funds to terrorist organizations. Such laws, regulations and sanctions shall be deemed to include the USA PATRIOT Act of 2001, Pub. L. No. 107-56 (the “Patriot Act”), the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq., the Trading with the Enemy Act, 50 U.S.C. App. §§ 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., and the sanction regulations promulgated pursuant thereto by the OFAC, as well as laws relating to prevention and detection of money laundering in 18 U.S.C. §§ 1956 and 1957.

Section 10.16 Plans & Specifications for Facilities. Managing Member acknowledges that the plans and specifications for the building prototype of the Facilities (the “Plans”) are protected by copyright owned by JEA Manager, and that except as expressly provided in this Section 10.16, no rights to use the Plans are being conferred to the Managing Member by this Agreement. Managing Member (for itself and its affiliates) agrees that except in connection with the ownership of (i) the Properties and (ii) any future property jointly developed and/or acquired by the Members, it will not construct any improvements utilizing the Plans unless agreed in writing by JEA Manager, which shall be subject to JEA Manager’s sole and absolute discretion.

ARTICLE XI.

BOOKS AND RECORDS

Section 11.1 Books and Records; Periodic Reporting.

(a) The Managing Member shall maintain at the principal place of business of the Company separate books of account for the Company that shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received, and all income derived in connection with the conduct of the Company and the operation of its business in accordance with modified accrual based income tax accounting consistently applied.

(b) Except as provided in Section 4.2, the Company’s federal and state income and other tax returns shall be prepared at the expense of the Company. All tax returns shall be signed on behalf of the Company and filed by the Managing Member and prepared in accordance with Section 2.1 of Exhibit B. At least ten (10) days prior to the due date, as the same may be extended, of each such Company tax return, the Managing Member shall transmit copies thereof

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to the Members for their review. In addition, as soon as reasonably possible each year, the Managing Member shall furnish each Member with such information as may be needed to enable such Member to file its federal income tax return and any required state income tax return. The cost of all such reporting shall be paid by the Company as a Company expense.

Section 11.2 Right to Inspection; Delivery of Information.

The Members shall have the right at all reasonable times, during their respective periods of membership in the Company, upon reasonable notice to examine and copy at the expense of the Company, the books and records of the Company.

Section 11.3 Notices of Default or Litigation.

In addition to the foregoing, any Member receiving any of the following notices or information (a “Receiving Member”) Managing Member shall promptly provide the other Member; provided, however, that Manager Member is not required to provide any such information which Non-Managing Member is already aware of in its capacity as JEA Manager.

(a) written notice of any litigation, arbitration, or other proceeding or governmental investigation (including any survey results or inspection reports from any governmental authority) pending or, to Receiving Member’s knowledge, threatened against or relating to the Company, the Operating Company, the Property or the Receiving Member (other than any litigation, arbitration or other proceeding concerning any bankruptcy or default by a tenant); provided, that with respect to any such litigation, arbitration or other proceeding relating solely to a monetary claim of less than $10,000.00, Receiving Member shall not be required to provide notice (written or otherwise) of such claim in accordance with the terms of this clause;

(b) a copy of all notices of default and violations of laws, regulations, codes, ordinances and the like received by the Company or Receiving Member relating to (i) the Company, (ii) the Operating Company, (iii) any Member, or (iv) the Property;

(c) a copy of all notices of default or any other correspondence sent by the Company to, or received by the Company from, the (i) Manager under the Management Agreement or the (ii) Senior Lender.

ARTICLE XII.

RIGHTS AND OBLIGATIONS OF MANAGING MEMBER

Section 12.1 Rights and Obligations of Managing Member.

The Managing Member shall have full, exclusive, and complete discretion, power, and authority, subject in all cases to the other provisions of this Agreement and the requirements of applicable law, to manage, control, administer, and operate the business and affairs of the Company for the purposes herein stated, and shall have the power to perform, or cause to be performed, among others, all of the following:

(a) operate, maintain and manage the Company Property in a manner necessary and appropriate for the accomplishment of the purposes of the Company;

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(b) cause the Operating Company to enter into any necessary and appropriate agreements and contracts deemed necessary and appropriate in connection with the management, maintenance and operation of the Property;

(c) as a fiduciary for the Company, hold and distribute funds to the Members by way of cash, income and return of capital, or otherwise, in accordance with the provisions of this Agreement;

(d) contract on behalf of the Company and/or the Operating Company for the engagement of independent contractors and supervise such contractors in connection with the rendering of services to the Company and/or the Operating Company;

(e) obtain insurance policies for that the Property and potential liabilities and risks of the Company in appropriate amounts (subject to availability at commercially reasonable rates);

(f) prepare and adopt the annual budgets for the Company and the Operating Companies;

(g) The Members stipulate and agree that Managing Member has used reasonable commercial efforts to perform its obligations under this Section 12.1 with respect to the management and operation of the Company if and to the extent and during the applicable time periods that such management and operational matters are within the purview of the obligations of a JEA Manager pursuant to an applicable JEA Management Agreement.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement, as of the date first set forth above.

SENTIO LEAH BAY, LLC,
a Delaware limited liability company
By:	Sentio Healthcare Properties, Inc., a
	Maryland corporation, its Manager
	By:
		John Mark Ramsey, CEO

[SIGNATURE OF ERWIN FAMILY PROPERTIES I, L.L.C. ON THE FOLLOWING PAGE]

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement, as of the date first set forth above.

ERWIN FAMILY PROPERTIES I, L.L.C.,
a Washington limited liability company
By:
	, Manager

[JOINDER BY MEMBERS OF TENANT PORTFOLIO ON THE FOLLOWING PAGE]

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JOINDER

BY MEMBERS IN

SENTIO LEAH BAY TRS PORTFOLIO, LLC,

a Delaware limited liability company

The undersigned being the sole members in Sentio Leah Bay TRS Portfolio, LLC, a Delaware limited liability company, do hereby join in the execution of this Agreement to confirm their agreement that (i) as to Sentio Leah Bay TRS, LLC, the entire Membership Interest of Managing Member in the Company shall be included with the entire membership interest of Sentio Leah Bay TRS, LLC in Tenant Portfolio, and (ii) as to Erwin Family Properties I, LLC, the entire Membership Interest of Non-Managing Member in the Company shall be included with the entire membership interest of Erwin Family Properties I, LLC, in Tenant Portfolio, as to each of subclauses (i) and (ii), both under the under the provisions of Article 7 of this Agreement.

SENTIO LEAH BAY TRS, LLC, a Delaware limited liability company
By:	Sentio Healthcare Properties, Inc., a
	Maryland corporation, its Manager
	By:
		John Mark Ramsey, CEO

[SIGNATURE PAGE OF ERWIN FAMILY PROPERTIES I, L.L.C. OF JOINDER BY MEMBERS

OF TENANT PORTFOLIO ON THE FOLLOWING PAGE]

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ERWIN FAMILY PROPERTIES I, L.L.C.
a Washington limited liability company
By:
	, Manager

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EXHIBIT A

DEFINITIONS

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is Controlled by or is under common Control with such Person or of an Affiliate of such Person.

“Agreement” shall mean this limited liability company agreement, as amended, modified or supplemented from time to time in accordance with its terms together with the Exhibits attached hereto.

“Anti-Money Laundering Laws” shall have the meaning set forth in Section 10.15(c).

“Assumption and Release Agreements” shall mean those certain assumption and release agreements between Senior Lender and Operating Companies.

“Available Cash from Operations” shall mean all cash funds of the Company on hand from time to time after reduction for (a) all Company Costs and Expenses that are due and payable as of such date, (b) the Threshold Working Capital Amount and (c) the Capital Expenditure Threshold.

“Bankruptcy” shall mean, with respect to any Person, if such Person: (a) makes an assignment for the benefit of creditors; (b) files a voluntary petition in bankruptcy, (c) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings; (d) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation; (e) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature; (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties; or (f) if one hundred twenty (120) days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the Delaware Act.

“Bona Fide Offer” means a written offer by a Qualified Purchaser to buy the entire Membership Interest of a Member accompanied by a cash deposit of a sum not less than five percent (5%) of the total proposed purchase price.

“Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the United States shall not be regarded as a Business Day.

“Call Option” shall have the meaning set forth in Section 7.8.

A-1

“Capital Account” shall mean, with respect to each Member, the account established and maintained for the Member on the books of the Company in compliance with Treasury Regulation §§1.704-1(b)(2)(iv) and 1.704-2, as amended. This definition shall be interpreted and applied in a manner consistent with such Treasury Regulations. Subject to the preceding sentence, each Member’s Capital Account will initially equal the amount of cash and fair market value of property contributed (as of the date of such contribution, net of liabilities that the Company is considered to assume or take subject to under Code Section 752) by such Member to the Company and throughout the term of the Company will be (a) increased by the amount of (1) income and gains allocated to such Member and (2) the amount of any cash and the fair market value of any property subsequently contributed by such Member to the Company (as of the date of such contribution, net of liabilities that the Company is considered to assume or take subject to under Code Section 752), and (b) decreased by the amount of (1) losses and deductions allocated to such Member and (2) the amount of distributions of cash and the fair market value of distributions of property (as of the date of such distribution, net of liabilities that the Member is considered to assume or take subject to under Code Section 752) distributed to such Member.

“Capital Contributions” shall mean the capital contributions of the Members required or permitted under Section 3.1 or 3.2.

“Capital Expenditure” shall mean any expenditure(s) for assets having a useful life in excess of one (1) year.

“Capital Expenditures Threshold” shall mean the greater of (i) Capital Expenditures reflected in the Approved Budget or (ii) SEVEN HUNDRED FIFTY DOLLARS ($750) per residential unit contained within each Property (currently $114,000).

“Code” means the Internal Revenue Code of 1986, as amended from time to time (or any succeeding law).

“Commissioner” means the Commissioner of the Internal Revenue Service of the United States of America.

“Company” shall mean Sentio Leah Bay Portfolio, LLC, a Delaware limited liability company.

“Company Costs and Expenses” shall mean all of the permitted expenditures of any kind made or to be made with respect to the direct or indirect operations of the Company and/or the Operating Company, including, without limitation, all required debt service payments, all amounts payable pursuant to any management, leasing or other agreement relating to the Property, costs of improvements to be made with respect to the Property, ad valorem taxes, federal, state and local taxes, assessment and school fees, insurance premiums, repair and maintenance costs, engineering fees, advertising and other marketing expenses, professional fees, utilities costs, overhead, costs, general and administrative costs of each of the Operating Companies and the Company and all other types of permitted costs, expenses, charges, liabilities and obligations of the Company and/or the Operating Company, as limited herein.

“Company Minimum Gain” has the same meaning as “partnership minimum gain” set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

A-2

“Company Property” shall mean the Property and all other property of whatever kind or nature owned by the Company from time to time.

“Contributing Member” shall have the meaning set forth in Section 3.2(b).

“Control” when used with respect to any specified Person, as such or in any related meaning, shall mean the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, membership or partnership interests, by contract or otherwise.

“Corporate Change of Control” means, with respect to a Member, (i) any transaction or series of related transactions (including without limitation any merger or consolidation) as a result of which the person(s) or entity(ies) that directly or indirectly through one or more intermediaries has a majority of the membership, ownership or control rights in the Member immediately prior to such transaction ceases to have a majority of the membership, ownership or control rights in the Member immediately subsequent to such transaction; (ii) any reorganization or restructuring of a Member involving fifty percent (50%) or more of the ownership or membership interests in the Member; (iii) any sale of all or substantially all of the assets of the Member; (iv) any redemption or sale of fifty percent (50%) or more of the ownership interests in the Member, including the issuance of warrants, options or other rights to acquire such interests; (v) issuance of ownership interests in the Member or any convertible debt security or debt security issued together with warrants or options, or any sale, conveyance or other disposition of any other form of securities in the other Member that, in combination, when issued or exercised would affect the ownership of fifty percent (50%) or more of the ownership interests in the Member; or (vi) any of the transactions described in subsection (ii)-(v) above with respect to any entity that owns or controls more than fifty-one percent (51%) of the membership, ownership or control interests in the Member, without the prior written consent of the other Member. For purposes hereof, “control” (or other similar variations thereof) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Member, whether through membership, ownership of voting securities, by contract or otherwise.

“Counsel” shall have the meaning set forth in Section 10.8.

“Delaware Act” shall have the meaning set forth in the Explanatory Statement.

“Effective Date” shall have the meaning set forth in the Preamble.

“Embargoes Person” shall have the meaning set forth in Section 10.14.

“Financial Institution” shall have the meaning set forth in Section 10.15(a).

“Fiscal Year” shall mean the 12-month period ending December 31 of each year; the first Fiscal Year shall begin on the date of this Agreement and the last Fiscal Year shall be the period beginning on January 1 of the calendar year in which the final liquidation and termination of the Company is completed and ending on the date such final liquidation and termination is completed. To the extent any computation or other provision hereof provides for action to be taken on a Fiscal Year basis, an appropriate proration or other adjustment shall be made in respect of the initial and final Fiscal Years to reflect that such periods are less than full calendar year periods.

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“Formation Date” shall have the meaning set forth in Section 1.1.

“Indemnitee” shall have the meaning set forth in Section 6.6(a).

“Interests” shall mean the interests of the Company in and to the Operating Company.

“Investment Opportunity” shall have the meaning set forth in Section 6.7.

“JEA Principal” shall mean Gerald Erwin or Cody Erwin, as the context may require.

“Leases” shall mean those certain Lease Agreements dated as of even date herewith between each Operating Company and each Tenant with respect to the Properties, as all of the same may be modified, amended, restated or consolidated from time to time.

“Lien” shall mean any mortgage, deed of trust, pledge, lien, encumbrance, charge or security interest, other than liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings.

“Liquidating Trustee” shall have the meaning set forth in Section 9.2(a).

“Losses” shall mean the dollar amounts of all costs, claims, suits, actions, losses, liabilities, obligations, reasonable fees and expenses of any kind or nature, including costs and expenses of accountants, attorneys and other professionals, judgments, fines, penalties, settlements and all other costs and expenses of any nature or type actually paid or incurred by a specified Person; provided, however, that Losses shall not include lost profits or consequential or punitive damages.

“Major Decision Notice” shall have the meaning set forth in Section 5.1(c).

“Major Decision(s)” shall have the meaning set forth in Section 5.1(b).

“Management Agreement” shall have the meaning set forth in Section 5.2.

“Managing Member Related Persons” shall have the meaning set forth in Section 6.5.

“Matter” shall have the meaning set forth in Section 10.8.

“Member(s)” shall mean Managing Member and Non-Managing Member and their permitted successors and assigns in its or their capacities as Members in the Company.

“Member Loan” shall have the meaning set forth in Section 3.2(b).

“Membership Interest” shall mean the interest of a Member in the Company, including, without limitation, such Member’s right (a) to allocations of items of income, gain, loss, deduction, and credit of the Company as set forth in Exhibit B hereto; (b) to a distributive share of the assets of the Company as set forth in Articles 4 and 9; and (c) to participate in the management and operation of the Company in accordance with this Agreement.

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“Membership Percentage” shall mean, for Non-Managing Member, 20% and for Managing Member, 80%.

“Net Capital Transaction Proceeds” shall mean the proceeds from (a) any financing or refinancing of the Property or any part thereof and (b) any sale, disposition, taking or loss of any direct or indirect interest in the Property or any part thereof, or all of the Membership Interests (but not part thereof) or any other interest therein, less payment of all costs and other expenses related thereto, any amounts expended to repair or replace any part of the Property taken or destroyed, all Company Costs and Expenses and all other obligations of the Company and/or the Operating Company then due. Without limiting the generality of the foregoing, proceeds shall include but not be limited to the proceeds from any eminent domain proceeding or conveyance in lieu thereof or from title insurance or casualty insurance, other than rental income insurance.

“Net Income” and “Net Losses” mean the income or losses of the Company as determined in accordance with the method of accounting followed by the Company for federal income tax purposes, including for all purposes: (1) any income exempt from tax; (2) any expenditures of the Company which are described in Code Section 705(a)(2)(B) or are treated as Code Section 705(a)(2)(B) expenditures under Treasury Regulation § 1.704-1(b)(2)(iv)(i); and (3) any adjustments to the book value of any Company asset pursuant to the Treasury Regulations; provided, however, if any property is carried on the books of the Company at a value that differs from that property’s adjusted basis for tax purposes, then any gain, loss, depreciation and amortization with respect to such property shall be computed with reference to the book value of such property, consistently with the requirement of Treasury Regulation § 1.704-1(b)(2)(iv)(g).

“Non-Compete Period” shall have the meaning set forth in Section 6.5(b).

“Non-Contributing Member” shall have the meaning set forth in Section 3.2(b).

“Non-Recourse Carveout Guarantees” shall refer to the guarantees referred to in the Assumption and Release Agreements.

“OFAC” shall have the meaning set forth in Section 10.15(a).

“Operating Company” shall mean Amber Glen Landlord, LLC, Mill Creek Landlord, LLC, Sugar Creek Landlord, LLC and Hudson Creek Landlord, LLC, each a Delaware limited liability company and the one hundred percent (100%) fee owner of the Urbana Property, Springfield Property, Normal Property and Bryan Property, respectively, as the context may require.

“Operating Company Available Cash” shall mean all cash funds of each of the Operating Companies on hand from time to time after: (a) payment of all Company Costs and Expenses (relating to the Operating Company) that are due and payable as of such date; and (b) provision for the payment of all Company Costs and Expenses that the Operating Company is obligated to pay within ninety (90) days of such date, but in all instances, the Operating Companies shall not make any distributions which would cause the amount of working capital for the applicable Operating Company to be less than the Threshold Working Capital Amount for such entity.

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“Option Price” shall have the meaning set forth in Section 7.8.

“Patriot Act” shall have the meaning set forth in Section 10.15(c)

“Person” shall mean an individual, corporation, partnership, limited liability company, trust, estate, unincorporated organization, association or other legally recognized entity.

“Permitted Managing Member Transferee” shall have the meaning set forth in Section 7.2(a).

“Permitted Non-Managing Member Transferee” shall have the meaning set forth in Section 7.2(b).

“Property” shall mean that certain land and improvements communities known as the “Urbana Property”, the “Springfield Property”, the “Normal Property”, and the “Bryan Property”, as the context may require.

“Purchaser Party” shall have the meaning set forth in Section 10.15(a).

“Qualified Purchaser” shall have the meaning set forth in Section 7.3(a) hereof.

“Recourse Liabilities” means any obligation, guaranty or indemnity by a Member under any loan to the Company or any Operating Company.

“Related Party” and “Related Parties” shall have the meaning set forth in Section 10.13(a)(iii).

“Remaining Member” shall have the meaning set forth in Section 7.3(a).

“Right of First Refusal” shall have the meaning set forth in Section 7.3(a) hereof.

“ROFO” shall have the meaning set forth in Section 6.7 hereof.

“ROFR Closing” shall have the meaning set forth in Section 7.3(c).

“ROFR Closing Date” shall have the meaning set forth in Section 7.3(c).

“Selling Member” shall have the meaning set forth in Section 7.3(a) hereof.

“Senior Lender” shall mean Fannie Mae as assignee of Red Mortgage Capital, Inc.

“Senior Loans” shall mean those certain loans from Senior Lender to Operating Companies as referred to in the Assumption and Release Agreements.

“Senior Loan Documents” shall mean those documents described in Exhibit B of the Assumption and Release Agreements, the Subordination, Assignment and Security Agreements and any other agreements, documents or certificates executed by the Operating Companies or other Persons in connection the foregoing, as all of the same are modified substantially in accordance with the provisions of the Senior Loan Terms, and as all of the same may be further modified, amended, restated or consolidated with the written consent of the Members from time to time.

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“Sentio Principal” shall mean Sentio Healthcare Properties, Inc., a Maryland corporation

“Settlement Notice” shall have the meaning set forth in Section 6.6(d) hereof.

“Specially Designated Nationals and Blocked Persons” shall have the meaning set forth in Section 10.15(a).

“Subordination, Assignment and Security Agreements” shall mean those certain subordination, assignment and security agreements between the Operating Companies, Senior Lender, JEA Manager and Tenants.

“Tenant” shall mean shall mean Amber Glen TRS, LLC, Mill Creek TRS, LLC, Sugar Creek TRS, LLC and Hudson Creek TRS, LLC, each a Delaware limited liability company and the tenant under the respective Lease of the Urbana Property, Springfield Property, Normal Property and Bryan Property, respectively, as the context may require.

“Tenant Portfolio” shall mean Sentio Leah Bay TRS Portfolio, LLC, a Delaware limited liability company and the owner of a one hundred percent (100%) membership interest in the Tenants.

“Tenant Portfolio Agreement” shall mean shall mean the limited liability company agreement of Tenant Portfolio, as amended, modified or supplemented from time to time in accordance with its terms together with the Exhibits attached hereto.

“Term” shall have the meaning set forth in Section 1.3.

“Senior Loan Terms” shall have the meaning set forth in Section 3.4.

“Third Party” shall mean any Person that is not a Member or an Affiliate of a Member.

“Threshold Working Capital Amount” shall mean, at the time any distribution is contemplated (but not less often than quarterly), without duplication of any required minimum working capital requirements as set forth in the Tenant Portfolio Agreement, the aggregate amount of Thirty Thousand Dollars ($30,000) for each Operating Company.

“Transfer” and related usages of that term shall mean any sale, transfer, assignment, pledge, hypothecation or other disposal of all or any part of a Membership Interest (including economic interests) or any direct or indirect ownership interest in a Member in any manner, whether directly or indirectly by Transfer of all or a portion of any type of equity, profits, distribution or other ownership interest, and shall include the ability to approve or have any right to vote on, consent to or veto any decision or matter set forth in this Agreement and a right to receive any share or portion of payments of dividends, distributions or profits.

“Treasury Regulations” or “Regulations” shall mean the regulations promulgated under the Code, as such regulations are in effect from time to time.

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“Unreturned Capital Contribution” shall mean, as calculated and determined with respect to each Member, the initial capital contribution of such Member, increased by additional Capital Contributions and only reduced by any distributions of capital pursuant to Sections 4.2(e) and (f) hereof. As of the date hereof, the amount of the Unreturned Capital Contribution of Managing Member is $392,000 and the amount of the Unreturned Capital Contribution of Non-Managing Member is $98,000.

“U.S. Person” shall have the meaning set forth in Section 10.15(a).

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EXHIBIT B

CERTAIN TAX AND ACCOUNTING MATTERS

ARTICLE I

ALLOCATION OF INCOME AND LOSSES

Section 1.1 Capital Account. Capital Account shall have the meaning set forth in Exhibit A to this Agreement.

Section 1.2 Capital Account Adjustments for Revaluations. Whenever the Company would be permitted to adjust the Capital Accounts of the Members pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(f) to reflect revaluations of Company Property, the Company may so adjust the Capital Accounts of the Members. In the event that the Capital Accounts of the Members are adjusted pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(f) to reflect revaluations of Company Property (a) the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulation §1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain or loss, as computed for book purposes, with respect to such property, (b) the Members’ distributive shares of depreciation, depletion, amortization and gain or loss, as computed for tax purposes, with respect to such property shall be determined so as to take account of the variation between the adjusted tax basis and book value of such property in accordance with Code Section 704(c), and (c) the amount of upward and/or downward adjustments to the book value of any Company Property shall be treated as income, gain, deduction and/or loss for purposes of applying the allocation provisions of this Exhibit. Consistent with the requirements of Code Section 704(c) and the preceding sentence, the Company hereby adopts and shall use the “traditional allocation method” pursuant to Regulation Section 1.704-(3)(b) with no “curative allocations” to offset the effects of the “ceiling rule.” In the event that Code Section 704(c) applies to any Company Property, the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulation §1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain and loss, as computed for book purposes, with respect to such Company Property.

Section 1.3 Allocations of Net Income and Net Losses.

(a) Allocation of Net Income. After giving effect to Section 1.5 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Income shall be allocated as follows:

(1) First, to the Members who have previously been allocated Net Losses pursuant to Section 1.5(f)(3) of this Exhibit in the reverse order (as to the periods in which such Net Losses were allocated) and in the same ratio of such Net Losses so allocated, until the aggregate Net Income allocated to each such Member pursuant to this Section 1.3(a)(1) is equal to the aggregate Net Losses allocated to that Member pursuant to said Section 1.5(f)(3);

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(2) Second, to the Members who have previously been allocated Net Losses pursuant to Section 1.5(f)(2) of this Exhibit in the reverse order (as to the periods in which such Net Losses were allocated) and in the same ratio of such Net Losses so allocated, until the aggregate Net Income allocated to each such Member pursuant to this Section 1.3(a)(2) is equal to the aggregate Net Losses allocated to that Member pursuant to said Section 1.5(f)(2);

(3) Third, to the Members who have previously been allocated Net Losses pursuant to Section 1.3(b)(5) of this Exhibit in the reverse order (as to the periods in which such Net Losses were allocated) and in the same ratio of Net Losses so allocated, until the aggregate Net Income allocated to each such Member pursuant to this Section 1.3(a)(3) is equal to the aggregate Net Losses allocated to that Member pursuant to said Section 1.3(b)(5);

(4) Fourth, to the Managing Member until the aggregate Net Income allocated to the Managing Member pursuant to this Section 1.3(a)(4) equals the (i) sum of (A) the amount of distributions for the current and all prior Fiscal Years to the Managing Member pursuant to Section 4.1(c), (B) the additional amount that currently would be required to be distributed to the Managing Member pursuant to Section 4.1(c) of the Agreement to provide the Managing Member with the Managing Member Preferred Return and (C) the aggregate amount of Net Losses allocated to the Managing Member pursuant to Section 1.3(b)(4) of this Exhibit;

(5) Fifth, to the Non-Managing Member until the aggregate Net Income allocated to the Non-Managing Member pursuant to this Section 1.3(a)(5) equals the (i) sum of (A) the amount of distributions for the current and all prior Fiscal Years to the Non-Managing Member pursuant to Section 4.1(d), (B) the additional amount that currently would be required to be distributed to the Non-Managing Member pursuant to Section 4.1(d) of the Agreement to provide the Non-Managing Member with the Non-Managing Member Preferred Return and (C) the aggregate amount of Net Losses allocated to the Non-Managing Member pursuant to Section 1.3(b)(3) of this Exhibit;

(6) Sixth, to the Members, in accordance with their respective Membership Percentages until the aggregate Net Income allocated to each Member pursuant to this Section 1.3(a)(6) equals (A) the amount of distributions for the current and all prior Fiscal Years to said Member pursuant to Section 4.1(e), (B) the additional amount that currently would be required to be distributed to said Member pursuant to Section 4.1(e) of the Agreement to provide the Members with a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution and (C) the aggregate amount of Net Losses allocated to said Member pursuant to Sections 1.3(b)(2) of this Exhibit;

(7) Thereafter, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member;

(b) Allocation of Net Losses. After giving effect to Section 1.5 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Losses shall be allocated as follows:

(1) First, (i) thirty-five percent (35%) to the Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member, until the aggregate amount of Net Losses allocated pursuant to this Section 1.3(b)(1) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(7) of this Exhibit;

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(2) Second, to the Members, pro rata in accordance with their respective Membership Percentages until the aggregate amount of Net Losses allocated pursuant to this Section 1.3(b)(2) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(6) of this Exhibit; and

(3) Third, to the Non-Managing Member until the aggregate amount of Net Losses allocated to the Non-Managing Member pursuant to this Section 1.3(b)(3) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(5) of this Exhibit;

(4) Fourth, to the Managing Member until the aggregate amount of Net Losses allocated to the Managing Member pursuant to this Section 1.3(b)(4) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(4) of this Exhibit;

(5) Thereafter, to the Members, pro rata in accordance with their respective Membership Percentages.

(c) Interest paid or accrued in connection with Member Loans shall be deducted in accordance with the appropriate U.S. income tax rules and shall be deducted as a deductible partnership expense for purposes of calculating taxable income, taxable loss, Net Profits and Net Losses.

Section 1.4 Allocations of Net Capital Gain and Net Capital Loss.

(a) Allocation of Net Capital Gain. After giving effect to Section 1.5 and Section 1.3 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Capital Gain shall be allocated as follows:

(1) First, to the Members who have previously been allocated Net Losses or Net Capital Loss pursuant to Section 1.5(f)(3) of this Exhibit in the reverse order and in the same ratio of such Losses so allocated, until the aggregate Net Capital Gain and Net Income allocated to each such Member pursuant to this Section 1.4(a)(1) and Section 1.3(a)(1) is equal to the aggregate Net Losses and Net Capital Loss allocated to that Member pursuant to said Section 1.5(f)(3);

(2) Second, to the Members who have previously been allocated Net Losses or Net Capital Loss pursuant to Section 1.5(f)(2) of this Exhibit in the reverse order and in the same ratio of such Losses so allocated, until the aggregate Net Capital Gain and Net Income allocated to each such Member pursuant to this Section 1.4(a)(2) and Section 1.3(a)(2) is equal to the aggregate Net Losses and Net Capital Loss allocated to that Member pursuant to said Section 1.5(f)(2);

(3) Third, to the Managing Member until the aggregate Net Capital Gain allocated to the Managing Member pursuant to this Section 1.4(a)(3) causes the Adjusted Capital Account of the Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(c) of the Agreement on the date on which such allocation is being made, would cause the

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Managing Member to receive a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of Managing Member taking into account the aggregate amount distributed to the Managing Member pursuant to Sections 4.1 and 4.2(c) of the Agreement from the inception of the Company through the date on which the allocation under this Section 1.4(a)(3) is being made;

(4) Fourth, to the Non-Managing Member until the aggregate Net Capital Gain allocated to the Non-Managing Member pursuant to this Section 1.4(a)(4) causes the Adjusted Capital Account of the Non-Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(d) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of Non-Managing Member taking into account the aggregate amount distributed to the Non-Managing Member pursuant to Sections 4.1 and 4.2(d) of the Agreement from the inception of the Company through the date on which the allocation under this Section 1.4(a)(4) is being made;

(5) Fifth, to the Managing Member until the aggregate Net Capital Gain allocated to the Managing Member pursuant to this Section 1.4(a)(5) causes the Adjusted Capital Account of the Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(e) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(6) Sixth, to the Non-Managing Member until the aggregate Net Capital Gain allocated to the Non-Managing Member pursuant to this Section 1.4(a)(6) causes the Adjusted Capital Account of the Non-Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(f) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(7) Seventh, to the Members, in accordance with their respective Membership Percentages until the aggregate Net Capital Gain allocated to the Members pursuant to this Section 1.4(a)(7) causes the Adjusted Capital Account of each Member to equal the amount, which, if distributed pursuant to Section 4.2(g) of the Agreement on the date on which such allocation is being made, would cause said Member to achieve a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution taking into account the aggregate amount distributed to said Member pursuant to Sections 4.1 and 4.2(g) of the Agreement from the inception of the Company through the date on which the allocation under this Section 1.4(a)(7) is being made; and

(8) Eighth, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member.

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(b) Allocation of Net Capital Loss. After giving effect to Section 1.5 and Section 1.3 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Capital Loss shall be allocated as follows:

(1) First, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member, in an amount equal to the excess, if any, of (i) the cumulative Net Capital Gain allocated pursuant to Section 1.4(a)(8) of this Exhibit B for all prior Fiscal Years over (ii) the cumulative Net Capital Loss allocated pursuant to this Section 1.4(b)(1) for all prior Fiscal Years;

(2) Second, to the Members, pro rata in accordance with their respective Membership Percentages in an amount equal to the excess, if any, of (i) the cumulative Net Capital Gain allocated pursuant to Section 1.4(a)(7) of this Exhibit B for all prior Fiscal Years over (ii) the cumulative Net Capital Loss allocated pursuant to this Section 1.4(b)(2) for all prior Fiscal Years;

(3) Third, to the Non-Managing Member until the aggregate Net Capital Loss allocated to the Non-Managing Member pursuant to this Section 1.4(b)(3) causes the Adjusted Capital Account of the Non-Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(d) of the Agreement on the date on which such allocation is being made, would cause the Non-Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(4) Fourth, to the Managing Member until the aggregate Net Capital Loss allocated to the Managing Member pursuant to this Section 1.4(b)(4) causes the Adjusted Capital Account of the Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(c) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(5) Fifth, to the Non-Managing Member until the aggregate Net Capital Loss allocated to the Non-Managing Member pursuant to this Section 1.4(b)(5) causes the Adjusted Capital Account of the Non-Managing Member to equal zero; and

(6) Sixth, to the Managing Member until the aggregate Net Capital Loss allocated to the Managing Member pursuant to this Section 1.4(b)(6) causes the Adjusted Capital Account of the Managing Member to equal zero.

Section 1.5 Other Allocation Provisions.

(a) Minimum Gain Chargeback. Except as otherwise provided in Treasury Regulations 1.704-2(f), notwithstanding anything to the contrary in this Exhibit, if there is a net decrease in “partnership minimum gain” (within the meaning of Treasury Regulation § 1.704-2(d)) for a Fiscal Year, then there shall be allocated to each Member items of income and gain for such Fiscal Year equal to such Member’s share of the net decrease in partnership minimum gain (within the meaning of Treasury Regulation § 1.704-2(f), provided, that if the Company has any discretion as to an exception set forth in Treasury Regulation § 1.704-2(f)(5), the Managing Member may exercise such discretion on behalf of the Company). In the event that the application of the minimum gain chargeback requirement would cause a distortion in the economic arrangement among the Members, the Managing Member may request that the Commissioner waive the minimum gain chargeback requirement pursuant to Treasury Regulation § 1.704-2(f)(4). Any Member’s share of Company Minimum Gain shall be

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determined in accordance with Treasury Regulation §1.704-2(g)(1). The foregoing is intended to be a “minimum gain chargeback” provision as described in Treasury Regulation § 1.704-2(f) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation.

(b) Member Minimum Gain Chargeback. If during a Fiscal Year there is a net decrease in partner nonrecourse debt minimum gain (as determined in accordance with Treasury Regulation § 1.704-2(i)(3)), then, in addition to the amounts, if any, allocated pursuant to the preceding paragraph, any Member with a share of that partner nonrecourse debt minimum gain (determined in accordance with Treasury Regulation §1.704-2(i)(5)) as of the beginning of the Fiscal Year shall, subject to the exceptions in Treasury Regulation §1.704-2(i)(4) (including the exceptions analogous to those in Treasury Regulation §1.704-2(f)(2), (3), (4) and (5), provided, that if the Company has any discretion as to the exception set forth in Treasury Regulation §1.704-2(f)(5) as made applicable by Treasury Regulation §1.704-2(i)(4), the Managing Member may exercise such discretion on behalf of the Company), be allocated items of income and gain for the year (and, if necessary, for succeeding years) equal to that Member’s share of the net decrease in the partner nonrecourse debt minimum gain. In the event that the application of the partner nonrecourse debt minimum gain chargeback requirement would cause a distortion in the economic arrangement among the Members, the Managing Member may request that the Commissioner waive the minimum gain chargeback requirement pursuant to Treasury Regulation §§1.704-2(f)(4) and 1.704-2(i)(4). The foregoing is intended to be the “chargeback of partner nonrecourse debt minimum gain” required by Treasury Regulation §1.704-2(i)(4) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation.

(c) Nonrecourse Deductions. Notwithstanding anything to the contrary in this Exhibit, nonrecourse deductions shall be allocated to the Members on a pro rata basis, in proportion to their Membership Percentages. Nonrecourse deductions shall have the meaning set forth in Treasury Regulation §1.704-2(b)(1).

(d) Qualified Income Offset. If, during any Fiscal Year, a Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation § 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a deficit balance in such Member’s Adjusted Capital Account, there shall be allocated to such Member items of income and gain (consisting of a pro rata portion of each item of Company income (including gross income, and gain for such year), in an amount and manner sufficient to eliminate such deficit as quickly as possible. The foregoing is intended to be a “qualified income offset” provision as described in Treasury Regulation § 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation. A Member’s “Adjusted Capital Account,” at any time, shall equal the Member’s Capital Account at such time (i) increased by the sum of (A) the amount of the Member’s share of partnership minimum gain as defined in Treasury Regulation §1.704-2(g)(1) and (3), (B) the amount of the Member’s share of partner nonrecourse debt minimum gain as defined in Treasury Regulation §1.704-2(i)(5), and (C) any amount of the deficit balance in its Capital Account the Member is obligated to restore on liquidation of the Company, and (ii) decreased by reasonably expected adjustments, allocations and distributions described in Treasury Regulation §§1.704-1(b)(2)(ii)(d)(4), (5) or (6). The foregoing is intended to comply with the provisions of Treasury Regulation Sections 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation.

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(e) Member Nonrecourse Deductions. Notwithstanding anything to the contrary in this Exhibit, to the extent required by Treasury Regulation §1.704-2(i), any items of income, gain, loss or deduction of the Company that are attributable to a nonrecourse debt of the Company that constitutes partner nonrecourse debt as defined in Treasury Regulation §1.704-2(b)(4) shall be allocated in accordance with the provisions of Treasury Regulation §1.704-2(i). This Section 1.5(e) is intended to satisfy the requirements of Treasury Regulation §1.704-2(i) and shall be interpreted and applied in a manner consistent therewith.

(f) Loss Limitation. Notwithstanding anything to the contrary in Section 1.3(b) of this Exhibit,

(1) The Net Losses allocated pursuant to Section 1.3(b) of this Exhibit to any Member for any Fiscal Year shall not exceed the maximum amount of Net Losses that may be allocated to such Member without causing such Member to have a negative balance in its Adjusted Capital Account at the end of such Fiscal Year.

(2) If some but not all of the Members would have deficits in their Adjusted Capital Accounts as a consequence of allocations of Net Losses pursuant to Section 1.3(b) of this Exhibit, the limitations set forth in this Section 1.5(f)(2) shall be applied by allocating Net Losses pursuant to this Section 1.5(f)(2) only to those Members who would not have a deficit in their Adjusted Capital Accounts as a consequence of receiving such an allocation of Net Losses (the allocation of such Net Losses among those Members to be in proportion to their aggregate Capital Contributions to the Company).

(3) If no other Member may receive an additional allocation of Net Losses pursuant to Section 1.5(f)(2) of this Exhibit, such additional Net Losses not allocated pursuant to said Section 1.5(f)(2) shall be allocated solely to those Members who bear the economic risks for such additional Net Losses within the meaning of Section 704(b) of the Code and the Treasury Regulations thereunder.

(g) Reversal of Regulatory Allocations. To the extent that any item of income, gain, loss or deduction has been specially allocated pursuant to paragraphs (a), through (e) of this Section 1.5 and such allocation is inconsistent with the way in which the same amount otherwise would have been allocated under Section 1.3 of this Exhibit, subsequent allocations under said Section 1.3 shall be made, to the extent possible and without duplication in a manner consistent with the Treasury Regulations under Code Section 704(b), which negate as rapidly as possible the effect of all such inconsistent allocations under paragraphs (a) through (e). This Section 1.5(g) shall be interpreted and applied in such a manner and to such extent as is reasonably necessary to eliminate, as quickly as possible, permanent economic distortions that would otherwise occur as a consequence of the allocations pursuant to paragraphs (a) through (e) of this Section 1.5, in the absence of this Section 1.5(g).

(h) Members’ Interests in Company Profits for Purposes of Section 752. As permitted by Regulations Section 1.752-3(a)(3), the Members hereby specify that solely for purposes of determining their respective shares of excess Nonrecourse Liabilities of the Company, the Members’ respective shares of Company profits shall be equal to their then respective relative Membership Percentages. Excess Nonrecourse Liabilities of the Company

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shall first be allocated to the Members up to the amount of built-in gain that is allocable to the Member on Code Section 704(c) property (as defined by Regulations Section 1.704-3(a)(3)(ii)) or property for which reverse section 704(c) allocations are applicable (as described by Regulation Section 1.704-3(a)(6)(i)) where such property is subject to nonrecourse liabilities to the extent that such built-in gain exceeds the gain described in Regulations Section 1.752-3(a)(2) with respect to such property.

(i) Distributions of Property. Solely for the purpose of adjusting the Capital Accounts of the Members, and not for tax purposes, if any property is distributed in kind to any Member, the difference between its fair market value (as determined in the reasonable judgment of the Managing Member) and its book value at the time of distribution shall be treated as gain or loss recognized by the Company and allocated pursuant to the provisions of Section 1.3 of this Exhibit.

(j) Transfer of Membership Interest. Except to the extent otherwise required by the Code and Treasury Regulations, if a Membership Interest or part thereof is transferred in any Fiscal Year, the items of income, gain, loss, deduction and credit allocable to such Membership Interest or part thereof, as the case may be, for such Fiscal Year shall be allocated to the person who held the interest on the date such items were realized or incurred by the Company as if the books of the Company had been closed, and the partnership tax year had ended, immediately after such transfer. At the request of the transferee, the Managing Member may, in its sole discretion, make the election provided for in Code Section 754.

(j) Order of Allocations. Any allocations made pursuant to this Exhibit shall be made in the following order of priority:

(i) Section 1.5(a);

(ii) Section 1.5(b);

(iii) Section 1.5(d);

(iv) Section 1.5(e);

(v) Section 1.5 (c);

(vi) Section 1.5(g); and

(vii) Section 1.3 as modified by Section 1.5(f).

(k) Liquidation of Company. It is intended that, in the event of a liquidation of the Company as defined in Treasury Regulation §1.704-1(b)(2)(ii)(g), distributions to be made in connection with such liquidation under Article 4 comply with the requirement of Regulations Section 1.704-1(b)(2)(ii)(b)(2) that liquidating distributions be made in accordance with positive Capital Accounts. However, if the balances in the Capital Accounts do not result in such requirement being satisfied, items of income, gain, loss, deduction and credit will be reallocated among the Members for the taxable year of the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) so as to cause the balances in the Capital Accounts to be in the amounts necessary so that, to the extent possible, such result is achieved.

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Section 1.6 Allocations for Income Tax Purposes. These provisions shall be applied as if all distributions and allocations were made at the end of the Fiscal Year. Where any provision depends on the Capital Account of any Member, that Capital Account shall be determined after the operation of all preceding provisions for the year. The income, gains, losses, deductions and credits of the Company for federal, state and local income tax purposes shall be allocated in the same manner as the corresponding items entering into the computation of Net Income and Net Losses were allocated pursuant to Sections 1.3, 1.4 and 1.5 of this Exhibit; provided that solely for federal, local and state income and franchise tax purposes and not for book or Capital Account purposes, income, gain, loss and deduction shall be allocated, other than with respect to the tax basis of property, as follows: in the case of property contributed in kind and other property to the extent applicable, in accordance with the principles of Code Sections 704(b) and 704(c) and the Treasury Regulations promulgated under such Code Sections.

Section 1.7 Distributions of Nonrecourse Liability Proceeds. If during a Fiscal Year the Company makes a distribution to any Member that is allocable to the proceeds of any nonrecourse liability of the Company that is allocable to an increase in Company Minimum Gain pursuant to Treasury Regulation §1.704-2(h), then the Company shall elect, to the extent permitted by Treasury Regulation §1.704-2(h)(3), to treat such distribution as a distribution that is not allocable to an increase in Company Minimum Gain.

ARTICLE II

MISCELLANEOUS MATTERS

Section 2.1 Preparation of Records and Returns; Tax Matters Member. Subject to the terms of this Section 2.1 and the other provisions of this Agreement, (i) all federal, state and local income tax returns, and financial and accounting books and records of the Company shall be prepared under the direction of the Managing Member in its sole and absolute discretion, (ii) all tax audits and litigation shall be conducted under the direction of the Managing Member in its sole and absolute discretion, and (iii) the determination of whether the Company shall make available elections for accounting or federal, state or local income tax purposes shall be made by the Managing Member in its sole and absolute discretion. The Managing Member is hereby designated as the “tax matters partner” for the Company (as such term is defined in Section 6231(a)(7) of the Code). The tax matters partner shall promptly notify Members who do not qualify as “notice partners” within the meaning of Code Section 6231(a)(8) at the beginning and completion of an administrative proceeding at the Company level promptly upon such notice being received by the tax matters partner. Moreover, the tax matters partner shall keep Non-Managing Member informed as to the status of any audit of the Company’s tax affairs, including the status of any resulting administrative and judicial proceedings relating thereto, and Non-Managing Member, if is so requests, may attend any such proceedings and negotiations related thereto and receive copies of any and all notices and other communications received by the Company from the taxing authority in connection with any such audit or other proceeding; provided further, that the tax matters partner shall obtain the prior written consent of Non-Managing Member before settling, compromising or otherwise altering the defense of any tax matter or proceeding before any taxing authority if Non-Managing Member or any of its direct or indirect beneficial owners would be materially adversely affected thereby.

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Section 2.2 Method of Making Contributions. References to contributions of property appearing in Article 1 of this Exhibit are included for the purpose of conforming to the requirements set forth in the Regulations and shall not give rise to an inference that contributions may be made in a form other than cash except as set forth in the Operating Agreement or any other written agreement of the Members.

Section 2.3 The Non-Managing Member may at any time, and from time to time, upon advice of its tax counsel, request the opportunity to enter into, and have in effect, one or more direct or indirect guarantees of Company or Operating Company indebtedness, including without limitation direct or indirect guarantee in the form of a “limited deficit restoration obligation” or in the form of a “bottom dollar guarantee,” (a “Non-Managing Member Guarantee”) in such amounts necessary to prevent a taxable reduction in the amount of liabilities (x) allocated to non-Managing Member for purposes of Section 752 of the Internal Revenue Code of 1986, as amended, or (y) for which non-Managing Member is considered “at risk” under Section 465. If such a request for a Non-Managing Member Guarantee is made by the Non-Managing Member, the Company and the Managing Member shall cooperate fully and shall use commercially reasonable efforts to assist the Non-Managing Member in obtaining the requested Non-Managing Member Guarantee. The parties acknowledge and agree that no such request shall be made while the debt secured by the Non Recourse Carveout Guarantees are in effect.

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EXHIBIT C

MANAGEMENT AGREEMENT

C

EX-10.3

Exhibit 10.3

LIMITED LIABILITY

COMPANY AGREEMENT

of

SENTIO LEAH BAY TRS PORTFOLIO, LLC,

a Delaware limited liability company,

by and between

SENTIO LEAH BAY TRS, LLC,

a Delaware limited liability company,

as a member

and

ERWIN FAMILY PROPERTIES I, L.L.C.,

a Washington limited liability company,

as a member

Dated as of August 31, 2012

TABLE OF CONTENTS

			Page
ARTICLE I. FORMATION AND OTHER ORGANIZATION MATTERS				1
	Section 1.1	Formation; Changes		1
	Section 1.2	Name		2
	Section 1.3	Term		2
	Section 1.4	Business		2
	Section 1.5	Names and Addresses of Members		2
	Section 1.6	Registered Office and Principal Place of Business		2
	Section 1.7	Certain Definitions		3
ARTICLE II. CERTAIN TAX AND ACCOUNTING MATTERS				3
ARTICLE III. CONTRIBUTIONS BY MEMBERS; FINANCING				3
	Section 3.1	Capital Contributions		3
	Section 3.2	Additional Capital Contributions		3
	Section 3.3	Recoupment for Contributions		4
	Section 3.4	Execution and Compliance with Senior Loan Documents		4
ARTICLE IV. DISTRIBUTIONS TO MEMBERS				5
	Section 4.1	Distributions of Available Cash from Operations		5
	Section 4.2	Distributions of Net Capital Transaction Proceeds		6
	Section 4.3	Distributions shall be Aggregated with those of Owner Portfolio		6
	Section 4.4	Shortfall in Preferred Return		7
	Section 4.5	Allocation of Purchase Price		7
	Section 4.6	Withholding Taxes with Respect to Members		7
	Section 4.7	Violation of Law		8
	Section 4.8	Termination of JEA Manager under JEA Management Agreement		8
ARTICLE V. MANAGEMENT OF THE COMPANY				8
	Section 5.1	Authority of Managing Member		8
	Section 5.2	Management Agreements		9
	Section 5.3	Limited Reimbursement of Expenses		9
ARTICLE VI. STATUS OF MEMBERS; INDEMNIFICATION				10
	Section 6.1	Role of Non-Managing Members		10
	Section 6.2	Liability of Members		10
	Section 6.3	Bankruptcy of Member		10
	Section 6.4	Relationship of Members		10
	Section 6.5	Other Activities; Affiliates; Non-Compete		11
	Section 6.6	Indemnification		12
	Section 6.7	Right of First Offer		14
ARTICLE VII. TRANSFER OF MEMBERSHIP INTERESTS				15
	Section 7.1	General		15
	Section 7.2	Permitted Transferees		15

	Section 7.3	Right of First Refusal	15
	Section 7.4	Effect of Assignment	16
	Section 7.5	Substitute Member	17
	Section 7.6	Further Requirements	17
	Section 7.7	Transfer Taxes	17
	Section 7.8	Managing Member’s Call Right	17
	Section 7.9	Corporate Change of Control of Non-Managing Member	18
ARTICLE VIII. CERTAIN REMEDIES			18
	Section 8.1	No Partition	18
	Section 8.2	Litigation Without Termination	18
	Section 8.3	Attorneys’ Fees	19
	Section 8.4	Cumulative Remedies	19
	Section 8.5	No Waiver	19
ARTICLE IX. DISSOLUTION OF COMPANY			19
	Section 9.1	Events Giving Rise to Dissolution	19
	Section 9.2	Procedure	20
ARTICLE X. MISCELLANEOUS			21
	Section 10.1	Notices	21
	Section 10.2	Entire Agreement	22
	Section 10.3	Amendments	23
	Section 10.4	Governing Law	23
	Section 10.5	Successors and Assigns	23
	Section 10.6	Interpretation	23
	Section 10.7	Severability	23
	Section 10.8	Legal Counsel	24
	Section 10.9	Advice from Independent Counsel/Voluntary Agreement	24
	Section 10.10	Counterparts	24
	Section 10.11	Benefits of Agreement; No Third-Party Rights	24
	Section 10.12	WAIVER OF JURY TRIAL	25
	Section 10.13	Special Purpose Provisions	25
	Section 10.14	Patriot Act Representation	26
	Section 10.15	OFAC Compliance and Source of Funds	26
ARTICLE XI. BOOKS AND RECORDS			27
	Section 11.1	Books and Records; Periodic Reporting	27
	Section 11.2	Right to Inspection; Delivery of Information	28
	Section 11.3	Notices of Default or Litigation	28
ARTICLE XII. RIGHTS AND OBLIGATIONS OF MANAGING MEMBER			29
	Section 12.1	Rights and Obligations of Managing Member	29

LIMITED LIABILITY COMPANY AGREEMENT OF

SENTIO LEAH BAY TRS PORTFOLIO, LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) of SENTIO LEAH BAY TRS PORTFOLIO, LLC, a Delaware limited liability company (the “Company”), dated as of August 31, 2012 (the “Effective Date”) by and among SENTIO LEAH BAY TRS, LLC, a Delaware limited liability company (“Managing Member”), as the Managing Member, and ERWIN FAMILY PROPERTIES I, L.L.C.,, a Washington limited liability company (“Non-Managing Member”), as the Non-Managing Member.

WITNESSED:

WHEREAS, Managing Member and Non-Managing Member formed the Company as a limited liability company under the provisions of the Delaware Limited Liability Company Act, as amended from time to time (the “Delaware Act”);

WHEREAS, Owner Portfolio has entered into that certain Purchase and Sale Agreement dated as of May 7, 2012 (the “Purchase Agreement”), pursuant to which, among other things, Owner Portfolio has the right to acquire Amber Glen of Urbana, IL – a 38 unit memory care facility located at 1704 East Amber Lane, Urbana, Illinois, (the “Urbana Property”); Mill Creek of Springfield, IL – a 38 unit memory care facility located at 3319 Ginger Creek Drive, Springfield, Illinois (the “Springfield Property”); Sugar Creek of Normal, IL – a 38 unit memory care facility located at 505 East Vernon Avenue, Normal, Illinois, (the “Normal Property”); and Hudson Creek of Bryan, TX – a 38 unit memory care facility located at 3850 Coppercrest Drive, Bryan, Texas, (the “Bryan Property”).

WHEREAS, the Company will own one hundred percent (100%) of the membership interests in Amber Glen TRS, LLC, Mill Creek TRS, LLC, Sugar Creek TRS, LLC and Hudson Creek TRS, LLC, each a Delaware limited liability company and the tenant under the respective lease of the Urbana Property, Springfield Property, Normal Property and Bryan Property, respectively, as the context may require;

WHEREAS, Managing Member and Non-Managing Member desire to enter into this Agreement to set forth their respective rights and obligations with respect to the Company.

NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

FORMATION AND OTHER ORGANIZATION MATTERS

Section 1.1 Formation; Changes. The Company was formed under the Delaware Act on June 21, 2012 (the “Formation Date”) by the execution, delivery and filing with the Secretary of the State of Delaware, of the Certificate of Formation of the Company.

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Section 1.2 Name.

The business of the Company shall be conducted under the name “SENTIO LEAH BAY TRS PORTFOLIO, LLC.”

Section 1.3 Term.

The term (“Term”) of the Company shall be from the Formation Date terminated as hereinafter provided. The existence of the Company as a separate legal entity shall continue until cancellation of the Company as provided in the Delaware Act.

Section 1.4 Business.

The business of the Company is solely to (a) own, hold, finance, pledge and manage the sole equity interest in each of the Operating Companies and (b) take any and all actions and make any and all decisions (i) in its capacity as the sole member of each of the Operating Companies which leases the Property, including, without limitation, in connection with the leasing and operation of the Property and the ownership of incidental personal property (including intangible personal property) necessary for the operation of the Property; and (ii) in connection with the ownership, financing, refinancing, selling, assigning, transferring and prosecuting or defending any and all legal proceedings relating to the interests of the Company in each of the Operating Companies; and do any and all other acts or things that may be necessary or incidental to carry on the business of the Company as described in clauses (a) and (b) above. The Company is not authorized to, and shall not, engage in any business other than as described in this Section 1.4.

Section 1.5 Names and Addresses of Members.

The names and addresses of the Members are as follows:

SENTIO LEAH BAY TRS, LLC

Attn: Scott Larche

189 S. Orange Ave., Suite 1700

Orlando, Florida 32801

Telephone No.: 407.999.7679

Telecopy No.: 407.999.5210

ERWIN FAMILY PROPERTIES I, L.L.C.

12115 NE 99th Street

Suite 1800

Vancouver, Washington

Telephone No.: 800.254.9442

Telecopy No.: 360.254.1770

Section 1.6 Registered Office and Principal Place of Business.

The registered office of the Company in the State of Delaware shall be 2711 Centerville Road, Suite 400, Wilmington, Delaware and its registered agent for service of process on the Company

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at such office shall be Corporation Service Company. The principal place of business of the Company shall be 189 S. Orange Ave., Suite 1700, Orlando, Florida, 32801, or such other location hereafter determined by the Managing Member.

Section 1.7 Certain Definitions.

Certain capitalized words and phrases used in this Agreement and not otherwise defined in the body hereof are defined in Exhibit A and shall have the meanings set forth therein.

ARTICLE II.

CERTAIN TAX AND ACCOUNTING MATTERS

The Members intend that the Company shall be taxed as a partnership for federal and state income tax purposes and shall not take any action that may result in the Company being taxed as other than a partnership for such purposes. Each and all of the provisions of Exhibit B annexed hereto and made a part hereof are incorporated herein and shall constitute part of this Agreement. Exhibit B provides for, among other matters, the maintenance of Capital Accounts, the allocation of profits and losses, and the maintenance of books and records.

ARTICLE III.

CONTRIBUTIONS BY MEMBERS; FINANCING

Section 3.1 Capital Contributions.

(a) Non-Managing Member has contributed $200.00 to the Company.

(b) Managing Member has contributed $800.00 to the Company.

Section 3.2 Additional Capital Contributions.

(a) The Managing Member may from time to time request that the Members make additional Capital Contributions by providing written notice to the Members of the aggregate amount of such Capital Contribution and the date upon which such amount shall be due. Each Member shall contribute its pro-rata share of such Capital Contribution based on its respective Membership Percentage.

(b) If Managing Member or Non-Managing Member (in such instance, a “Non-Contributing Member”) does not contribute all of an additional Capital Contribution that is requested under Section 3.2(a) within the time period described in Section 3.2(a), then the contributing Member (the “Contributing Member”) may, but shall not be obligated to, fund the amount the Non-Contributing Member does not contribute. In the event the Non-Contributing Member funds no portion of its share of additional capital with respect to a request under Section 3.2(a), the entire amount funded with respect to such request by the Contributing Member shall be treated as a loan to the Company. In the event the Non-Contributing Member funds only a portion of its share of additional capital with respect to a request under Section 3.2(a), such portion so funded shall be treated as a Capital Contribution and a portion of the amount funded by the Contributing Member with respect to such request shall be treated as a Capital Contribution such that Capital Contributions with respect to such request shall be in proportion

3

to Membership Percentages. The balance of the amount funded by the Contributing Member with respect to such request shall be treated as a loan to the Company. For example, assume the Managing Member makes a $100,000 capital call pursuant to Section 3.2(a), and that Membership Percentages are 80% (Managing Member): 20% (Non-Managing Member). Assume further that the Managing Member contributes its $80,000 share of the capital call, the Non-Managing Member contributes only $10,000 of its $20,000 share of the capital call, and the Managing Member funds the shortfall of $10,000. The Non-Managing Member (i.e., the Non-Contributing Member) will be treated as making a Capital Contribution of $10,000, and the Managing Member (i.e., the Contributing Member) will be treated as making a Capital Contribution of $40,000 thereby resulting in Capital Contributions with respect to such capital call being made in proportion to Membership Percentages. The balance of the amount funded by the Contributing Member (i.e., $50,000) will be treated as a loan to the Company. Any amount funded and classified as a loan under this Section shall be referred to as a “Member Loan”. A Member Loan shall not be deemed to be a Capital Contribution for purposes of this Agreement. Each Member Loan shall bear interest at a rate equal to the lower of twelve percent (12%) per annum, compounded monthly, or the maximum rate of interest permitted by applicable law. If a Member makes a Member Loan pursuant to this Section 3.2(b), then such Member shall receive payments with respect to such Member Loan as described in Sections 4.1 and 4.2 before any distributions are made with respect to Capital Contributions made by the Members pursuant to Sections 3.1 and 3.2(a). The remedies provided in this Section 3.2(b) for the failure of a Member to fund its share of a requested Capital Contribution shall be the sole remedies available with respect thereto. Nothing in this Section 3.2 shall be deemed to obligate any Member to cause any of its Affiliates to incur any Recourse Liabilities.

Section 3.3 Recoupment for Contributions.

Except as expressly provided herein, (a) no Member shall receive any recoupment or payment on account of or with respect to the Capital Contributions made by it pursuant to this Agreement, (b) no Member shall be entitled to interest on or with respect to any Capital Contributions, (c) no Member shall be entitled to withdraw any part of such Member’s Capital Contributions, and (d) no Member shall be entitled to receive any distributions from the Company except as otherwise set forth herein.

Section 3.4 Execution and Compliance with Senior Loan Documents.

The Members hereby approve and ratify (i) the Senior Loans, as assumed by the Landlords from the Senior Lender pursuant to the Senior Loan Documents, as modified by those certain Assumption and Release Agreements and Subordination, Assignment and Security Agreements to be dated as of the closing of the transactions contemplated by the Purchase Agreement (as it may now or hereafter be amended from time to time, the “Senior Loan Terms”) and (ii) execution and delivery of all documents and instruments necessary and appropriate to modify the Senior Loan Documents substantially in accordance with the provisions thereof. No Member shall be required to make additional Capital Contributions or loans to the Company so that the Company, the Landlords and the Operating Companies can comply with those terms and conditions.

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ARTICLE IV.

DISTRIBUTIONS TO MEMBERS

Section 4.1 Distributions of Available Cash from Operations.

Subject to the provisions of the Senior Loan Documents (or any other loan documents entered into in accordance with the provisions of Section 5.1(b)(ii)), the Annual Budget, the Company shall make distributions of Available Cash from Operations quarterly; provided, notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to the Members if such distribution would violate Section 18-607 of the Delaware Act or any other applicable law. Except as provided in Section 4.2, the Company, in any given quarter, may not make any distributions which would cause the amount of working capital to be less than the Threshold Working Capital Amount. If such distribution shall inadvertently be made, the Members agree to immediately return such excess amount distributed to the Company (and such returned excess amount shall not be treated as a Capital Contribution). Distributions of Available Cash From Operations shall be made in the following order of priority:

(a) First, to the Members who have made Member Loans in accordance with Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective unpaid Member Loans until each of them has received cumulative payments pursuant to this Section 4.1(a) equal to all interest due in respect of such Member Loans.

(b) Second, to the Members who have made Member Loans pursuant to Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective Member Loans until each of them has received cumulative payments pursuant to this Section 4.1(b) equal to the outstanding principal amounts of its respective Member Loans.

(c) Third, to the Managing Member, until the Managing Member has achieved a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution (as hereinafter defined) of the Managing Member (the “Managing Member Preferred Return”).

(d) Fourth, to the Non-Managing Member, until the Non-Managing Member has achieved a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of the Non-Managing Member (the “Non-Managing Member Preferred Return”).

(e) Fifth, until the Managing Member and Non-Managing Members have each achieved a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, to the Members on a pro rata basis in accordance with their respective Membership Percentages.

(f) Thereafter, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five (65%) to Managing Member.

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Section 4.2 Distributions of Net Capital Transaction Proceeds.

Distributions of Net Capital Transaction Proceeds shall be made promptly following the Company’s receipt thereof. All such distributions shall be made in the following order of priority:

(a) First, to the Members who have made Member Loans in accordance with Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective unpaid Member Loans until each of them has received cumulative distributions pursuant to Section 4.1(a) and this Section 4.2(a) equal to all interest due in respect of such Member Loans.

(b) Second, to the Members who have made Member Loans pursuant to Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective Member Loans until each of them has received cumulative distributions pursuant to Section 4.2(b) and this Section 4.2(b) equal to the outstanding principal amounts of its respective Member Loans.

(c) Third, to the Managing Member, until the Managing Member has received and achieved the Managing Member Preferred Return.

(d) Fourth, to the Non-Managing Member, until the Non-Managing Member has received and achieved the Non-Managing Member Preferred Return.

(e) Fifth, to the Managing Member, until the Managing Member has been repaid its entire Unreturned Capital Contribution.

(f) Sixth, to the Non-Managing Member, until the Non-Managing Member has been repaid its entire Unreturned Capital Contribution, to the Non-Managing Member.

(g) Seventh, until the Managing Member and Non-Managing Members have each achieved a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, to the Members on a pro rata basis in accordance with their respective Membership Percentages.

(h) Thereafter, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member.

Section 4.3 Distributions shall be Aggregated with those of Owner Portfolio

In determining and calculating the cumulative, non-compounding annual returns at any given point of time in connection with Section 4.1 and Section 4.2 herein, the Distributions of Available Cash from Operations and Distributions of Net Capital Transaction Proceeds (as each such term is defined in the Owner Portfolio Agreement) at such given point of time, to (1) Managing Member under the provisions of this Agreement shall be aggregated with such distributions to Sentio Leah Bay, LLC under the provisions of the Owner Portfolio Agreement and (ii) to Non-Managing Member under the provisions of this Agreement shall be aggregated with such distributions to Erwin Family Properties I, L.L.C. under the provisions of the Owner Portfolio Agreement. For purposes hereof, distributions hereunder shall be made in accordance with the order of priority contained in Section 4.1 and Section 4.2 hereof, as applicable, as if

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such distributions were distributions of additional Available Cash from Operations and Net Capital Transaction Proceeds, as applicable, for the same measurement period pursuant to the Owner Portfolio Agreement after all distributions of actual Available Cash from Operations and Net Capital Transaction Proceeds have been made pursuant to the Owner Portfolio Agreement for such measurement period.

Section 4.4 Shortfall in Preferred Return.

For purposes of Sections 4.1 and 4.2 of this Agreement, and Section 1.3 of Exhibit B hereto, if the Company shall fail to achieve the Managing Member Preferred Return and/or the Non-Managing Member Preferred Return in any given year, such shortfall must be made up in future years if and to the extent that the Company then has sufficient Available Cash From Operations or Net Income, as the case may be. However, if, in any given year, the Company achieves a return in excess of the Managing Member Preferred Return and/or the Non-Managing Member Preferred Return, such excess shall not be taken into account for purposes of determining whether or not the Company achieved the Managing Member Preferred Return and the Non-Managing Member Preferred Return in any subsequent year.

Section 4.5 Allocation of Purchase Price.

For purposes of Section 4.2 of this Agreement, and Section 1.3 of Exhibit B hereto, in the case of a sale of all of the Membership Interests of the Company or substantially all of its assets, and the sale of all of the membership interest of Owner Portfolio or substantially all of its assets, the parties agree the portion of the purchase price allocable to the Company or its assets shall be nominal and that Owner Portfolio can take whatever actions may be necessary to support that position, including the termination of the Leases.

Section 4.6 Withholding Taxes with Respect to Members.

The Company shall comply with any withholding requirements under federal, state and local law that the Managing Member determines is required, and shall remit any amounts withheld to, and file required forms with, the applicable jurisdictions. All amounts withheld from Company revenues or distributions by or for the Company pursuant to the Code or any provision of any federal, state or local law, and any taxes, fees or assessments levied upon the Company, shall be treated for purposes of this Article 4 as having been distributed (as an advance) to those Members who received a credit for tax or other benefit with respect to the withheld amounts, or whose identity or status caused the withholding obligations, taxes, fees or assessments to be incurred. If the amount withheld exceeded the affected Member’s actual share of cash available for distribution, such Member shall reimburse the Company for such excess withholding or other amounts paid (as described above). Each Member agrees to furnish the Company with such representations, forms, or other information as the Managing Member shall reasonably request to assist it in determining the extent of, and in fulfilling, the Company’s withholding obligations, if any. As soon as practicable after becoming aware that any withholding requirement may apply to a Member, the Managing Member shall advise such Member of such requirement and the anticipated effect thereof. Such Member shall pay or reimburse to the Company all identifiable costs or expenses of the Company caused by or resulting from withholding taxes (including expenses incurred to reduce withholding taxes) with respect to such Member.

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Section 4.7 Violation of Law.

Notwithstanding any other provision contained in this Agreement, the Company shall not make a distribution to a Member in respect of its interest in the Company if such distribution would violate the Delaware Act or other applicable law.

Section 4.8 Termination of JEA Manager under JEA Management Agreement.

If any JEA Management Agreement shall terminate by reason of the exercise by any Operating Company, as the case may be, of its right to terminate for default by the applicable JEA Manager pursuant to Sections III(A) or III(C) of the Management Agreement attached hereto as Exhibit C, or any substantially similar provisions in any subsequent JEA Management Agreement, then the distributions to Non-Managing Member hereunder in Section 4.1(e) and Section 4.2 (h) shall be automatically redetermined and adjusted to reduce the proportion of such distributions to Non-Managing Member in Sections 4.1(e) and Section 4.2(h) from thirty-five percent (35%) to twenty percent (20%) and increase the proportion of such distributions to Managing Member in Sections 4.1(e) and Section 4.2(h) from sixty-five percent (65%) to eighty percent (80%).

ARTICLE V.

MANAGEMENT OF THE COMPANY

Section 5.1 Authority of Managing Member.

(a) The Managing Member shall have the sole and exclusive authority to manage and implement the policies, operations and affairs of the Company and to make all decisions regarding the major policy decisions and over-all direction of the Company and the Operating Company and their respective businesses, including, without limitation causing the Operating Company to take any action in furtherance thereof; provided, however, that the Managing Member shall not have the authority to make any Major Decisions with respect to the Company or the Operating Company without the prior written consent of Non-Managing Member. (b) Each of the following matters (each a “Major Decision” and collectively, the “Major Decisions”) shall require the prior written approval of the Managing Member and Non-Managing Member:

(i) the sale, refinance or other disposition of all or any material portion of the Company Property or the Property other than the sale or disposition of personal property being replaced in the ordinary course of business;

(ii) causing or permitting the Company or Operating Company to prepay (in whole or in part), refinance, amend, modify or extend any loan obligation of the Company or any Operating Company or to cause or permit any loan obligation of the Company or any Operating Company to be guaranteed in whole or in part other than pursuant to the Non-Recourse Carveout Guarantees;

(iii) entering into, terminating or causing or permitting the termination of a Management Agreement, except if the same is a JEA Management Agreement, (to avoid all doubt, the Members acknowledge and agree that, if applicable, subject to its terms or as otherwise provided herein, Managing Member may terminate or cause or permit an JEA Management Agreement to be terminated

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pursuant to Sections III(A) or III(C) without the consent of the Non-Managing Member and the engagement of the initial replacement manager in such event is not a Major Decision, all pursuant to the provisions of Section 5.2 hereof); and

(iv) any merger or consolidation of the Company or material change in use of any of the Properties.

(b) Each of the Managing Member and Non-Managing Member may propose to adopt, modify or revoke a Major Decision at any time. Whenever a Member proposes to adopt, modify or revoke a Major Decision, it shall deliver a written notice (a “Major Decision Notice”) to the other Member (i) describing the proposal in sufficient detail and (ii) containing sufficient information to permit the other Member to make an informed decision on the proposal and shall subsequently provide to the other Member such additional information as the other Member may reasonably request.

Section 5.2 Management Agreements.

The Operating Companies shall enter into management agreements with property managers with respect to each Property (each, a “Management Agreement”). The Members do not object to and hereby authorize to the extent applicable, Jerry Erwin Associates, Inc., a Washington corporation d/b/a JEA Senior Living (“JEA Manager”) being engaged as property manager of the Properties pursuant to Management Agreements substantially in the from attached hereto and incorporated by reference as Exhibit C. JEA Manager may serve as the property manager for the Properties; subject to the applicable termination provisions of the Management Agreement, as long as the Non-Managing Member is Controlled by the JEA Principals, JEA Manager or an entity Controlled by the JEA Principals. Each of the Management Agreements attached hereto as Exhibit C and any other Management Agreement with JEA Manager is referred to as a “JEA Management Agreement”). In the event that JEA Manager, or any other Affiliate of JEA Manager or the JEA Principals is removed or otherwise ceases to serve as the property manager for the Properties the Managing Member shall choose the replacement property manager in its sole discretion.

Section 5.3 Limited Reimbursement of Expenses.

The Company shall, or shall cause the Operating Company to reimburse the Members and their respective agents or representatives for all direct, actual, reasonable, verifiable, out-of-pocket incidental costs and expenses incurred by them with Third Parties which are incurred by the Members in connection with the acquisition and financing of the Property and the preparation and negotiation of this Agreement and the documents required hereunder, which shall not exceed the amounts set forth in the Owner Portfolio Agreement, or (b) are directly attributable to the business of the Company and/or the Operating Company and are incurred for and on behalf of the Company and/or the Operating Company, in accordance with an Approved Budget. It is expressly understood that the Company shall not be responsible for, or reimburse any of, the salaries or other compensation of such Member’s employees, or any general or administrative overhead of any Member, including, but not limited to, rent. Without waiving the effect of the foregoing provisions, the Members hereby authorize and direct the Company to cause the following to be paid or reimbursed, as costs and expenses of the Company: (i) the fees and costs of the law firms of Foley & Lardner LLP, and DLA Piper and the accounting firm of Deloitte

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and Touche LLP, which represented the interest of Managing Member in connection with this transaction; (ii) the fees and costs of the law firms of Cherry Petersen Landry Albert LLP and Bryan Cave, which represented the interests of the Non-Managing Member in connection with this transaction.

ARTICLE VI.

STATUS OF MEMBERS; INDEMNIFICATION

Section 6.1 Role of Non-Managing Members.

Except as expressly provided herein, the Non-Managing Member shall not participate in the management or control of the Company’s business, nor shall it transact any business for the Company, but such Member’s consent shall be required whenever this Agreement provides for the consent or approval of all Members or such Member.

Section 6.2 Liability of Members.

Except as otherwise expressly required by law, each Member shall have no personal liability whatsoever, whether to the Company, to the other Members or to the creditors of the Company, for the debts of the Company or any of its losses. The foregoing shall not, however, limit the personal liability of a Member for its obligations to the Company or any Indemnitee under this Agreement or to the Company or any other Person under any other agreement to which such Member may be a party. In no event shall any partner, member, manager, officer, director, stockholder, shareholder or owner of either Member or any affiliate thereof be liable for the obligations of the Members hereunder.

Section 6.3 Bankruptcy of Member.

Notwithstanding any other provision of this Agreement, the Bankruptcy of any Member shall not cause such Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution. In the event of the Bankruptcy of Managing Member, Non-Managing Member shall have the right, but not the obligation, to be Managing Member upon written notice of such election. If Non-Managing Member does not so elect to become Managing Member within ninety (90) days after the Bankruptcy of Managing Member, or if Non-Managing Member does elect to become Managing Member and in the event of a Bankruptcy of Non-Managing Member, then the Company may only act with the joint consent of Managing Member and Non-Managing Member.

Section 6.4 Relationship of Members.

Each Member agrees that, to the fullest extent permitted by Section 18-1101 and other provisions of the Delaware Act and except to the extent expressly stated in this Agreement or in any other agreement to which a Member is a party:

(a) Except as expressly provided in this Agreement, no Member shall have any authority to bind or act for, or assume any obligation or responsibility on behalf of, any other Member, the Company or to act as the agent, representative or attorney-in-fact for any other Member.

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(b) Except as expressly provided herein, any consent, approval, determination or other action by a Member shall be given or taken in the sole and absolute discretion of that Member in its own best interests and without regard to the best interests of another Member, the Company or the financial, tax or other effect on another Member or the Company. Each Member acknowledges and agrees that (i) to the extent a Member is acting or proposing to act on behalf of the Company, such Member shall be acting in the capacity as a fiduciary of the Company and the other Members (subject to the provisions of Section 6.5) and (ii) to the extent a Member is determining whether to initiate or approve a Major Decision, such Member is entitled to act in a manner deemed by such Member to be in its own best interest.

Section 6.5 Other Activities; Affiliates; Non-Compete.

(a) The Company and the Non-Managing Member expressly acknowledge and agree that Managing Member and Affiliates of Managing Member and other Persons related to Managing Member and Affiliates of Managing Member (collectively the “Managing Member Related Persons”) have direct and/or indirect interests in investing in, owning, operating, transferring, managing, leasing and otherwise using, real property and interests therein for profit, and engaging in any and all activities related or incidental thereto and/or that such Managing Member Related Persons will make other investments consistent with such interests. Except to the extent expressly provided herein or in other agreements among one or more of the parties hereto: (i) neither the Company nor the Non-Managing Member shall have any right by virtue of this Agreement or the Company relationship created hereby in or to any other ventures or activities in which any Managing Member Related Person is involved or to the income or proceeds derived therefrom; (ii) the pursuit of other ventures and activities by any Managing Member Related Person, even if competitive with the business of the Company, is hereby consented to by the Company and the Non-Managing Member and shall not be deemed wrongful or improper under this Agreement; and (iii) no Managing Member Related Person shall be obligated to present any particular investment opportunity to the Company or to the Non-Managing Member, even if such opportunity is of a character which, if presented to the Company, could be taken by the Company.

(b) Non-Managing Member recognizes and acknowledges that by virtue of accepting membership hereunder, Non-Managing Member will acquire valuable training and knowledge, and learn proprietary trade secrets and confidential information of the Company. In consideration of the foregoing and this Agreement, Non-Managing Member hereby agrees that during the period in which either (i) Non-Managing Member is a Member of the Company and for one (1) year thereafter; or (ii) JEA Manager is managing the Property and for one (1) year thereafter (the “Non-Compete Period”), Non-Managing Member will not, other than within the scope of Non-Managing Member’s membership with the Company, directly or indirectly (whether as employee, manager, owner, member, consultant, independent contractor, partner (limited or general) or otherwise) own, manage, control, participate in, consult with, render services for or in any manner engage in a business which involves the ownership or operation of any facility with licensed Alzheimer’s or Memory Care units within five (5) miles of the Property; nor shall Non-Managing Member knowingly request, induce, solicit or attempt to influence any Company client or Company referral source to curtail any business they are currently or have been transacting with the Company during the Non-Compete Period. Furthermore, during the Non-Compete Period, Non-Managing Member shall not, without the

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Managing Member’s prior written consent, directly or indirectly, knowingly solicit or encourage or attempt to influence any Company employee, agent or independent contractor to leave the employment of or agent/independent contractor relationship with the Company. Non-Managing Member hereby agrees that the restraint imposed under this Section 6.5 is reasonable and not unduly harsh or oppressive.

Section 6.6 Indemnification.

(a) The Company shall indemnify and hold each Member and its Affiliates, and each of the direct and indirect members, partners, principals, officers, directors, managers and employees of each of the Members and each of their Affiliates (each, an “Indemnitee”), harmless from and against any Losses (including without limitation Losses arising from Recourse Liabilities) suffered or sustained by it by reason of the Recourse Liabilities or by reason of any acts, omissions or alleged acts or omissions by such Indemnitee on behalf of the Company within the scope of authority conferred on it by this Agreement, including, any judgment, award, settlement, reasonable attorneys’ fees and other costs and expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim; provided that no Person shall be entitled to indemnification hereunder to the extent that the Losses incurred by such Person arose out of or were the result of such Person’s fraud, gross negligence or willful misconduct, the failure of such Person to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2), or such Person’s obligations to indemnify any other Person pursuant to the provisions of the Purchase Agreement.

(b) No Indemnitee shall be liable, responsible or accountable in damages or otherwise to the Company or any Member for any action taken or failure to act on behalf of the Company unless such action or omission constituted fraud, gross negligence or willful misconduct or the failure of such Indemnitee to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2). Each Member shall indemnify, protect, defend and hold the Company, each other Member and each such other Member’s related Indemnitees harmless from and against any and all Losses suffered or sustained by it by reason of any act or omission constituting fraud, gross negligence or willful misconduct by such Member or any related Indemnitee of such Member or failure of such Member to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2); provided, however, that no Person shall be entitled to indemnification hereunder to the extent that the Losses incurred by such Person arose out of or were the result of such Person’s fraud, gross negligence or willful misconduct or the failure of such Person to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2).

(c) If a claim or assertion of liability is made or asserted by a third party against an Indemnitee that, if prevailed upon by any such third party, would result in such Indemnitee being entitled to indemnification pursuant to this Section 6.56, such Indemnitee will forthwith give to the applicable indemnitor written notice of the claims or assertion of liability and request the indemnitor to defend the same. Failure to so notify the indemnitor will not relieve the indemnitor of any liability that the indemnitor might have to such Indemnitee except to the extent that such failure actually prejudices the indemnitor’s legal position. The indemnitor

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will have the obligation to defend the Indemnitee against such claim or assertion (if such Indemnitee is entitled to indemnification pursuant to this Section 6.6) and the indemnitor will give written notice to the Indemnitee of acceptance of the defense of such claim and the name of the counsel (who shall be reasonably acceptable to the Indemnitee) selected by the indemnitor to defend such claim. The Indemnitee will be entitled to participate with the indemnitor at the expense of the indemnitor in such defense and also will be entitled at its option (and at the expense of the Company) to employ separate counsel for such defense; provided, however, that if and to the proportionate extent the Indemnitee is found (by a final judgment of a court of competent jurisdiction) not to be entitled to indemnification hereunder, the Indemnitee shall reimburse the indemnitor for such expense). The indemnitor and the Indemnitee will cooperate with each other in the defense of any such action and the relevant records of each will be made available to the other with respect to such defense.

(d) No Indemnitee will be entitled to indemnification under this Section 6.6 if it has entered into any settlement or compromise of any claim giving rise to any indemnifiable loss without the written consent of the indemnitor. If a bona fide settlement offer is made with respect to a claim and the indemnitor desires to accept and agree to such offer, the indemnitor will give written notice to the Indemnitee to that effect (the “Settlement Notice”). If the settlement offer includes a full release of the Indemnitee and the Indemnitee fails to consent to the settlement offer within ten calendar days after receipt of the Settlement Notice, then the Indemnitee will be deemed to have rejected such settlement offer and will be responsible for continuing the defense of such claim and, in such event, the maximum liability of the indemnitor as to such claim will not exceed the amount of such settlement offer plus any and all reasonable costs and expenses paid or incurred by the Indemnitee up to the date of the Settlement Notice and which are otherwise the responsibility of the indemnitor pursuant to this Section. If the settlement offer does not include a full release of the Indemnitee and the Indemnitee fails to consent to the settlement offer, the indemnitor shall continue to remain liable to the Indemnitee to the full extent set forth in this Section 6.6.

(e) Any indemnification permitted under subsection (a) shall be made only out of the assets of the Company, and no Member shall be obligated to contribute to the capital of, or loan funds to, the Company to enable the Company to provide such indemnification.

(f) The indemnification provided by this Section 6.6 shall be in addition to any other rights to which each Indemnitee may be entitled as a matter of law or otherwise, as to action in the Indemnitee’s capacity as a Managing Member, Member, as a director, officer, employee, constituent partner, shareholder or other Affiliate of a Member and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Indemnitee.

(g) To the extent provided in the Annual Budget, the Company may purchase and maintain insurance on behalf of any one or more Indemnitees. If insurance is obtained for any Indemnitee, it shall be obtained on the same basis for all other Indemnitees who have comparable risks.

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(h) In no event may an Indemnitee subject an Affiliate or other related Indemnitee of a Member to personal liability by reason of the indemnification provisions of this Agreement.

(i) The provisions of this Section 6.6 are for the benefit of the Indemnitees and the heirs, successors, assigns, administrators and personal representatives of the Indemnitees and shall not be deemed to create any rights for the benefit of any other Persons. The indemnification obligations under this Section 6.6 shall survive the sale of the Membership Interests by any Member, the sale of the Property by the Company or the dissolution of the Company.

(j) Notwithstanding anything to the contrary contained herein, all indemnification obligations of the Company are fully subordinated to any obligations relative to the Senior Loans or respecting the Properties and such indemnification obligations shall in no event constitute a claim against the Company if cash flow in excess of amounts necessary to pay obligations under the Senior Loans are insufficient to pay such indemnification obligations.

Section 6.7 Right of First Offer

For so long as the Non-Managing Member is a Member of the Company, Managing Member shall have a right of first offer (“ROFO”) to invest or otherwise participate in all joint ventured investments of Non-Managing Member with any Real Estate Investment Trust (REIT) which also involve the ownership or operation of assisted living or memory care facilities (an “Investment Opportunity”). Non-Managing Member shall deliver written notice to Managing Member of any Investment Opportunity, which details the terms and conditions of the Investment Opportunity. Managing Member shall have fifteen (15) Business Days from receipt of such notice to notify the Non-Managing Member of Managing Member’s intent to exercise the ROFO with respect to the Investment Opportunity. Failure to respond to the Non-Managing Member within the fifteen (15) Business Day period referenced in the immediately preceding sentence shall terminate Managing Member’s ROFO with respect to that Investment Opportunity, at which point the Non-Managing Member shall be entitled to offer the Investment Opportunity to any and all third parties on terms and conditions substantially similar to those presented to the Managing Member.

Notwithstanding Managing Members failure to exercise the ROFO with respect to an Investment Opportunity, in no event shall the Non-Managing Member be entitled to pursue an Investment Opportunity which otherwise violates the non-compete provisions of Section 6.5 of this Agreement.

Notwithstanding the foregoing, Managing Member acknowledges that Non-Managing Member’s obligations under this Section 6.7 shall be subject to its obligations to SHACT Group, LLC, a California limited liability company (“Senior ROFO Party”) existing prior to May 7, 2012 and, with respect thereto and any Investment Opportunities (but only such Investment Opportunities) which must first be presented to Senior ROFO Party, Managing Members’ rights under this Section 6.7 shall only apply to such Investment Opportunities that Senior ROFO Party elects not to participate in. The preceding sentence in no way effects Managing Member’s rights otherwise provided in this Section 6.7 with respect to any Investment Opportunities that are not the subject of Non-Managing Member’s obligations to Senior ROFO Party. The provisions of this Section 6.7 shall not apply following a Change of Control of Managing Member.

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ARTICLE VII.

TRANSFER OF MEMBERSHIP INTERESTS

Section 7.1 General.

No Member may Transfer or permit the Transfer of all or any portion of its Membership Interest or any direct interest in such Member without the prior written consent of the other Member, which consent may be withheld at the sole and absolute discretion of such other Member, unless the Transfer is to either a Permitted Managing Member Transferee or a Permitted Non-Managing Member Transferee and unless and until all requirements and conditions stated in this Article, which shall be read and construed as a whole, have been satisfied in full or have been waived by the non-transferring Member. Any Transfer in violation of this Article shall be invalid, ineffective and not enforceable for any purpose. No authorization, consent or waiver applicable to one Transfer shall apply or be deemed to apply to any other Transfer or requested Transfer.

Section 7.2 Permitted Transferees.

(a) A “Permitted Managing Member Transferee” means any Person Controlling, Controlled by or under common Control with Managing Member.

(b) A “Permitted Non-Managing Member Transferee” means any Person Controlling, Controlled by or under common Control with Non-Managing Member.

Section 7.3 Right of First Refusal.

(a) Third Party Offer. Any Member (“Selling Member”) who has received a Bona Fide Offer from a Third Party prospective purchaser (“Qualified Purchaser”), to purchase all (but not less than all) of the Selling Member’s Membership Interest, before selling any of its Membership Interest, shall first offer the sale thereof to the other Member (the “Remaining Member”) upon the same terms and conditions stated in such Bona Fide Offer (“Right of First Refusal”). To avoid all doubt, any sale of less than all of the Membership Interest of a Member is subject to the prior written consent of the other Member (which may be withheld at the sole and absolute discretion of such other Member), except to the extent any exception contained in Section 7.2 applies, that is, the Transfer is to either a Permitted Managing Member Transferee or a Permitted Non-Managing Member Transferee. Notwithstanding the foregoing or anything else in this Agreement to the contrary no Member may Transfer or permit the Transfer of all or any portion of its Membership Interest or any direct or indirect interest in such Member while any such Transfer previously initiated by another Member is continuing and have not yet been completed or terminated in accordance with the applicable provisions of this Agreement.

(b) Remaining Member’s Right to Purchase. The Remaining Member shall have the right to purchase all, but not part, of the Membership Interest of the Selling Member. If the Remaining Member does not exercise its right by written notice forwarded no later than thirty (30) days after receipt of such offer, then: a) the Selling Member may sell all (but not less than all) or its Membership Interest to the Qualified Purchaser under the same terms and

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conditions as are set forth in the original Bona Fide Offer and b) the Qualified Purchaser’s Unreturned Capital Contribution shall be the same as the Unreturned Capital Contribution of the Selling Member immediately before the sale. The sale to the Qualified Purchaser must be consummated within thirty (30) days from the last date on which the Remaining Member had the right to accept the offer to purchase, subject to reasonable extensions (not to exceed ninety (90) days) to (i) obtain an agreement with the holder(s) of any mortgage encumbering the Property and/or any mezzanine loan encumbering the Membership Interest to permit the Qualified Purchaser (and its designees, if applicable) to assume such loan(s), and release the Selling Member (and its designees, if applicable) from all liability with respect to such loan(s) arising from and after the closing with the Qualified Purchaser, and (ii) if applicable, transfer the licenses issued with respect to the facilities operated pursuant to the Leases. Evidence that the sale has been so consummated shall be supplied in writing by the Selling Member and the Qualified Purchaser to the Company and the Remaining Member. If the sale has not been consummated within said thirty (30) day period, as it may be extended, the rights of the Remaining Members to purchase shall again attach to the Membership Interest of the Selling Member and no sale may be made to any purchaser without again complying with the provisions of this Section 7.3 and the remainder of Article 7.

(c) Closing. The purchase referred to in Section 7.3 shall be closed (the “ROFR Closing”) within forty-five (45) days following acceptance by the Remaining Member (the “ROFR Closing Date”), subject to reasonable extensions (not to exceed ninety (90) days) to (i) obtain an agreement with the holder(s) of any mortgage encumbering the Property and/or any mezzanine loan encumbering the Membership Interest to if applicable, to permit the Remaining Member (and its designees, if applicable) to assume such loan(s), release the Selling Member (and its designees, if applicable) from all liability with respect to such loan(s) arising from and after the ROFR Closing Date, and (iii) if applicable, transfer the licenses issued with respect to the facilities operated pursuant to the Leases. The ROFR Closing shall be held at the offices of Foley & Lardner LLP, 111 North Orange Avenue, Suite 1800, Orlando, Florida 32801, at 10:00 a.m. on the ROFR Closing Date, or at such other time or place as parties may agree. At the ROFR Closing: (i) the Selling Member shall deliver (A) an assignment of Membership Interest representing the Membership Interest sold by the Selling Member, subject to no pledge, lien or other encumbrance and (B) any and all other documents that may be reasonably required by the purchaser thereof, and (ii) the Remaining Member shall pay the agreed upon consideration.

Section 7.4 Effect of Assignment.

(a) In the event of any sale, assignment or transfer permitted hereunder, the Company shall not be dissolved or wound up, but shall continue. No such sale, assignment or transfer shall relieve the assignor from any of its obligations under this Agreement accruing prior to such sale, assignment or transfer. Notwithstanding the foregoing, as a condition to any sale, transfer or assignment by a Member, the transferee or assignee must execute this Agreement (as amended) and agree to be bound by all of its terms and provisions.

(b) Upon the Transfer of its entire Membership Interest in the Company and the admission of such Member’s transferee(s) as a substitute Member pursuant to this Article, a Member shall be deemed to have withdrawn from the Company.

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(c) If a Member Transfers less than all of its Membership Interest in the Company or if all or part of the direct or indirect ownership or other interests in a Member are Transferred such Member shall continue to have the sole and exclusive right to approve Major Decisions and to take other actions required or permitted under this Agreement, to the extent such Member had such right prior to the Transfer.

Section 7.5 Substitute Member.

The transferee of a Membership Interest shall be automatically admitted to the Company as a substitute Member, upon its compliance with this Article. Unless a transferee of a Membership Interest is admitted as a substitute Member under this Section 7.5, it shall have none of the powers of a Member hereunder and shall have only such rights of an assignee under the Delaware Act as are consistent with the other terms and provisions of this Agreement.

Section 7.6 Further Requirements.

In addition to the other requirements of this Article, and unless waived or modified in whole or in part by Non-Managing Member (if the transfer is by Managing Member or one of its transferees) or Managing Member (if the transfer is by Non-Managing Member or one of its transferees), no transfer of all or any portion of a Membership Interest may be made unless the following conditions are met:

(a) The delivery to the Company of a fully executed copy of all transfer documents relating to the transfer, including (but without limitation) this Agreement, an instrument of transfer and the agreement in writing of the transferee to (i) be bound by the terms of this Agreement and (ii) pay all costs and expenses of the Company incident to the transfer.

(b) The representation of the transferring Member and the transferee, and the delivery of an opinion of counsel reasonably acceptable to the non-transferring Members, that (i) the transfer will not cause the Company to be treated as an association taxable as a corporation for Federal income tax purposes, (ii) the transfer will not cause the Company to be treated as a “publicly traded Company” within the meaning of Section 7704 of the Code and (iii) the transfer will not violate the Securities Act of 1933, as amended, or any other applicable Federal or state securities laws, rules or regulations.

Section 7.7 Transfer Taxes.

The transferor of any Membership Interest shall be responsible for the payment of any transfer taxes payable in connection therewith unless the transferee shall otherwise agree.

Section 7.8 Managing Member’s Call Right.

At any time after the third anniversary of the Effective Date of this Agreement, the Managing Member shall have the right and option, but not the obligation, to purchase the Membership Interest from the Non-Managing Member for a sum equal to such amount as would be distributed to the Non-Managing Member pursuant to Section 4.2 if the Property were sold for the Option Price. The “Option Price” shall mean a mutually agreed upon price for the Property, or such other price as may be determined in the manner set forth by this Section 7.8. Managing

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Member shall exercise the call option by written notice to the Non-Managing Member (the “Call Option”). Thereafter, the Members shall act in a commercially reasonable, good faith manner to complete the repurchase of the Membership Interest within thirty (30) days after receipt of the Call Option by the Non-Managing Member. If, at the end of such thirty (30) days following the date of delivery of the Call Option, all parties are in agreement as to the fair market value of the Property, then the Non-Managing Member shall transfer its Membership Interest to the Managing Member in exchange for the payment in immediately available funds at closing provided in this Section 7.8, utilizing such agreed upon valuation, less actual transaction costs in accordance with the provisions of Section 4.2. If the Members have failed to agree upon the fair market value of the Property, each Member shall have a further ten (10) Business Days in which to hire an appraiser of their choice. If either the Managing Member or the Non-Managing Member fails to appoint their respective appraiser within the ten (10) Business Day period referenced in the immediately preceding sentence, the determination of the appraiser appointed by the other Member (if so appointed within such period) shall be conclusive and binding on the Members. If the appraisers appointed by the Managing Member and the Non-Managing Member are unable to agree upon the fair market value of the Property being valued within thirty (30) days after the appointment of the second of such appraisers, the two appraisers shall appoint a third appraiser. In such case, the average of the determinations of the three appraisers shall be conclusive and binding on the Members, unless the determination of one independent appraiser is disparate from the middle determination by more than twice the amount by which the third determination is disparate from the middle determination, in which case the determination of the most disparate appraiser shall be excluded, and the average of the remaining two determinations shall be conclusive and binding on the Members.

Section 7.9 Corporate Change of Control of Non-Managing Member

In the event of a Corporate Change of Control of Non-Managing Member which occurs without the consent of the Managing Member, the Non-Managing Member shall be deemed to have made an offer to sell of the Non-Managing Member’s Membership Interest immediately prior to the effectuation of the Corporate Change of Control. The purchase price for the Non-Managing Member’s Membership Interest shall be determined in the manner set forth in Section 7.8 hereinabove.

ARTICLE VIII.

CERTAIN REMEDIES

Section 8.1 No Partition.

Each Member hereby irrevocably waives any and all rights that it may have to maintain any action for partition of the Company Property.

Section 8.2 Litigation Without Termination.

Each Member shall be entitled to maintain, on its own behalf or on behalf of the Company, any action or proceeding against any other Member or the Company (including, without limitation, any action for damages, specific performance or declaratory relief) for or by reason of the breach

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by such party of this Agreement or any other agreement entered into in connection with this Agreement, notwithstanding the fact that any or all of the parties to such proceeding may then be Members in the Company.

Section 8.3 Attorneys’ Fees.

In the event of any dispute hereunder, or in connection with the execution of this Agreement, or otherwise relating to the relationship of the Members contemplated hereby, the prevailing party in any legal proceeding brought to resolve such dispute shall be entitled to recover from the non-prevailing party in any such proceeding, all of such prevailing party’s reasonable attorneys’ fees and disbursements, at both trial and appellate levels and in any administrative proceeding or bankruptcy proceeding. The provisions of this Section 8.3 shall survive the sale of the Membership Interests by any Member, the sale of the Property by the Company or the dissolution of the Company.

Section 8.4 Cumulative Remedies.

No remedy conferred upon the Company or any Member pursuant to this Agreement is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity or by statute (subject, however, to the limitations expressly herein set forth).

Section 8.5 No Waiver.

No waiver by a Member or the Company of any breach of this Agreement shall be deemed to be a waiver of any other breach of any kind or nature, and no acceptance of payment or performance by a Member or the Company after any such breach shall be deemed to be a waiver of any breach of this Agreement, whether or not such Member or the Company knows of such breach at the time it accepts such payment or performance. Subject to any applicable statutes of limitation and any provisions in this Agreement to the contrary, no failure or delay on the part of a Member or the Company to exercise any right it may have under this Agreement shall prevent the exercise thereof by such Member or the Company, and no such failure or delay shall operate as a waiver of any breach of, or default under, this Agreement.

ARTICLE IX.

DISSOLUTION OF COMPANY

Section 9.1 Events Giving Rise to Dissolution.

No act, thing, occurrence, event or circumstance shall cause or result in the dissolution of the Company, except that the happening of any one of the following events shall work an immediate dissolution of the Company:

(a) The sale of all or substantially all of the Company Property;

(b) Approval by a majority of the Members to dissolve the Company;

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(c) The termination of the legal existence of the last remaining Member of the Company or the occurrence of any other event which terminates the continued membership of the last remaining Member of the Company in the Company unless the Company is continued without dissolution in a manner permitted by this Agreement or the Delaware Act; or

(d) The entry of a decree of judicial dissolution under Section 18-802 of the Delaware Act, provided, however, that to the fullest extent permitted by law, the Members waive the right to seek and shall not seek or acquiesce in the entry of a decree of judicial dissolution.

(e) Failure of the transaction described in the Purchase Agreement to close by July 31, 2012, as such date may be extended by the parties thereto.

Upon the occurrence of any event that causes the last remaining Member of the Company to cease to be a member of the Company, to the fullest extent permitted by law, the personal representative of such Member is hereby authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such Member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute Member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining Member in the Company.

Without limitation on the other provisions hereof, neither the assignment of all or any part of a Membership Interest permitted hereunder nor the admission of a substitute member nor the bankruptcy, insolvency or dissolution of a Member shall, in and of itself, work the dissolution of the Company. Except as otherwise provided in this Agreement, each Member agrees that a Member may not withdraw or resign from or, to the fullest extent permitted by law, cause a voluntary dissolution of the Company.

Notwithstanding any other provision of this Agreement, the Bankruptcy of a Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution.

Notwithstanding any other provision of this Agreement, each of the Members waives any right it might have to dissolve the Company upon the Bankruptcy of a Member or the occurrence of an event that causes a Member to cease to be a member of the Company.

Section 9.2 Procedure.

(a) Upon the dissolution of the Company, the Managing Member or, if Managing Member or its Affiliate is not the Managing Member, then such Person as the remaining Members or if there are no remaining Members, their personal representatives or other successors, shall select to wind up the Company’s affairs (the Managing Member or such other Person being referred to herein as the “Liquidating Trustee”) shall wind up the affairs of the Company. The Members shall continue to receive allocation of Net Income and Net Losses and distributions of Available Cash from Operations during the period of liquidation of the Company in the same manner and proportion as though the Company had not dissolved. The Liquidating Trustee shall, exercising due and prudent business judgment, determine the time, manner and terms of any sale or sales of Company Property pursuant to such liquidation, having due regard to the activity and condition of the relevant market and general financial and economic conditions.

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(b) Following the satisfaction of all debts and liabilities of the Company and all expenses of liquidation (whether by payment or reasonable provision for payment thereof), the proceeds of the liquidation and any other funds of the Company shall be distributed in accordance with Section 4.2.

(c) Each Member shall look solely to the assets of the Company for all distributions that such Member may be entitled to under this Agreement and shall have no recourse therefor (in the event of any deficit in an Member’s Capital Account or otherwise) against any other Member; provided that nothing herein contained shall relieve any Member of such Member’s obligation to pay any liability or indebtedness owing the Company by such Member and any reimbursements required to be made to the Company (including, without limitation, pursuant to Section 4.2) and the Company and the Members shall be entitled at all times to enforce such obligations of such Member. No Member shall have any right to demand or receive property other than cash upon dissolution and termination of the Company.

(d) Notwithstanding any other provision of this Agreement to the contrary, upon liquidation of a Membership Interest (whether or not in connection with a liquidation of the Company), no Member shall have any liability to restore any deficit in its Capital Account. In addition, no allocation to any Member of any loss, whether attributable to depreciation or otherwise, shall create any asset of or obligation to the Company, even if such allocation reduces a Member’s Capital Account or creates or increases a deficit in such Member’s Capital Account; it is also the intent of the Members that no Member shall be obligated to pay any such amount to or for the account of the Company or any creditor of the Company. The obligations of the Members to make contributions pursuant to Article 3 are for the exclusive benefit of the Company and not of any creditor of the Company; and no such creditor is intended as a third party beneficiary of this Agreement nor shall any such creditor have any rights hereunder, including, but without limitation, the right to enforce any Capital Contribution obligations of the Members.

(e) Upon the completion of the liquidation of the Company and the distribution of all Company assets and if the Certificate of Formation of the Company shall have been cancelled in the manner required by the Delaware Act, the Company shall terminate.

ARTICLE X.

MISCELLANEOUS

Section 10.1 Notices.

All notices, consents or waivers shall be in writing and shall be deemed to have been duly given:

(a) when delivered personally; or

(b) seventy-two (72) hours after being mailed, registered or certified mail, return receipt requested, postage prepaid, to the respective addresses set forth below; or

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(c) one (1) Business Day after being delivered to a nationally-recognized overnight courier service, prepaid, marked for next day delivery, addressed to the addressee at its address set forth below; or

(d) on the Business Day of receipt if received during normal business hours and, if received after the close of business, the first Business Day after receipt, if delivered by facsimile transmission to the fax number (if any) of the receiving party listed below, if receipt is confirmed in writing by the sending facsimile machine.

(e) The addresses for notice are:

If to the Company, to its address set forth in Section 1.6 hereof:

If to Managing
Member:	SENTIO LEAH BAY TRS, LLC
	Attn: Scott Larche
	189 S. Orange Ave., Suite 1700
	Orlando, Florida 32801
	Telephone No.: 407.999.7679
	Telecopy No.:	407.999.5210
With a copy to:	Foley & Lardner LLP
	111 North Orange Avenue
	Suite 1800
	Orlando, Florida 32801
	Attention:	Michael A. Okaty, Esq.
	Telephone:	407.244.3229
	Facsimile:	407.648.1743
If to Non-Managing
Member:	12115 NE 99th Street
	Suite 1800
	Vancouver, Washington
	Telephone No.: 800.254.9442
	Telecopy No.:	360.254.1770
With copies to:	Cherry Petersen Landry Albert LLP
	8350 N. Central Exwy., Suite 1500
	Dallas, Texas 75206
	Attention: Terry Landry
	Telephone No.: 214.265.9174
	Telecopy No.:	214.265.7008

Section 10.2 Entire Agreement.

This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof, except for the Owner Portfolio Agreement. This Agreement supersedes any prior agreement or understandings between the parties and/or their Affiliates with respect to the subject matter hereof and shall not amend or modify or in any way affect any other agreement or understanding between the parties hereto that are not related to the subject matter hereof.

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Section 10.3 Amendments.

This Agreement may be amended by written agreement of amendment executed by all Members, but not otherwise.

Section 10.4 Governing Law.

This Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to its conflict of law provisions.

Section 10.5 Successors and Assigns.

Except as limited by this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and permitted assigns.

Section 10.6 Interpretation.

The section headings and captions contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. As used herein, the neuter gender shall include the masculine and feminine genders, and vice versa, and the singular, the plural, and vice versa, as the context demands. The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive. References herein to this Agreement shall be deemed to refer to this Agreement as of the date of such Agreement and as it may be amended thereafter, unless otherwise specified. The parties hereto agree that this Agreement is the product of negotiation between sophisticated parties, all of whom were represented by counsel, and each of whom had an opportunity to participate in and did participate in the drafting of each provision hereof. In the event any court or other adjudicative body of competent jurisdiction is called upon to interpret this Agreement, the language of this Agreement shall be construed as a whole, according to its fair meaning and intent, and not strictly for or against any party, regardless of which party drafted or was principally responsible for drafting the Agreement or any specific term or condition hereof. The Settlement Agreement has been circulated for editing to all parties. As such, the Agreement shall be deemed to have been drafted by all parties jointly, and no party shall be deemed to have drafted this Agreement, or any of its individual terms or conditions. No party may offer in evidence or otherwise use, for purposes of suggesting any interpretation of this Settlement Agreement, any prior drafts of this Agreement.

Section 10.7 Severability.

If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to other Persons or circumstances, shall not be affected thereby.

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Section 10.8 Legal Counsel.

Legal counsel for a Member or one of its Affiliates (“Counsel”) may represent the Company in connection with legal work or issues arising in connection with the Company and/or the Operating Company (each, a “Matter”). Each Member recognizes and acknowledges that any such Counsel will be acting as legal counsel for the Company and/or the Operating Company with respect to each Matter and shall not be acting as the legal counsel of any individual Member. Each Member further recognizes and accepts that its interest with respect to any Matter may be adverse to the interests of the other Members and of the Company and/or the Operating Company. Each Member nevertheless consents to the representation of the Company and/or the Operating Company by such Counsel with respect to each Matter and waives for the benefit of each other Member and of such Counsel any potential or actual conflict of interest between or among such Members and between any such Members and the Company and/or the Operating Company. Each Member acknowledges that in the event of any future dispute or litigation between or among the Members and/or between any of the Members and the Company and/or the Operating Company, the Counsel may continue to represent its Member client, notwithstanding any such dispute and its prior representation of the Company and/or the Operating Company.

Section 10.9 Advice from Independent Counsel/Voluntary Agreement.

Notwithstanding the provisions of Section 10.8, the Members represent and warrant that (a) each of them is represented by legal and tax counsel of its choice, (b) each of them has consulted with such counsel regarding this Agreement, (c) each of them is fully aware of the meaning and the tax and other consequences of the provisions contained herein, (d) each of them has not relied in any way on any representation or other statement made by any other Member or its legal or tax counsel or by any other Person and (e) each of them has entered into this Agreement voluntarily and without coercion or duress of any kind.

Section 10.10 Counterparts.

This Agreement may be executed in any number of counterparts, and/or by facsimile and/or by electronic mail, each of which counterpart shall be deemed to be an original and all such counterparts taken together shall be deemed to constitute one and the same instrument. The signatories hereto confirm that any facsimile or electronic copy of another signatory’s executed counterpart of this Agreement (or its signature page) will be deemed to be an executed original.

Section 10.11 Benefits of Agreement; No Third-Party Rights.

None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of a Member, and nothing in this Agreement shall be deemed to create any right in any Person not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person, provided, however, that the Indemnitees and their respective successors and assigns are intended third-party beneficiaries of this applicable indemnification provisions set forth in this Agreement.

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Section 10.12 WAIVER OF JURY TRIAL.

EACH MEMBER AND THE COMPANY HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE MEMBERS AND THE COMPANY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. THE MEMBERS AND THE COMPANY ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.

Section 10.13 Special Purpose Provisions.

(a) Notwithstanding anything to the contrary set forth herein, the Company and the Members hereby agree that at all times:

(i) The Company shall not own any asset or property other than (A) the membership interests in each of the Operating Companies and (B) incidental personal property necessary for the ownership of such interests. The Company shall not allow the Operating Company to lease any asset or property other than (x) the Property, or own any asset or property other than (y) incidental personal property (including intangible personal property) necessary for the operation of the Property.

(ii) The Company shall not allow the Operating Companies to engage in any business other than as stated in Section 2 of each of the Operating Companies LLC Agreement. The Company will not engage in any business other than as stated in Section 1.4.

(iii) The Company will maintain, and the Company shall cause the Operating Company to maintain, an arms-length relationship with their Affiliates, constituent parties and any other Persons furnishing services to them, and the Company will not enter, nor shall the Company allow the Operating Company to enter, into any contract or agreement or engage in any material transaction (as transferor or transferee) with any Affiliate of each of the Operating Companies or the Company or any constituent party of each of the Operating Companies or the Company, except for fair value and upon terms and conditions that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arms-length basis with third parties other than any such party. The Company will not engage, nor shall the Company allow the Operating Company to engage, in any transaction with any Affiliate of the Company, the Operating Company, any constituent party of the Company, any guarantors of the obligations of the Company or the Operating Company or any Affiliate of any constituent party, owner or guarantor (individually, a “Related Party” and collectively the “Related Parties”) involving any intent to hinder, delay or defraud any Person.

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(iv) The Company will be, and the Company shall cause the Operating Company to be, and at all times hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate or any constituent party thereof) except that the Operating Company shall be treated as a disregarded entity for federal, and to the extent applicable, state and local income tax purposes only.

The Members acknowledge that this Section 10.13 may be modified to include additional special purpose provisions if such provisions are required by a third party lender with respect to a transaction involving the Company.

Section 10.14 Patriot Act Representation. Each Member hereby represents and warrants that on the date hereof and throughout the term of this Agreement (a) none of the funds or other assets or any Member, or any principal of any of them, constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. Law, including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq., the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001 (Public Law 107-56), the Trading with the Enemy Act, 50 U.S.C. App 1 et seq., and any Executive Orders or regulation promulgated under any such legislation with the result that the investment in the Company is prohibited by law or is in violation of law (any such person, entity or government being referred to herein as an “Embargoes Person”), and (b) none of the funds of any Member or any such principal, as applicable have been derived from any unlawfully activity with the result that the investment in the Company or in any principal, as applicable, whether directly or indirectly, is prohibited by law or is in violation of law.

Section 10.15 OFAC Compliance and Source of Funds. Each Member represents and warrants that such Member is not now nor shall it be at any time hereafter an individual, corporation, partnership, joint venture, association, joint stock company, trust, trustee, estate, limited liability company, unincorporated organization, real estate investment trust, government or any agency or political subdivision thereof, or any other form of entity with whom a United States citizen, entity organized under the laws of the United States or its territories or entity having its principal place of business within the United States or any of its territories (collectively, a “U.S. Person”), is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under United States law, regulation, executive orders and lists published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”) (including those executive orders and lists published by OFAC with respect to Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC “Specially Designated Nationals and Blocked Persons”) or otherwise. Neither Member nor any Person who owns an interest in Member (collectively, a “Purchaser Party”) is now nor shall be at any time hereafter a Person with whom a U.S. Person, including a “financial institution” as defined in 31 U.S.C. § 5312(a)(2) (“Financial Institution”), is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under United States law, regulation, executive orders and lists published by the OFAC (including those executive orders and lists published by OFAC with respect to Specially Designated Nationals and Blocked Persons) or otherwise.

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(b) Member’s Funds. Each Member represents and warrants that such Member has taken, and shall continue to take hereafter, such measures as are required by law to assure that the funds used to pay to the Company the Capital Contribution are derived from: (i) transactions that do not violate United States law nor, to the extent such funds originate outside the United States, do not violate the laws of the jurisdiction in which they originated; and (ii) permissible sources under United States law and to the extent such funds originate outside the United States, under the laws of the jurisdiction in which they originated.

(c) Anti-Money Laundering Laws. Each Member represents and warrants that to the best of such Member’s knowledge after making due inquiry, neither Member nor any Purchaser Party, nor any Person providing funds to Member: (i) is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti Money Laundering Laws (as hereinafter defined in this Section 10.15(c)); (ii) has been assessed civil or criminal penalties under any Anti-Money Laundering Laws; or (iii) has had any of its funds seized or forfeited in any action under any Anti Money Laundering Laws. For purposes of this Subsection (i), the term “Anti-Money Laundering Laws” shall mean laws, regulations and sanctions, state and federal, criminal and civil, that: (w) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (x) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States; (y) require identification and documentation of the parties with whom a Financial Institution conducts business; or (z) are designed to disrupt the flow of funds to terrorist organizations. Such laws, regulations and sanctions shall be deemed to include the USA PATRIOT Act of 2001, Pub. L. No. 107-56 (the “Patriot Act”), the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq., the Trading with the Enemy Act, 50 U.S.C. App. §§ 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., and the sanction regulations promulgated pursuant thereto by the OFAC, as well as laws relating to prevention and detection of money laundering in 18 U.S.C. §§ 1956 and 1957.

Section 10.16 Plans & Specifications for Facilities. Managing Member acknowledges that the plans and specifications for the building prototype of the Facilities (the “Plans”) are protected by copyright owned by JEA Manager, and that except as expressly provided in this Section 10.16, no rights to use the Plans are being conferred to the Managing Member by this Agreement. Managing Member (for itself and its affiliates) agrees that except in connection with the (i) the Properties and (ii) any future property jointly developed and/or acquired by the Members, it will not construct any improvements utilizing the Plans unless agreed in writing by JEA Manager, which shall be subject to JEA Manager’s sole and absolute discretion.

ARTICLE XI.

BOOKS AND RECORDS

Section 11.1 Books and Records; Periodic Reporting.

(a) The Managing Member shall maintain at the principal place of business of the Company separate books of account for the Company that shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received, and all income derived in connection with the conduct of the Company and the operation of its business in accordance with modified accrual based income tax accounting consistently applied.

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(b) Except as provided in Section 4.2, the Company’s federal and state income and other tax returns shall be prepared at the expense of the Company. All tax returns shall be signed on behalf of the Company and filed by the Managing Member and prepared in accordance with Section 2.1 of Exhibit B. At least ten (10) days prior to the due date, as the same may be extended, of each such Company tax return, the Managing Member shall transmit copies thereof to the Members for their review. In addition, as soon as reasonably possible each year, the Managing Member shall furnish each Member with such information as may be needed to enable such Member to file its federal income tax return and any required state income tax return. The cost of all such reporting shall be paid by the Company as a Company expense.

Section 11.2 Right to Inspection; Delivery of Information.

The Members shall have the right at all reasonable times, during their respective periods of membership in the Company, upon reasonable notice to examine and copy at the expense of the Company, the books and records of the Company.

Section 11.3 Notices of Default or Litigation.

In addition to the foregoing, any Member receiving any of the following notices or information (a “Receiving Member”) Managing Member shall promptly provide the other Member; provided, however, that Manager Member is not required to provide any such information which Non-Managing Member is already aware of in its capacity as JEA Manager.

(a) written notice of any litigation, arbitration, or other proceeding or governmental investigation (including any survey results or inspection reports from any governmental authority) pending or, to Receiving Member’s knowledge, threatened against or relating to the Company, the Operating Company, the Property or the Receiving Member (other than any litigation, arbitration or other proceeding concerning any bankruptcy or default by a tenant); provided, that with respect to any such litigation, arbitration or other proceeding relating solely to a monetary claim of less than $10,000.00, Receiving Member shall not be required to provide notice (written or otherwise) of such claim in accordance with the terms of this clause;

(b) a copy of all notices of default and violations of laws, regulations, codes, ordinances and the like received by the Company or Receiving Member relating to (i) the Company, (ii) the Operating Company, (iii) any Member, or (iv) the Property;

(c) a copy of all notices of default or any other correspondence sent by the Company to, or received by the Company from, the (i) Manager under the Management Agreement or the (ii) Senior Lender.

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ARTICLE XII.

RIGHTS AND OBLIGATIONS OF MANAGING MEMBER

Section 12.1 Rights and Obligations of Managing Member.

The Managing Member shall have full, exclusive, and complete discretion, power, and authority, subject in all cases to the other provisions of this Agreement and the requirements of applicable law, to manage, control, administer, and operate the business and affairs of the Company for the purposes herein stated, and shall have the power to perform, or cause to be performed, among others, all of the following:

(a) operate, maintain and manage the Company Property in a manner necessary and appropriate for the accomplishment of the purposes of the Company;

(b) cause the Operating Company to enter into any necessary and appropriate agreements and contracts deemed necessary and appropriate in connection with the management, maintenance and operation of the Property;

(c) as a fiduciary for the Company, hold and distribute funds to the Members by way of cash, income and return of capital, or otherwise, in accordance with the provisions of this Agreement;

(d) contract on behalf of the Company and/or the Operating Company for the engagement of independent contractors and supervise such contractors in connection with the rendering of services to the Company and/or the Operating Company;

(e) obtain insurance policies for that the Property and potential liabilities and risks of the Company in appropriate amounts (subject to availability at commercially reasonable rates);

(f) prepare and adopt the annual budgets for the Company and the Operating Companies;

(g) The Members stipulate and agree that Managing Member has used reasonable commercial efforts to perform its obligations under this Section 12.1 with respect to the management and operation of the Company if and to the extent and during the applicable time periods that such management and operational matters are within the purview of the obligations of a JEA Manager pursuant to an applicable JEA Management Agreement.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement, as of the date first set forth above.

SENTIO LEAH BAY TRS, LLC,
a Delaware limited liability company
By:	Sentio Healthcare Properties, Inc., a
	Maryland corporation, its Manager
	By:
		John Mark Ramsey, CEO

[SIGNATURE OF ERWIN FAMILY PROPERTIES I, L.L.C. ON THE FOLLOWING PAGE]

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement, as of the date first set forth above.

ERWIN FAMILY PROPERTIES I, L.L.C.,
a Washington limited liability company
By:
	, Manager

[JOINDER BY MEMBERS OF OWNER PORTFOLIO ON THE FOLLOWING PAGE]

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JOINDER

BY MEMBERS IN

SENTIO LEAH BAY PORTFOLIO, LLC,

a Delaware limited liability company

The undersigned being the sole members in Sentio Leah Bay Portfolio, LLC, a Delaware limited liability company, do hereby join in the execution of this Agreement to confirm their agreement that (i) as to Sentio Leah Bay, LLC, the entire Membership Interest of Managing Member in the Company shall be included with the entire membership interest of Sentio Leah Bay, LLC in Owner Portfolio, and (ii) as to Erwin Family Properties I, LLC, the entire Membership Interest of Non-Managing Member in the Company shall be included with the entire membership interest of Erwin Family Properties I, LLC, in Owner Portfolio, as to each of subclauses (i) and (ii), both under the under the provisions of Article 7 of this Agreement.

SENTIO LEAH BAY, LLC, a Delaware limited
liability company
By:	Sentio Healthcare Properties, Inc., a
	Maryland corporation, its Manager
	By:
		John Mark Ramsey, CEO

[SIGNATURE PAGE OF ERWIN FAMILY PROPERTIES I, L.L.C. OF JOINDER BY MEMBERS OF OWNER PORTFOLIO ON THE FOLLOWING PAGE]

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ERWIN FAMILY PROPERTIES I, L.L.C.
a Washington limited liability company
By:
	, Manager

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EXHIBIT A

DEFINITIONS

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is Controlled by or is under common Control with such Person or of an Affiliate of such Person.

“Agreement” shall mean this limited liability company agreement, as amended, modified or supplemented from time to time in accordance with its terms together with the Exhibits attached hereto.

“Anti-Money Laundering Laws” shall have the meaning set forth in Section 10.15(c).

“Assumption and Release Agreements” shall mean those certain assumption and release agreements between Senior Lender and Landlords.

“Available Cash from Operations” shall mean all cash funds of the Company on hand from time to time after reduction for (a) all Company Costs and Expenses that are due and payable as of such date, (b) the Threshold Working Capital Amount and (c) the Capital Expenditure Threshold.

“Bankruptcy” shall mean, with respect to any Person, if such Person: (a) makes an assignment for the benefit of creditors; (b) files a voluntary petition in bankruptcy, (c) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings; (d) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation; (e) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature; (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties; or (f) if one hundred twenty (120) days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the Delaware Act.

“Bona Fide Offer” means a written offer by a Qualified Purchaser to buy the entire Membership Interest of a Member accompanied by a cash deposit of a sum not less than five percent (5%) of the total proposed purchase price.

“Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the United States shall not be regarded as a Business Day.

“Call Option” shall have the meaning set forth in Section 7.8.

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“Capital Account” shall mean, with respect to each Member, the account established and maintained for the Member on the books of the Company in compliance with Treasury Regulation §§1.704-1(b)(2)(iv) and 1.704-2, as amended. This definition shall be interpreted and applied in a manner consistent with such Treasury Regulations. Subject to the preceding sentence, each Member’s Capital Account will initially equal the amount of cash and fair market value of property contributed (as of the date of such contribution, net of liabilities that the Company is considered to assume or take subject to under Code Section 752) by such Member to the Company and throughout the term of the Company will be (a) increased by the amount of (1) income and gains allocated to such Member and (2) the amount of any cash and the fair market value of any property subsequently contributed by such Member to the Company (as of the date of such contribution, net of liabilities that the Company is considered to assume or take subject to under Code Section 752), and (b) decreased by the amount of (1) losses and deductions allocated to such Member and (2) the amount of distributions of cash and the fair market value of distributions of property (as of the date of such distribution, net of liabilities that the Member is considered to assume or take subject to under Code Section 752) distributed to such Member.

“Capital Contributions” shall mean the capital contributions of the Members required or permitted under Section 3.1 or 3.2.

“Capital Expenditure” shall mean any expenditure(s) for assets having a useful life in excess of one (1) year.

“Code” means the Internal Revenue Code of 1986, as amended from time to time (or any succeeding law).

“Commissioner” means the Commissioner of the Internal Revenue Service of the United States of America.

“Company” shall mean Sentio Leah Bay TRS Portfolio, LLC, a Delaware limited liability company.

“Company Costs and Expenses” shall mean all of the permitted expenditures of any kind made or to be made with respect to the direct or indirect operations of the Company and/or the Landlord, including, without limitation, all required debt service payments, all amounts payable pursuant to any management, leasing or other agreement relating to the Property, costs of improvements to be made with respect to the Property, ad valorem taxes, federal, state and local taxes, assessment and school fees, insurance premiums, repair and maintenance costs, engineering fees, advertising and other marketing expenses, professional fees, utilities costs, overhead, costs, general and administrative costs of each of the Operating Companies and the Company and all other types of permitted costs, expenses, charges, liabilities and obligations of the Company and/or the Landlord, as limited herein.

“Company Minimum Gain” has the same meaning as “partnership minimum gain” set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

“Company Property” shall mean the Property and all other property of whatever kind or nature owned by the Company from time to time.

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“Contributing Member” shall have the meaning set forth in Section 3.2(b).

“Control” when used with respect to any specified Person, as such or in any related meaning, shall mean the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, membership or partnership interests, by contract or otherwise.

“Corporate Change of Control” means, with respect to a Member, (i) any transaction or series of related transactions (including without limitation any merger or consolidation) as a result of which the person(s) or entity(ies) that directly or indirectly through one or more intermediaries has a majority of the membership, ownership or control rights in the Member immediately prior to such transaction ceases to have a majority of the membership, ownership or control rights in the Member immediately subsequent to such transaction; (ii) any reorganization or restructuring of a Member involving fifty percent (50%) or more of the ownership or membership interests in the Member; (iii) any sale of all or substantially all of the assets of the Member; (iv) any redemption or sale of fifty percent (50%) or more of the ownership interests in the Member, including the issuance of warrants, options or other rights to acquire such interests; (v) issuance of ownership interests in the Member or any convertible debt security or debt security issued together with warrants or options, or any sale, conveyance or other disposition of any other form of securities in the other Member that, in combination, when issued or exercised would affect the ownership of fifty percent (50%) or more of the ownership interests in the Member; or (vi) any of the transactions described in subsection (ii)-(v) above with respect to any entity that owns or controls more than fifty-one percent (51%) of the membership, ownership or control interests in the Member, without the prior written consent of the other Member. For purposes hereof, “control” (or other similar variations thereof) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Member, whether through membership, ownership of voting securities, by contract or otherwise.

“Counsel” shall have the meaning set forth in Section 10.8.

“Delaware Act” shall have the meaning set forth in the Explanatory Statement.

“Effective Date” shall have the meaning set forth in the Preamble.

“Embargoes Person” shall have the meaning set forth in Section 10.14.

“Financial Institution” shall have the meaning set forth in Section 10.15(a).

“Fiscal Year” shall mean the 12-month period ending December 31 of each year; the first Fiscal Year shall begin on the date of this Agreement and the last Fiscal Year shall be the period beginning on January 1 of the calendar year in which the final liquidation and termination of the Company is completed and ending on the date such final liquidation and termination is completed. To the extent any computation or other provision hereof provides for action to be taken on a Fiscal Year basis, an appropriate proration or other adjustment shall be made in respect of the initial and final Fiscal Years to reflect that such periods are less than full calendar year periods.

“Formation Date” shall have the meaning set forth in Section 1.1.

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“Indemnitee” shall have the meaning set forth in Section 6.6(a).

“Interests” shall mean the interests of the Company in and to the Operating Company.

“Investment Opportunity” shall have the meaning set forth in Section 6.7.

“JEA Principal” shall mean Gerald Erwin or Cody Erwin, as the context may require.

“Landlord” shall mean Amber Glen Landlord, LLC, Mill Creek Landlord, LLC, Sugar Creek Landlord, LLC and Hudson Creek Landlord, LLC, each a Delaware limited liability company and the one hundred percent (100%) fee owner of the Urbana Property, Springfield Property, Normal Property and Bryan Property, respectively, as the context may require.

“Leases” shall mean those certain Lease Agreements dated as of even date herewith between each Landlord and each Operating Company with respect to the Properties, as all of the same may be modified, amended, restated or consolidated from time to time.

“Lien” shall mean any mortgage, deed of trust, pledge, lien, encumbrance, charge or security interest, other than liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings.

“Liquidating Trustee” shall have the meaning set forth in Section 9.2(a).

“Losses” shall mean the dollar amounts of all costs, claims, suits, actions, losses, liabilities, obligations, reasonable fees and expenses of any kind or nature, including costs and expenses of accountants, attorneys and other professionals, judgments, fines, penalties, settlements and all other costs and expenses of any nature or type actually paid or incurred by a specified Person; provided, however, that Losses shall not include lost profits or consequential or punitive damages.

“Major Decision Notice” shall have the meaning set forth in Section 5.1(c).

“Major Decision(s)” shall have the meaning set forth in Section 5.1(b).

“Management Agreement” shall have the meaning set forth in Section 5.2.

“Managing Member Related Persons” shall have the meaning set forth in Section 6.5.

“Matter” shall have the meaning set forth in Section 10.8.

“Member(s)” shall mean Managing Member and Non-Managing Member and their permitted successors and assigns in its or their capacities as Members in the Company.

“Member Loan” shall have the meaning set forth in Section 3.2(b).

“Membership Interest” shall mean the interest of a Member in the Company, including, without limitation, such Member’s right (a) to allocations of items of income, gain, loss, deduction, and credit of the Company as set forth in Exhibit B hereto; (b) to a distributive share of the assets of the Company as set forth in Articles 4 and 9; and (c) to participate in the management and operation of the Company in accordance with this Agreement.

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“Membership Percentage” shall mean, for Non-Managing Member, 20% and for Managing Member, 80%.

“Net Capital Transaction Proceeds” shall mean the proceeds from (a) any financing or refinancing of the Property or any part thereof and (b) any sale, disposition, taking or loss of any direct or indirect interest in the Property or any part thereof, or all of the Membership Interests (but not part thereof) or any other interest therein, less payment of all costs and other expenses related thereto, any amounts expended to repair or replace any part of the Property taken or destroyed, all Company Costs and Expenses and all other obligations of the Company and/or the Landlord then due. Without limiting the generality of the foregoing, proceeds shall include but not be limited to the proceeds from any eminent domain proceeding or conveyance in lieu thereof or from title insurance or casualty insurance, other than rental income insurance.

“Net Income” and “Net Losses” mean the income or losses of the Company as determined in accordance with the method of accounting followed by the Company for federal income tax purposes, including for all purposes: (1) any income exempt from tax; (2) any expenditures of the Company which are described in Code Section 705(a)(2)(B) or are treated as Code Section 705(a)(2)(B) expenditures under Treasury Regulation § 1.704-1(b)(2)(iv)(i); and (3) any adjustments to the book value of any Company asset pursuant to the Treasury Regulations; provided, however, if any property is carried on the books of the Company at a value that differs from that property’s adjusted basis for tax purposes, then any gain, loss, depreciation and amortization with respect to such property shall be computed with reference to the book value of such property, consistently with the requirement of Treasury Regulation § 1.704-1(b)(2)(iv)(g).

“Non-Compete Period” shall have the meaning set forth in Section 6.5(b).

“Non-Contributing Member” shall have the meaning set forth in Section 3.2(b).

“Non-Recourse Carveout Guarantees” shall refer to the guarantees referred to in the Assumption and Release Agreements.

“OFAC” shall have the meaning set forth in Section 10.15(a).

“Operating Company” shall mean Amber Glen TRS, LLC, Mill Creek TRS, LLC, Sugar Creek TRS, LLC and Hudson Creek TRS, LLC, each a Delaware limited liability company and the tenant under the respective Lease of the Urbana Property, Springfield Property, Normal Property and Bryan Property, respectively, as the context may require.

“Operating Company Available Cash” shall mean all cash funds of each of the Operating Companies on hand from time to time after: (a) payment of all Company Costs and Expenses (relating to the Operating Company) that are due and payable as of such date; and (b) provision for the payment of all Company Costs and Expenses that the Operating Company is obligated to pay within ninety (90) days of such date, but in all instances, the Operating Companies shall not make any distributions which would cause the amount of working capital for the applicable Operating Company to be less than the Threshold Working Capital Amount for such entity.

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“Option Price” shall have the meaning set forth in Section 7.8.

“Owner Portfolio” shall mean Sentio Leah Bay Portfolio, LLC, a Delaware limited liability company and the owner of a one hundred percent (100%) membership interest in the Landlords.

“Owner Portfolio Agreement” shall mean shall mean the limited liability company agreement of Owner Portfolio, as amended, modified or supplemented from time to time in accordance with its terms together with the Exhibits attached hereto.

“Patriot Act” shall have the meaning set forth in Section 10.15(c)

“Person” shall mean an individual, corporation, partnership, limited liability company, trust, estate, unincorporated organization, association or other legally recognized entity.

“Permitted Managing Member Transferee” shall have the meaning set forth in Section 7.2(a).

“Permitted Non-Managing Member Transferee” shall have the meaning set forth in Section 7.2(b).

“Property” shall mean that certain land and improvements communities known as the “Urbana Property”, the “Springfield Property”, the “Normal Property”, and the “Bryan Property”, as the context may require.

“Purchaser Party” shall have the meaning set forth in Section 10.15(a).

“Qualified Purchaser” shall have the meaning set forth in Section 7.3(a) hereof.

“Recourse Liabilities” means any obligation, guaranty or indemnity by a Member under any loan to the Company or any Landlord.

“Related Party” and “Related Parties” shall have the meaning set forth in Section 10.13(a)(iii).

“Remaining Member” shall have the meaning set forth in Section 7.3(a).

“Right of First Refusal” shall have the meaning set forth in Section 7.3(a) hereof.

“ROFO” shall have the meaning set forth in Section 6.7 hereof.

“ROFR Closing” shall have the meaning set forth in Section 7.3(c).

“ROFR Closing Date” shall have the meaning set forth in Section 7.3(c).

“Selling Member” shall have the meaning set forth in Section 7.3(a) hereof.

“Senior Lender” shall mean Fannie Mae as assignee of Red Mortgage Capital, Inc.

“Senior Loans” shall mean those certain loans from Senior Lender to Landlords as referred to in the Assumption and Release Agreements.

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“Senior Loan Documents” shall mean those documents described in Exhibit B of the Assumption and Release Agreements, the Subordination, Assignment and Security Agreements and any other agreements, documents or certificates executed by the Landlords or other Persons in connection the foregoing, as all of the same are modified substantially in accordance with the provisions of the Senior Loan Terms, and as all of the same may be further modified, amended, restated or consolidated with the written consent of the Members from time to time.

“Sentio Principal” shall mean Sentio Healthcare Properties, Inc., a Maryland corporation

“Settlement Notice” shall have the meaning set forth in Section 6.6(d) hereof.

“Specially Designated Nationals and Blocked Persons” shall have the meaning set forth in Section 10.15(a).

“Subordination, Assignment and Security Agreements” shall mean those certain subordination, assignment and security agreements between the Operating Companies, Senior Lender, JEA Manager and Landlords.

“Term” shall have the meaning set forth in Section 1.3.

“Senior Loan Terms” shall have the meaning set forth in Section 3.4.

“Third Party” shall mean any Person that is not a Member or an Affiliate of a Member.

“Threshold Working Capital Amount” shall mean, at the time any distribution is contemplated (but not less often than quarterly), without duplication of any required minimum working capital requirements as set forth in the Owner Portfolio Agreement, the aggregate amount of Thirty Thousand Dollars ($30,000) for each Operating Company.

“Transfer” and related usages of that term shall mean any sale, transfer, assignment, pledge, hypothecation or other disposal of all or any part of a Membership Interest (including economic interests) or any direct or indirect ownership interest in a Member in any manner, whether directly or indirectly by Transfer of all or a portion of any type of equity, profits, distribution or other ownership interest, and shall include the ability to approve or have any right to vote on, consent to or veto any decision or matter set forth in this Agreement and a right to receive any share or portion of payments of dividends, distributions or profits.

“Treasury Regulations” or “Regulations” shall mean the regulations promulgated under the Code, as such regulations are in effect from time to time.

“Unreturned Capital Contribution” shall mean, as calculated and determined with respect to each Member, the initial capital contribution of such Member, increased by additional Capital Contributions and only reduced by any distributions of capital pursuant to Sections 4.2(e) and (f) hereof. As of the date hereof, the amount of the Unreturned Capital Contribution of Managing Member is $800.00 and the amount of the Unreturned Capital Contribution of Non-Managing Member is $200.00.

“U.S. Person” shall have the meaning set forth in Section 10.15(a).

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EXHIBIT B

CERTAIN TAX AND ACCOUNTING MATTERS

ARTICLE I

ALLOCATION OF INCOME AND LOSSES

Section 1.1 Capital Account. Capital Account shall have the meaning set forth in Exhibit A to this Agreement.

Section 1.2 Capital Account Adjustments for Revaluations. Whenever the Company would be permitted to adjust the Capital Accounts of the Members pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(f) to reflect revaluations of Company Property, the Company may so adjust the Capital Accounts of the Members. In the event that the Capital Accounts of the Members are adjusted pursuant to Treasury Regulation §1.704-1(b)(2)(iv)(f) to reflect revaluations of Company Property (a) the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulation §1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain or loss, as computed for book purposes, with respect to such property, (b) the Members’ distributive shares of depreciation, depletion, amortization and gain or loss, as computed for tax purposes, with respect to such property shall be determined so as to take account of the variation between the adjusted tax basis and book value of such property in accordance with Code Section 704(c), and (c) the amount of upward and/or downward adjustments to the book value of any Company Property shall be treated as income, gain, deduction and/or loss for purposes of applying the allocation provisions of this Exhibit. Consistent with the requirements of Code Section 704(c) and the preceding sentence, the Company hereby adopts and shall use the “traditional allocation method” pursuant to Regulation Section 1.704-(3)(b) with no “curative allocations” to offset the effects of the “ceiling rule.” In the event that Code Section 704(c) applies to any Company Property, the Capital Accounts of the Members shall be adjusted in accordance with Treasury Regulation §1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and gain and loss, as computed for book purposes, with respect to such Company Property.

Section 1.3 Allocations of Net Income and Net Losses.

(a) Allocation of Net Income. After giving effect to Section 1.5 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Income shall be allocated as follows:

(1) First, to the Members who have previously been allocated Net Losses pursuant to Section 1.5(f)(3) of this Exhibit in the reverse order (as to the periods in which such Net Losses were allocated) and in the same ratio of such Net Losses so allocated, until the aggregate Net Income allocated to each such Member pursuant to this Section 1.3(a)(1) is equal to the aggregate Net Losses allocated to that Member pursuant to said Section 1.5(f)(3);

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(2) Second, to the Members who have previously been allocated Net Losses pursuant to Section 1.5(f)(2) of this Exhibit in the reverse order (as to the periods in which such Net Losses were allocated) and in the same ratio of such Net Losses so allocated, until the aggregate Net Income allocated to each such Member pursuant to this Section 1.3(a)(2) is equal to the aggregate Net Losses allocated to that Member pursuant to said Section 1.5(f)(2);

(3) Third, to the Members who have previously been allocated Net Losses pursuant to Section 1.3(b)(5) of this Exhibit in the reverse order (as to the periods in which such Net Losses were allocated) and in the same ratio of Net Losses so allocated, until the aggregate Net Income allocated to each such Member pursuant to this Section 1.3(a)(3) is equal to the aggregate Net Losses allocated to that Member pursuant to said Section 1.3(b)(5);

(4) Fourth, to the Managing Member until the aggregate Net Income allocated to the Managing Member pursuant to this Section 1.3(a)(4) equals the (i) sum of (A) the amount of distributions for the current and all prior Fiscal Years to the Managing Member pursuant to Section 4.1(c), (B) the additional amount that currently would be required to be distributed to the Managing Member pursuant to Section 4.1(c) of the Agreement to provide the Managing Member with the Managing Member Preferred Return and (C) the aggregate amount of Net Losses allocated to the Managing Member pursuant to Section 1.3(b)(4) of this Exhibit;

(5) Fifth, to the Non-Managing Member until the aggregate Net Income allocated to the Non-Managing Member pursuant to this Section 1.3(a)(5) equals the (i) sum of (A) the amount of distributions for the current and all prior Fiscal Years to the Non-Managing Member pursuant to Section 4.1(d), (B) the additional amount that currently would be required to be distributed to the Non-Managing Member pursuant to Section 4.1(d) of the Agreement to provide the Non-Managing Member with the Non-Managing Member Preferred Return and (C) the aggregate amount of Net Losses allocated to the Non-Managing Member pursuant to Section 1.3(b)(3) of this Exhibit;

(6) Sixth, to the Members, in accordance with their respective Membership Percentages until the aggregate Net Income allocated to each Member pursuant to this Section 1.3(a)(6) equals (A) the amount of distributions for the current and all prior Fiscal Years to said Member pursuant to Section 4.1(e), (B) the additional amount that currently would be required to be distributed to said Member pursuant to Section 4.1(e) of the Agreement to provide the Members with a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution and (C) the aggregate amount of Net Losses allocated to said Member pursuant to Sections 1.3(b)(2) of this Exhibit;

(7) Thereafter, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member;

(b) Allocation of Net Losses. After giving effect to Section 1.5 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Losses shall be allocated as follows:

(1) First, (i) thirty-five percent (35%) to the Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member, until the aggregate amount of Net Losses allocated pursuant to this Section 1.3(b)(1) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(7) of this Exhibit;

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(2) Second, to the Members, pro rata in accordance with their respective Membership Percentages until the aggregate amount of Net Losses allocated pursuant to this Section 1.3(b)(2) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(6) of this Exhibit; and

(3) Third, to the Non-Managing Member until the aggregate amount of Net Losses allocated to the Non-Managing Member pursuant to this Section 1.3(b)(3) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(5) of this Exhibit;

(4) Fourth, to the Managing Member until the aggregate amount of Net Losses allocated to the Managing Member pursuant to this Section 1.3(b)(4) equals the aggregate amount Net Income allocated pursuant to Section 1.3(a)(4) of this Exhibit;

(5) Thereafter, to the Members, pro rata in accordance with their respective Membership Percentages.

(c) Interest paid or accrued in connection with Member Loans shall be deducted in accordance with the appropriate U.S. income tax rules and shall be deducted as a deductible partnership expense for purposes of calculating taxable income, taxable loss, Net Profits and Net Losses.

Section 1.4 Allocations of Net Capital Gain and Net Capital Loss.

(a) Allocation of Net Capital Gain. After giving effect to Section 1.5 and Section 1.3 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Capital Gain shall be allocated as follows:

(1) First, to the Members who have previously been allocated Net Losses or Net Capital Loss pursuant to Section 1.5(f)(3) of this Exhibit in the reverse order and in the same ratio of such Losses so allocated, until the aggregate Net Capital Gain and Net Income allocated to each such Member pursuant to this Section 1.4(a)(1) and Section 1.3(a)(1) is equal to the aggregate Net Losses and Net Capital Loss allocated to that Member pursuant to said Section 1.5(f)(3);

(2) Second, to the Members who have previously been allocated Net Losses or Net Capital Loss pursuant to Section 1.5(f)(2) of this Exhibit in the reverse order and in the same ratio of such Losses so allocated, until the aggregate Net Capital Gain and Net Income allocated to each such Member pursuant to this Section 1.4(a)(2) and Section 1.3(a)(2) is equal to the aggregate Net Losses and Net Capital Loss allocated to that Member pursuant to said Section 1.5(f)(2);

(3) Third, to the Managing Member until the aggregate Net Capital Gain allocated to the Managing Member pursuant to this Section 1.4(a)(3) causes the Adjusted Capital Account of the Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(c) of the Agreement on the date on which such allocation is being made, would cause the

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Managing Member to receive a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of Managing Member taking into account the aggregate amount distributed to the Managing Member pursuant to Sections 4.1 and 4.2(c) of the Agreement from the inception of the Company through the date on which the allocation under this Section 1.4(a)(3) is being made;

(4) Fourth, to the Non-Managing Member until the aggregate Net Capital Gain allocated to the Non-Managing Member pursuant to this Section 1.4(a)(4) causes the Adjusted Capital Account of the Non-Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(d) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive a ten percent (10%) cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of Non-Managing Member taking into account the aggregate amount distributed to the Non-Managing Member pursuant to Sections 4.1 and 4.2(d) of the Agreement from the inception of the Company through the date on which the allocation under this Section 1.4(a)(4) is being made;

(5) Fifth, to the Managing Member until the aggregate Net Capital Gain allocated to the Managing Member pursuant to this Section 1.4(a)(5) causes the Adjusted Capital Account of the Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(e) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(6) Sixth, to the Non-Managing Member until the aggregate Net Capital Gain allocated to the Non-Managing Member pursuant to this Section 1.4(a)(6) causes the Adjusted Capital Account of the Non-Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(f) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(7) Seventh, to the Members, in accordance with their respective Membership Percentages until the aggregate Net Capital Gain allocated to the Members pursuant to this Section 1.4(a)(7) causes the Adjusted Capital Account of each Member to equal the amount, which, if distributed pursuant to Section 4.2(g) of the Agreement on the date on which such allocation is being made, would cause said Member to achieve a twelve percent (12%) cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution taking into account the aggregate amount distributed to said Member pursuant to Sections 4.1 and 4.2(g) of the Agreement from the inception of the Company through the date on which the allocation under this Section 1.4(a)(7) is being made; and

(8) Eighth, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member.

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(b) Allocation of Net Capital Loss. After giving effect to Section 1.5 and Section 1.3 of this Exhibit, for any Fiscal Year, the items of income, expense, gain and loss of the Company comprising Net Capital Loss shall be allocated as follows:

(1) First, (i) thirty-five percent (35%) to Non-Managing Member, and (ii) sixty-five percent (65%) to Managing Member, in an amount equal to the excess, if any, of (i) the cumulative Net Capital Gain allocated pursuant to Section 1.4(a)(8) of this Exhibit B for all prior Fiscal Years over (ii) the cumulative Net Capital Loss allocated pursuant to this Section 1.4(b)(1) for all prior Fiscal Years;

(2) Second, to the Members, pro rata in accordance with their respective Membership Percentages in an amount equal to the excess, if any, of (i) the cumulative Net Capital Gain allocated pursuant to Section 1.4(a)(7) of this Exhibit B for all prior Fiscal Years over (ii) the cumulative Net Capital Loss allocated pursuant to this Section 1.4(b)(2) for all prior Fiscal Years;

(3) Third, to the Non-Managing Member until the aggregate Net Capital Loss allocated to the Non-Managing Member pursuant to this Section 1.4(b)(3) causes the Adjusted Capital Account of the Non-Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(d) of the Agreement on the date on which such allocation is being made, would cause the Non-Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(4) Fourth, to the Managing Member until the aggregate Net Capital Loss allocated to the Managing Member pursuant to this Section 1.4(b)(4) causes the Adjusted Capital Account of the Managing Member to equal the amount, which, if distributed pursuant to Section 4.2(c) of the Agreement on the date on which such allocation is being made, would cause the Managing Member to receive an amount equal to its Unreturned Capital Contribution balance;

(5) Fifth, to the Non-Managing Member until the aggregate Net Capital Loss allocated to the Non-Managing Member pursuant to this Section 1.4(b)(5) causes the Adjusted Capital Account of the Non-Managing Member to equal zero; and

(6) Sixth, to the Managing Member until the aggregate Net Capital Loss allocated to the Managing Member pursuant to this Section 1.4(b)(6) causes the Adjusted Capital Account of the Managing Member to equal zero.

Section 1.5 Other Allocation Provisions.

(a) Minimum Gain Chargeback. Except as otherwise provided in Treasury Regulations 1.704-2(f), notwithstanding anything to the contrary in this Exhibit, if there is a net decrease in “partnership minimum gain” (within the meaning of Treasury Regulation § 1.704-2(d)) for a Fiscal Year, then there shall be allocated to each Member items of income and gain for such Fiscal Year equal to such Member’s share of the net decrease in partnership minimum gain (within the meaning of Treasury Regulation § 1.704-2(f), provided, that if the Company has any discretion as to an exception set forth in Treasury Regulation § 1.704-2(f)(5), the Managing Member may exercise such discretion on behalf of the Company). In the event that the application of the minimum gain chargeback requirement would cause a distortion in the economic arrangement among the Members, the Managing Member may request that the Commissioner waive the minimum gain chargeback requirement pursuant to Treasury Regulation § 1.704-2(f)(4). Any Member’s share of Company Minimum Gain shall be

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determined in accordance with Treasury Regulation §1.704-2(g)(1). The foregoing is intended to be a “minimum gain chargeback” provision as described in Treasury Regulation § 1.704-2(f) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation.

(b) Member Minimum Gain Chargeback. If during a Fiscal Year there is a net decrease in partner nonrecourse debt minimum gain (as determined in accordance with Treasury Regulation § 1.704-2(i)(3)), then, in addition to the amounts, if any, allocated pursuant to the preceding paragraph, any Member with a share of that partner nonrecourse debt minimum gain (determined in accordance with Treasury Regulation §1.704-2(i)(5)) as of the beginning of the Fiscal Year shall, subject to the exceptions in Treasury Regulation §1.704-2(i)(4) (including the exceptions analogous to those in Treasury Regulation §1.704-2(f)(2), (3), (4) and (5), provided, that if the Company has any discretion as to the exception set forth in Treasury Regulation §1.704-2(f)(5) as made applicable by Treasury Regulation §1.704-2(i)(4), the Managing Member may exercise such discretion on behalf of the Company), be allocated items of income and gain for the year (and, if necessary, for succeeding years) equal to that Member’s share of the net decrease in the partner nonrecourse debt minimum gain. In the event that the application of the partner nonrecourse debt minimum gain chargeback requirement would cause a distortion in the economic arrangement among the Members, the Managing Member may request that the Commissioner waive the minimum gain chargeback requirement pursuant to Treasury Regulation §§1.704-2(f)(4) and 1.704-2(i)(4). The foregoing is intended to be the “chargeback of partner nonrecourse debt minimum gain” required by Treasury Regulation §1.704-2(i)(4) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation.

(c) Nonrecourse Deductions. Notwithstanding anything to the contrary in this Exhibit, nonrecourse deductions shall be allocated to the Members on a pro rata basis, in proportion to their Membership Percentages. Nonrecourse deductions shall have the meaning set forth in Treasury Regulation §1.704-2(b)(1).

(d) Qualified Income Offset. If, during any Fiscal Year, a Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation § 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a deficit balance in such Member’s Adjusted Capital Account, there shall be allocated to such Member items of income and gain (consisting of a pro rata portion of each item of Company income (including gross income, and gain for such year), in an amount and manner sufficient to eliminate such deficit as quickly as possible. The foregoing is intended to be a “qualified income offset” provision as described in Treasury Regulation § 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation. A Member’s “Adjusted Capital Account,” at any time, shall equal the Member’s Capital Account at such time (i) increased by the sum of (A) the amount of the Member’s share of partnership minimum gain as defined in Treasury Regulation §1.704-2(g)(1) and (3), (B) the amount of the Member’s share of partner nonrecourse debt minimum gain as defined in Treasury Regulation §1.704-2(i)(5), and (C) any amount of the deficit balance in its Capital Account the Member is obligated to restore on liquidation of the Company, and (ii) decreased by reasonably expected adjustments, allocations and distributions described in Treasury Regulation §§1.704-1(b)(2)(ii)(d)(4), (5) or (6). The foregoing is intended to comply with the provisions of Treasury Regulation Sections 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in all respects in accordance with that Treasury Regulation.

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(e) Member Nonrecourse Deductions. Notwithstanding anything to the contrary in this Exhibit, to the extent required by Treasury Regulation §1.704-2(i), any items of income, gain, loss or deduction of the Company that are attributable to a nonrecourse debt of the Company that constitutes partner nonrecourse debt as defined in Treasury Regulation §1.704-2(b)(4) shall be allocated in accordance with the provisions of Treasury Regulation §1.704-2(i). This Section 1.5(e) is intended to satisfy the requirements of Treasury Regulation §1.704-2(i) and shall be interpreted and applied in a manner consistent therewith.

(f) Loss Limitation. Notwithstanding anything to the contrary in Section 1.3(b) of this Exhibit,

(1) The Net Losses allocated pursuant to Section 1.3(b) of this Exhibit to any Member for any Fiscal Year shall not exceed the maximum amount of Net Losses that may be allocated to such Member without causing such Member to have a negative balance in its Adjusted Capital Account at the end of such Fiscal Year.

(2) If some but not all of the Members would have deficits in their Adjusted Capital Accounts as a consequence of allocations of Net Losses pursuant to Section 1.3(b) of this Exhibit, the limitations set forth in this Section 1.5(f)(2) shall be applied by allocating Net Losses pursuant to this Section 1.5(f)(2) only to those Members who would not have a deficit in their Adjusted Capital Accounts as a consequence of receiving such an allocation of Net Losses (the allocation of such Net Losses among those Members to be in proportion to their aggregate Capital Contributions to the Company).

(3) If no other Member may receive an additional allocation of Net Losses pursuant to Section 1.5(f)(2) of this Exhibit, such additional Net Losses not allocated pursuant to said Section 1.5(f)(2) shall be allocated solely to those Members who bear the economic risks for such additional Net Losses within the meaning of Section 704(b) of the Code and the Treasury Regulations thereunder.

(g) Reversal of Regulatory Allocations. To the extent that any item of income, gain, loss or deduction has been specially allocated pursuant to paragraphs (a), through (e) of this Section 1.5 and such allocation is inconsistent with the way in which the same amount otherwise would have been allocated under Section 1.3 of this Exhibit, subsequent allocations under said Section 1.3 shall be made, to the extent possible and without duplication in a manner consistent with the Treasury Regulations under Code Section 704(b), which negate as rapidly as possible the effect of all such inconsistent allocations under paragraphs (a) through (e). This Section 1.5(g) shall be interpreted and applied in such a manner and to such extent as is reasonably necessary to eliminate, as quickly as possible, permanent economic distortions that would otherwise occur as a consequence of the allocations pursuant to paragraphs (a) through (e) of this Section 1.5, in the absence of this Section 1.5(g).

(h) Members’ Interests in Company Profits for Purposes of Section 752. As permitted by Regulations Section 1.752-3(a)(3), the Members hereby specify that solely for purposes of determining their respective shares of excess Nonrecourse Liabilities of the Company, the Members’ respective shares of Company profits shall be equal to their then respective relative Membership Percentages. Excess Nonrecourse Liabilities of the Company

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shall first be allocated to the Members up to the amount of built-in gain that is allocable to the Member on Code Section 704(c) property (as defined by Regulations Section 1.704-3(a)(3)(ii)) or property for which reverse section 704(c) allocations are applicable (as described by Regulation Section 1.704-3(a)(6)(i)) where such property is subject to nonrecourse liabilities to the extent that such built-in gain exceeds the gain described in Regulations Section 1.752-3(a)(2) with respect to such property.

(i) Distributions of Property. Solely for the purpose of adjusting the Capital Accounts of the Members, and not for tax purposes, if any property is distributed in kind to any Member, the difference between its fair market value (as determined in the reasonable judgment of the Managing Member) and its book value at the time of distribution shall be treated as gain or loss recognized by the Company and allocated pursuant to the provisions of Section 1.3 of this Exhibit.

(j) Transfer of Membership Interest. Except to the extent otherwise required by the Code and Treasury Regulations, if a Membership Interest or part thereof is transferred in any Fiscal Year, the items of income, gain, loss, deduction and credit allocable to such Membership Interest or part thereof, as the case may be, for such Fiscal Year shall be allocated to the person who held the interest on the date such items were realized or incurred by the Company as if the books of the Company had been closed, and the partnership tax year had ended, immediately after such transfer. At the request of the transferee, the Managing Member may, in its sole discretion, make the election provided for in Code Section 754.

(j) Order of Allocations. Any allocations made pursuant to this Exhibit shall be made in the following order of priority:

(i) Section 1.5(a);

(ii) Section 1.5(b);

(iii) Section 1.5(d);

(iv) Section 1.5(e);

(v) Section 1.5 (c);

(vi) Section 1.5(g); and

(vii) Section 1.3 as modified by Section 1.5(f).

(k) Liquidation of Company. It is intended that, in the event of a liquidation of the Company as defined in Treasury Regulation §1.704-1(b)(2)(ii)(g), distributions to be made in connection with such liquidation under Article 4 comply with the requirement of Regulations Section 1.704-1(b)(2)(ii)(b)(2) that liquidating distributions be made in accordance with positive Capital Accounts. However, if the balances in the Capital Accounts do not result in such requirement being satisfied, items of income, gain, loss, deduction and credit will be reallocated among the Members for the taxable year of the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) so as to cause the balances in the Capital Accounts to be in the amounts necessary so that, to the extent possible, such result is achieved.

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Section 1.6 Allocations for Income Tax Purposes. These provisions shall be applied as if all distributions and allocations were made at the end of the Fiscal Year. Where any provision depends on the Capital Account of any Member, that Capital Account shall be determined after the operation of all preceding provisions for the year. The income, gains, losses, deductions and credits of the Company for federal, state and local income tax purposes shall be allocated in the same manner as the corresponding items entering into the computation of Net Income and Net Losses were allocated pursuant to Sections 1.3, 1.4 and 1.5 of this Exhibit; provided that solely for federal, local and state income and franchise tax purposes and not for book or Capital Account purposes, income, gain, loss and deduction shall be allocated, other than with respect to the tax basis of property, as follows: in the case of property contributed in kind and other property to the extent applicable, in accordance with the principles of Code Sections 704(b) and 704(c) and the Treasury Regulations promulgated under such Code Sections.

Section 1.7 Distributions of Nonrecourse Liability Proceeds. If during a Fiscal Year the Company makes a distribution to any Member that is allocable to the proceeds of any nonrecourse liability of the Company that is allocable to an increase in Company Minimum Gain pursuant to Treasury Regulation §1.704-2(h), then the Company shall elect, to the extent permitted by Treasury Regulation §1.704-2(h)(3), to treat such distribution as a distribution that is not allocable to an increase in Company Minimum Gain.

ARTICLE II

MISCELLANEOUS MATTERS

Section 2.1 Preparation of Records and Returns; Tax Matters Member. Subject to the terms of this Section 2.1 and the other provisions of this Agreement, (i) all federal, state and local income tax returns, and financial and accounting books and records of the Company shall be prepared under the direction of the Managing Member in its sole and absolute discretion, (ii) all tax audits and litigation shall be conducted under the direction of the Managing Member in its sole and absolute discretion, and (iii) the determination of whether the Company shall make available elections for accounting or federal, state or local income tax purposes shall be made by the Managing Member in its sole and absolute discretion. The Managing Member is hereby designated as the “tax matters partner” for the Company (as such term is defined in Section 6231(a)(7) of the Code). The tax matters partner shall promptly notify Members who do not qualify as “notice partners” within the meaning of Code Section 6231(a)(8) at the beginning and completion of an administrative proceeding at the Company level promptly upon such notice being received by the tax matters partner. Moreover, the tax matters partner shall keep Non-Managing Member informed as to the status of any audit of the Company’s tax affairs, including the status of any resulting administrative and judicial proceedings relating thereto, and Non-Managing Member, if is so requests, may attend any such proceedings and negotiations related thereto and receive copies of any and all notices and other communications received by the Company from the taxing authority in connection with any such audit or other proceeding; provided further, that the tax matters partner shall obtain the prior written consent of Non-Managing Member before settling, compromising or otherwise altering the defense of any tax matter or proceeding before any taxing authority if Non-Managing Member or any of its direct or indirect beneficial owners would be materially adversely affected thereby.

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Section 2.2 Method of Making Contributions. References to contributions of property appearing in Article 1 of this Exhibit are included for the purpose of conforming to the requirements set forth in the Regulations and shall not give rise to an inference that contributions may be made in a form other than cash except as set forth in the Operating Agreement or any other written agreement of the Members.

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EXHIBIT C

MANAGEMENT AGREEMENT

C

EX-10.4

Exhibit 10.4

ASSUMPTION AND RELEASE AGREEMENT

(FULL PROPERTY AND LOAN ASSUMPTION)

(PRE-2011 LOAN DOCUMENTS)

This ASSUMPTION AND RELEASE AGREEMENT (“Agreement”) is dated as of             , 2012 by and among URBANA CARE GROUP LLC, an Illinois limited liability company (“Transferor”), CRAIG SPAULDING, an individual (“Spaulding”), AMBER GLEN LANDLORD, LLC, a                     limited liability company (“Transferee”), JERRY ERWIN, an individual (“Erwin”; and together with Spaulding, individually, collectively, jointly and severally, “Original Key Principal”), SENTIO HEALTHCARE PROPERTIES, INC., a Maryland corporation (“Sentio”; and together with Erwin, individually, collectively, jointly and severally, “New Key Principal”) and FANNIE MAE, a corporation duly organized under the Federal National Mortgage Association Charter Act, as amended, 12 U.S.C. Section 1716 et seq. and duly organized and existing under the laws of the United States (“Fannie Mae”).

RECITALS:

A. Fannie Mae is the holder of that certain Multifamily Note dated as of May 15, 2009 (as amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Note”) in the original principal amount of $8,976,000.00 made by Transferor to Red Mortgage Capital, Inc., an Ohio corporation (“Original Lender”), which Note evidences a loan (“Mortgage Loan”) made by Original Lender to Transferor. To secure the repayment of the Note, Transferor also executed and delivered a Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of May 15, 2009, and recorded on June 8, 2009 as instrument number 2009R16315 in the land records of Champaign County, Illinois (as amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Security Instrument”) encumbering the land as more particularly described in Exhibit A to this Agreement (the “Mortgaged Property”). Transferor is liable for the payment and performance of all of Transferor’s obligations under the Note, the Security Instrument and all other documents executed in connection with the Mortgage Loan, as listed on Exhibit B to this Agreement (as amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Loan Documents”). Each of the Loan Documents has been duly assigned or endorsed to Fannie Mae, including the Security Instrument, which has been assigned to Fannie Mae pursuant to that certain Assignment of Mortgage dated as of May 15, 2009, and recorded on June 8, 2009 as instrument number 2009R16316 in the land records of Champaign County, Illinois. The current servicer of the Mortgage Loan is Red Mortgage Capital, LLC, a Delaware limited liability company (“Servicer”).

B. Original Key Principal is liable for the obligations under the Exceptions to Non-Recourse Guaranty dated as of May 15, 2009 made by Original Key Principal to Original Lender (the “Guaranty”).

C. Fannie Mae has been asked to consent to the transfer of the Mortgaged Property to Transferee and the assumption by Transferee of the obligations of Transferor under the Loan Documents.

D. Fannie Mae has been asked to consent to the release of Spaulding from his obligations under the Guaranty.

E. Fannie Mae requires that the Transferee and New Key Principal be identified in the Security Instrument for the purposes of the transfer restrictions.

F. Fannie Mae has agreed to consent to (i) the transfer of the Mortgaged Property by Transferor to Transferee, and (ii) the release of Spaulding from his obligations under the Guaranty, subject to the terms and conditions stated below. Erwin shall not be released from his obligations under the Guaranty.

AGREEMENTS:

NOW, THEREFORE, for and in consideration of the foregoing, and the mutual covenants and promises set forth in this Agreement and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Transferor, Transferee, Erwin, Spaulding, Sentio and Fannie Mae agree as follows:

1. Recitals.

The recitals set forth above are true and correct and are hereby incorporated by reference.

2. Defined Terms.

All capitalized terms used but not defined in this Agreement shall have the meanings assigned to them in the Security Instrument. As used in this Agreement, the following terms shall have the following meanings:

“Claims” means any and all possible claims, demands, actions, costs, expenses and liabilities whatsoever, known or unknown, at law or in equity, originating in whole or in part, on or before the date of this Agreement, which Transferor, Erwin, Spaulding, Sentio or Transferee, or any of their respective partners, members, officers, agents or employees, may now or hereafter have against Indemnitees, if any, and irrespective of whether any such claims arise out of contract, tort, violation of laws or regulations, or otherwise in connection with any of the Loan Documents, including any contracting for, charging, taking, reserving, collecting or receiving interest in excess of the highest lawful rate applicable thereto and any loss, cost or damage, of any kind or character, arising out of or in any way connected with or in any way resulting from the acts, actions or omissions of Indemnitees, including any requirement that the Loan Documents be modified as a condition to the transactions contemplated by this Agreement, any charging, collecting or contracting for prepayment premiums, transfer fees or assumption fees, any breach of fiduciary duty, breach of any duty of fair dealing, breach of confidence, breach of funding commitment, undue influence, duress, economic coercion, violation of any federal or state securities or Blue Sky laws or regulations, conflict of interest, NEGLIGENCE, bad faith, malpractice, violations of the Racketeer Influenced and Corrupt Organizations Act, intentional or

negligent infliction of mental distress, tortious interference with contractual relations, tortious interference with corporate governance or prospective business advantage, breach of contract, deceptive trade practices, libel, slander, conspiracy or any claim for wrongfully accelerating the Note or wrongfully attempting to foreclose on any collateral relating to the Note, but in each case only to the extent permitted by applicable law.

“Indemnitees” means, collectively, Original Lender, Servicer, Fannie Mae and their respective successors, assigns, agents, directors, officers, employees and attorneys, and each current or substitute trustee under the Security Instrument.

3. Assumption of Obligations.

Transferee hereby agrees to assume all of the payment and performance obligations of Transferor set forth in the Note, the Security Instrument and the other Loan Documents in accordance with their respective terms and conditions, as the same may be modified by this Agreement, including payment of all sums due under the Note. Transferee further agrees to abide by and be bound by all of the terms of the Loan Documents, all as though each of the Loan Documents had been made, executed and delivered by Transferee.

4. Transferor’s and Original Key Principal’s Representations and Warranties.

Transferor and Original Key Principal represent and warrant to Fannie Mae as of the date of this Agreement that:

(a) The Note has an unpaid principal balance of $        , and prior to default bears interest at the rate of         percent (    %) per annum;

(b) The Note requires that monthly payments of principal and interest in the amount of $56,145.41 be made on or before the first (1st) day of each month, continuing to and including June 1, 2019, when all sums due under the Loan Documents will be immediately due and payable in full;

(c) The Security Instrument is a valid first lien on the Mortgaged Property for the full unpaid principal amount of the Mortgage Loan and all other amounts as stated in the Security Instrument;

(d) There are no defenses, offsets or counterclaims to the Note, the Security Instrument or the other Loan Documents;

(e) There are no defaults by Transferor under the provisions of the Note, the Security Instrument or the other Loan Documents;

(f) All provisions of the Note, the Security Instrument and other Loan Documents are in full force and effect; and

(g) There are no subordinate liens of any kind covering or relating to the Mortgaged Property, nor are there any mechanics’ liens or liens for unpaid taxes or assessments encumbering the Mortgaged Property, nor has notice of a lien or notice of intent to file a lien been received.

Transferor and Original Key Principal understand and intend that Fannie Mae will rely on the representations and warranties contained herein.

5. Transferee’s and Sentio’s Representations and Warranties.

Transferee and Sentio represent and warrant to Fannie Mae as of the date of this Agreement that neither Transferee nor Sentio has any knowledge that any of the representations made by Transferor and Original Key Principal in Section 4 above are not true and correct.

6. Consent to Transfer.

Fannie Mae hereby consents to the transfer of the Mortgaged Property and to the assumption by Transferee of all of the obligations of Transferor under the Loan Documents, subject to the terms and conditions set forth in this Agreement. Fannie Mae’s consent to the transfer of the Mortgaged Property to Transferee is not intended to be and shall not be construed as a consent to any subsequent transfer which requires Lender’s consent pursuant to the terms of the Security Instrument. Further, in no event shall Fannie Mae’s consent herein be construed as release of Erwin’s liability under, pursuant to, or arising from, the Guaranty, and it is hereby expressly agreed that Lender does not, and has not, released Erwin from any liability under, pursuant to, or arising from, the Guaranty related to any period of time prior to, on, or subsequent to, the date hereof.

7. Amendment and Modification of Loan Documents. [TBD]

8. Assumption by Sentio of Liability for the Exceptions to Non-Recourse.

Sentio hereby assumes all liability under the provisions of the Guaranty jointly and severally with Erwin.

9. Reaffirmation by Erwin of Liability for the Exceptions to Non-Recourse.

Erwin hereby affirms and reaffirms all liability under the provisions of the Guaranty jointly and severally with Sentio, and Erwin hereby acknowledges that Erwin is not being released, and has not been released, from any liability under, pursuant to, or arising from, the Guaranty related to any period of time prior to, on, or subsequent to, the date hereof.

10. Release of Transferor and Spaulding.

In reliance on Transferor’s, Erwin’s, Spaulding’s, Sentio’s and Transferee’s representations and warranties in this Agreement, Fannie Mae releases Transferor and Spaulding from all of their respective obligations under the Loan Documents, provided, however, that Transferor and Spaulding are not released from any liability pursuant to this Agreement or Section 18 of the Security Instrument. If any material element of the representations and warranties made by Transferor and Spaulding contained herein is false as of the date of this Agreement, then the release set forth in this Section 9 will be cancelled as of the date of this Agreement and Transferor and Spaulding will remain obligated under the Loan Documents as though there had been no such release.

11. Priority; Modification.

This Agreement embodies and constitutes the entire understanding among the parties with respect to the transactions contemplated herein, and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged into this Agreement. Neither this Agreement nor any provision hereof may be waived, modified, amended, discharged or terminated except by an instrument in writing signed by the party against which the enforcement of such waiver, modification, amendment, discharge or termination is sought, and then only to the extent set forth in such instrument. Except as expressly modified hereby, the Note, Security Instrument and other Loan Documents shall remain in full force and effect and this Agreement shall have no effect on the priority or validity of the liens set forth in the Security Instrument or the Loan Documents, which are incorporated herein by reference. Transferee and New Key Principal hereby ratify and affirm the respective agreements made by Transferor and Original Key Principal to Original Lender in connection with the Mortgage Loan and agree that, except to the extent modified hereby, all of such agreements remain in full force and effect.

12. No Impairment of Lien.

Nothing set forth herein shall affect the priority or extent of the lien of any of the Loan Documents, nor, except as expressly set forth herein, release or change the liability of any party who may now be or after the date of this Agreement, become liable, primarily or secondarily, under the Loan Documents.

13. Costs.

Transferee and Transferor agree to pay all fees and costs (including attorneys’ fees) incurred by Fannie Mae and Servicer in connection with Fannie Mae’s consent to and approval of the transfer of the Mortgaged Property and a transfer fee of $            in consideration of the consent to that transfer.

14. Financial Information.

Transferee and New Key Principal represent and warrant to Fannie Mae that all financial information and information regarding the management capability of Transferee and New Key Principal provided to Servicer or Fannie Mae was true and correct as of the date provided to Servicer or Fannie Mae and remains materially true and correct as of the date of this Agreement.

15. Complete Release.

Transferee, Erwin, Spaulding, Sentio and Transferor, jointly and severally as between Transferee and New Key Principal and, unconditionally and irrevocably release and forever discharge Indemnitees from all Claims, and jointly and severally agree to indemnify Indemnitees, and hold them harmless from any and all claims, losses, causes of action, costs and expenses of every kind or character in connection with the Claims or the transfer of the

Mortgaged Property. Notwithstanding the foregoing, Transferor and Spaulding shall not be responsible for any Claims arising from the action or inaction of Transferee and New Key Principal, and Transferee and New Key Principal shall not be responsible for any Claims arising from the action or inaction of Transferor or Spaulding. Transferor and Transferee agree that Fannie Mae and Original Lender have no fiduciary or similar obligations to Transferor or Transferee and that their relationship is strictly that of creditor and debtor. This release is accepted by Fannie Mae, Servicer and Original Lender pursuant to this Agreement and shall not be construed as an admission of liability on the part of any such party. Transferor, Erwin, Spaulding, Sentio and Transferee hereby represent and warrant that they are the current legal and beneficial owners of all Claims, if any, released hereby and have not assigned, pledged or contracted to assign or pledge any such Claim to any other person.

16. Notice.

(a) Process of Serving Notice.

Except as otherwise set forth herein or in any Loan Document, all notices under this Agreement shall be:

(1) in writing and shall be:

(A) delivered, in person;

(B) mailed, postage prepaid, either by registered or certified delivery, return receipt requested;

(C) sent by overnight courier; or

(D) sent by electronic mail with originals to follow by overnight courier;

(2) addressed to the intended recipient at the address(es) below the signature block, as applicable; and

(3) deemed given on the earlier to occur of:

(A) the date when the notice is received by the addressee; or

(B) if the recipient refuses or rejects delivery, the date on which the notice is so refused or rejected, as conclusively established by the records of the United States Postal Service or any express courier service.

(b) Change of Address.

Any party to this Agreement may change the address to which notices intended for it are to be directed by means of notice given to the other parties identified in this Agreement.

(c) Receipt of Notices.

Transferee, Transferor, Erwin, Spaulding, Sentio and Lender shall not refuse or reject delivery of any notice given in accordance with this Agreement. Each party is required to acknowledge, in writing, the receipt of any notice upon request by the other party.

17. Construction.

(a) The captions and headings of the sections of this Agreement are for convenience only and shall be disregarded in construing this Agreement.

(b) Any reference in this Agreement to an “Exhibit” or “Schedule” or a “Section” or an “Article” shall, unless otherwise explicitly provided, be construed as referring, respectively, to an exhibit or schedule attached to this Agreement or to a Section or Article of this Agreement. All exhibits and schedules attached to or referred to in this Agreement are incorporated by reference into this Agreement.

(c) Any reference in this Agreement to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.

(d) Use of the singular in this Agreement includes the plural and use of the plural includes the singular.

(e) As used in this Agreement, the term “including” means “including, but not limited to” or “including, without limitation,” and is for example only and not a limitation.

(f) Whenever Transferor’s, Original Key Principal’s, New Key Principal’s, Erwin’s, Spaulding’s, Sentio’s or Transferee’s knowledge is implicated in this Agreement or the phrase “to Transferor’s knowledge”, “to Original Key Principal’s knowledge”, “to New Key Principal’s knowledge”, “to Erwin’s knowledge”, “to Spaulding’s knowledge”, “to Sentio’s knowledge” or “to Transferee’s knowledge” or a similar phrase is used in this Agreement, Transferor’s, Original Key Principal’s, New Key Principal’s, Erwin’s, Spaulding’s, Sentio’s or Transferee’s knowledge or such phrase(s) shall be interpreted to mean to the best of Transferor’s, Original Key Principal’s, New Key Principal’s, Erwin’s, Spaulding’s, Sentio’s or Transferee’s knowledge after reasonable and diligent inquiry and investigation.

(g) Unless otherwise provided in this Agreement, if Lender’s approval is required for any matter hereunder, such approval may be granted or withheld in Lender’s sole and absolute discretion.

(h) Unless otherwise provided in this Agreement, if Lender’s designation, determination, selection, estimate, action or decision is required, permitted or contemplated hereunder, such designation, determination, selection, estimate, action or decision shall be made in Lender’s sole and absolute discretion.

(i) All references in this Agreement to a separate instrument or agreement shall include such instrument or agreement as the same may be amended or supplemented from time to time pursuant to the applicable provisions thereof.

(j) “Lender may” shall mean at Lender’s discretion, but shall not be an obligation.

18. WAIVER OF JURY TRIAL.

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER OR KEY PRINCIPAL AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH OF THE PARTIES TO THIS AGREEMENT, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

19. Miscellaneous.

(a) This Agreement shall be construed according to and governed by the laws of the jurisdiction in which the Mortgaged Property is located without regard to its conflicts of law principles.

(b) If any provision of this Agreement is adjudicated to be invalid, illegal or unenforceable, in whole or in part, it will be deemed omitted to that extent and all other provisions of this Agreement will remain in full force and effect.

(c) No change or modification of this Agreement shall be valid unless the same is in writing and signed by all parties hereto.

(d) This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns.

(e) This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

(f) THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Remainder of Page Intentionally Blank]

IN WITNESS WHEREOF, Transferee, Erwin, Spaulding, Sentio, Transferor, and Fannie Mae, have signed and delivered this Agreement under seal (where applicable) or have caused this Agreement to be signed and delivered under seal (where applicable) by their duly authorized representative. Where applicable law so provides, Transferee, Erwin, Spaulding, Sentio, Transferor, and Fannie Mae, intend that this Agreement shall be deemed to be signed and delivered as a sealed instrument.

TRANSFEREE:
AMBER GLEN LANDLORD, LLC , a              limited liability company
By:	(SEAL)
Name:
Title:
Address:

[ADD NOTARY PROVISIONS]

ERWIN:
(SEAL)
Name:	Jerry Erwin
Address:

[ADD NOTARY PROVISIONS]

TRANSFEREE:
SENTIO HEALTHCARE PROPERTIES, INC., a Maryland corporation
By:	(SEAL)
Name:
Title:
Address:

[ADD NOTARY PROVISIONS]

TRANSFEROR:
URBANA CARE GROUP LLC, an Illinois limited liability company
By:	(SEAL)
Name:
Title:
Address:

[ADD NOTARY PROVISIONS]

SPAULDING:
(SEAL)
Name:	Craig Spaulding
Address:

[ADD NOTARY PROVISIONS]

FANNIE MAE:
By:	(SEAL)
Name:
Title:
c/o Red Mortgage Capital, LLC
Two Miranova Place, 12th Floor
Columbus, Ohio 43215
and
Attn: Multifamily Operations - Asset Management
Drawer AM
3900 Wisconsin Avenue, N.W.
Washington, DC 20016

[ADD NOTARY PROVISIONS]

EXHIBIT A

TO

ASSUMPTION AND RELEASE AGREEMENT

(FULL PROPERTY AND LOAN ASSUMPTION)

(PRE-2011 LOAN DOCUMENTS)

[Insert Legal Description]

EXHIBIT B

TO

ASSUMPTION AND RELEASE AGREEMENT

(FULL PROPERTY AND LOAN ASSUMPTION)

(PRE-2011 LOAN DOCUMENTS)

1. Note.

2. Security Instrument.

3. Guaranty.

4. Replacement Reserve and Security Agreement dated as of May 15, 2009 by and between Transferor and Original Lender.

5. Certificate of Borrower dated as of May 15, 2009 by Transferor for the benefit of Original Lender.

6. Agreement to Amend or Comply dated as of May 15, 2009 by Transferor for the benefit of Original Lender.

EX-10.5

Exhibit 10.5

SUBORDINATION, ASSIGNMENT AND SECURITY AGREEMENT

THIS SUBORDINATION, ASSIGNMENT AND SECURITY AGREEMENT (this “Assignment”) is made and entered into as of             , 2012 by and among (i) AMBER GLEN LANDLORD, LLC, a                      limited liability company (the “Borrower”), (ii) FANNIE MAE, a corporation duly organized under the Federal National Mortgage Association Charter Act, as amended, 12 U.S.C. Section 1716 et seq. and duly organized and existing under the laws of the United States (the “Lender”), (iii) AMBER GLEN TRS, LLC, a                      limited liability company (the “Operator”), and (iv) JERRY ERWIN ASSOCIATES, INC., a Washington corporation d/b/a JEA Senior Living (the “Manager”).

Recitals

A. Borrower is the owner of a Seniors Housing Facility known as Amber Glen Alzheimer’s Special Care Center and located in Urbana, Champaign County, Illinois (the “Mortgaged Property”). A legal description of the Mortgaged Property is attached hereto as Exhibit A.

B. Operator is the managing operator of the Mortgaged Property pursuant to that certain [Operating Lease] dated             , 2012, between Borrower and Operator (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Operating Lease”) and is the holder of all of the Licenses required to operate the Mortgaged Property as a Seniors Housing Facility.

C. Manager is the manager of the Mortgaged Property pursuant to that certain [Management Agreement] dated             , 2012, between Operator and Manager (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Management Agreement”).

D. Lender is the holder of that certain Multifamily Note, dated as of May 15, 2009 (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Note”), originally made by Urbana Care Group LLC, an Illinois limited liability company (“Transferor”), which evidences a mortgage loan (the “Loan”) secured by that certain Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of May 15, 2009, and recorded on June 8, 2009 as instrument number 2009R16315 in the land records of Champaign County, Illinois (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Instrument”), thereby encumbering the Mortgaged Property.

E. Borrower has requested, and Lender has agreed, to (i) consent to the transfer of the Mortgaged Property by Transferor to Borrower (the “Transfer”) described in that certain Assumption and Release Agreement, dated of even date herewith, by and among Borrower, Lender, Transferor and other parties (the “Assumption Agreement”), and (ii) approve the Operating Lease and the Management Agreement.

F. Lender requires and Operator is willing to subordinate its right, title and interest to and under the Operating Lease to the Instrument and to assign all Leases, Rents, Equipment, Inventory, Contracts and Accounts to Lender as additional security for the Loan.

G. Lender requires and Manager is willing to subordinate its right, title and interest to and under the Management Agreement to the Instrument and to assign all of Manager’s interest in any Leases, Rents, Contracts and Accounts to Lender as additional security for the Loan.

H. Operator is willing to attorn to Lender upon a default by Borrower under the Loan Documents, to perform its obligations under the Operating Lease and this Assignment for Lender, or its successors and assigns in interest, and to permit Lender to terminate the Operating Lease without liability.

I. Manager is willing to attorn to Lender upon a default by Borrower under the Loan Documents, to perform its obligations under the Management Agreement and this Assignment for Lender, or its successors and assigns in interest, and to permit Lender to terminate the Management Agreement without liability.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Borrower, Lender, Operator and Manager agree as follows:

1. DEFINITIONS. Capitalized terms used in this Assignment and not otherwise defined shall have the meanings assigned to them in the Instrument. All terms used herein which are defined in the Uniform Commercial Code, as in effect from time to time in the jurisdiction in which the Mortgaged Property is located, shall have the same meanings when used herein. The following terms, when used in this Assignment, shall have the following meanings:

(a) “Accounts” means all money, funds, investment property, accounts, general intangibles, deposit accounts, chattel paper, documents, instruments, judgments, claims, settlements of claims, causes of action, refunds, rebates, reimbursements, reserves, deposits, subsidies, proceeds, products, rents and profits, now or hereafter arising, received or receivable, from or on account of Operator’s operation and Manager’s management of the Mortgaged Property as a Seniors Housing Facility.

(b) “Contracts” means any contract or other agreement for the provision of goods or services at or otherwise in connection with the operation, use or management of the Mortgaged Property, including cash deposited to secure performance by parties of their obligations.

(c) “Equipment” means all right, title and interest of Operator in and to all machinery, equipment, computer equipment (hardware and software), tools, furniture, furnishings, kitchen or restaurant supplies and facilities, office equipment, dining room supplies and facilities, medical supplies and facilities, appliances, supplies, books, records, fixtures, leasehold improvements, all tangible and intangible property, and goods now owned and hereafter acquired, used in connection with the operation of the Mortgaged Property, together with all present and future parts, additions, accessories, replacements, attachments, accessions, replacement parts and substitutions therefore, and the proceeds thereof (cash and non-cash including insurance proceeds).

(d) “Event of Default” means the occurrence of any event listed in Section 22 of the Instrument or a default by Borrower, Operator or Manager of any representation, warranty or covenant under this Assignment, the Operating Lease or the Management Agreement.

(e) “Impositions” and “Imposition Deposits” shall have the meaning as defined in Section 7(a) of the Instrument.

(f) “Improvements” means the buildings, structures, improvements and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions, which may now or hereafter constitute the Mortgaged Property.

(g) “Indebtedness” means the principal of, interest on, and all other amounts due at any time under, the Note (as hereinafter defined), the Instrument or any other Loan Documents, including prepayment premiums, late charges, default interest.

(h) “Instrument” shall have the meaning as defined in Recital D above.

(i) “Inventory” means all right, title and interest of Operator in and to inventory of every type and description, now owned and hereafter acquired, including, without limitation, raw materials, work in process, finished goods, goods returned or repossessed or stopped in transit, goods used for demonstration, promotion, marketing or similar purposes, property in, on or with which any of the foregoing may be stored or maintained, all materials and supplies usable or used or consumed at the Mortgaged Property, and all documents and documents of title relating to any of the foregoing, together with all present and future parts, additions, accessories, attachments, accessions, replacements, replacement parts and substitutions therefor or thereto in any form whatsoever.

(j) “Land” means the land described in Exhibit A.

(k) “Leases” means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Operator is a cooperative housing corporation), and all modifications, extensions or renewals thereof. The term “Leases” shall also include any residency, occupancy, admission, and care agreements pertaining to residents of the Mortgaged Property and shall also specifically include, without limitation, the Operating Lease.

(l) “Loan” shall have the meaning as defined in Recital D above.

(m) “Loan Documents” means the Note, the Instrument, the Assumption Agreement (and the “Loan Documents” described therein), this Assignment, all guaranties and any other documents now or in the future executed by Borrower, Operator, Manager or any other person or entity in connection with the Loan, as such documents may be amended from time to time.

(n) “Management Agreement” shall have the meaning as defined in Recital C above.

(o) “Mortgaged Property” shall have the meaning as defined in Recital A above.

(p) “Note” shall have the meaning as defined in Recital D above.

(q) “Operating Lease” shall have the meaning as defined in Recital B above.

(r) “Rents” means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including but not limited to payments under any Housing Assistance Payments Contract), parking fees, laundry and vending machine income and fees and charges for food, healthcare and other services provided at the Mortgaged Property, whether now due, past due, or to become due, resident and tenant security deposits, entrance fees, application fees, processing fees, community fees and any other amounts or fees deposited by any resident or tenant (whether forfeited, or not) with and including all proceeds from any private insurance for residents to cover rental charges and charges for services at or in connection with the Mortgaged Property, and the right to Third Party Payments due for the rents or services of residents at the Mortgaged Property. Each of the foregoing shall be considered “Rents” for the purposes of the actions and rights set forth in Section 3 of this Assignment.

(s) “Taxes” shall have the meaning as defined in Section 1(y) of the Instrument.

2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.

(a) This Assignment is also a security agreement under the Uniform Commercial Code for any of the Contracts, Accounts, Equipment, Inventory, Leases and Rents which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future and all products and cash and non-cash proceeds thereof (collectively, “UCC Collateral”), and Operator and Manager, hereby assign and grant to Lender a security interest in the UCC Collateral, to the extent each of Operator and Manager have an interest in the UCC Collateral. Operator and Manager hereby authorize Lender to file financing statements, continuation statements and financing statement amendments in such form as Lender may require to perfect or continue the perfection of this security interest and Operator and Manager agree, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments. Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Lender may require. Without the prior written consent of Lender, neither Operator nor Manager shall create or permit to exist any other lien or security interest in any of the UCC Collateral.

(b) If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies

provided by this Assignment or existing under applicable law. In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender’s other remedies.

(c) Upon an Event of Default, Lender or its designee may (in Lender’s sole discretion) terminate Operator’s and Manager’s authority to collect Accounts and notify the residents and account debtors that the Accounts have been assigned to Lender or of Lender’s security interest therein and, either in its own name or that of Operator or Manager, demand, collect (including, without limitation, through any lockbox arrangement prescribed by Lender), receive, receipt for, sue for or give acquittance for any or all amounts due or to become due in respect of the Accounts, and may also, in its discretion, file any claim, institute any proceeding or take any other action that Lender may deem necessary or appropriate to protect and realize upon the security interest of Lender in the Accounts. All of Lender’s collection expenses shall be charged to the Borrower’s account and added to the Indebtedness. If Lender is collecting the Accounts as above provided, Lender shall have the right to receive, endorse, assign and deliver in Lender’s name, Operator’s name or Manager’s name any and all checks, drafts and other instruments for the payment of money relating to the Accounts, and Operator and Manager hereby waive notice of presentment, protest and non-payment of any instrument so endorsed. If Lender is collecting the Accounts directly as above provided, Operator and Manager hereby constitute Lender or Lender’s designee as Operator’s and Manager’s attorney-in-fact with power with respect to the Accounts to: (1) endorse Operator’s or Manager’s name upon all notes, acceptances, checks, drafts, money orders or other evidences of payment that may come into Lender’s possession; (2) notify the Post Office to change the address for delivery of mail addressed to Operator or Manager for the Mortgaged Property to such address as Lender may designate; and (3) receive, open, and dispose of all such mail addressed to Operator or Manager.

(d) Upon an Event of Default, Lender may, without demand and without advertisement or notice, at any time or times, sell and deliver any or all Equipment or Inventory held by or for it at public or private sale, for cash, upon credit or otherwise, at such prices and upon such terms as Lender, in its sole discretion, deems advisable. Subject to the provisions of applicable law, Lender may postpone or cause the postponement of the sale of all or any portion of the Equipment or Inventory by announcement at the time and place of such sale, and such sale may, without further notice, be made at the time and place to which the sale has been postponed or Lender may further postpone such sale by announcement made at such time and place. Without in any way limiting the foregoing, Lender shall, following any Event of Default, have the right, in addition to all other rights provided herein or by law, to enter without legal process upon the Mortgaged Property (provided that such entry be done lawfully) for the purpose of taking possession of the Equipment or Inventory, and the right to maintain such possession on the Mortgaged Property or to remove the Equipment or Inventory or any part thereof to such other places as Lender may desire. Whether or not Lender exercises its right to take possession of the Equipment or Inventory, Operator and Manager shall, upon Lender’s demand, promptly assemble the Equipment or Inventory and make it available to Lender at the Mortgaged Property.

3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a) As consideration for the material financial benefit to be derived by Operator from Lender’s approval of the Operating Lease and consenting to the Transfer, and by Manager from Lender’s approval of the Management Agreement and consenting to the Transfer, to the extent permitted by applicable law, Operator and Manager absolutely and unconditionally assign and transfer to Lender all of Operator’s and Manager’s respective right, title and interest in and to any Rents. To the extent permitted by applicable law, it is the intention of Operator and Manager to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Operator’s and Manager’s respective right, title and interest in and to any Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Operator or Manager. Promptly upon request by Lender, Operator and Manager agree to execute and deliver such further assignments as Lender may from time to time require. To the extent permitted by applicable law, Operator, Manager and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction (as that term is defined in Section 30[a] of the Instrument), then it is the intention of Operator and Manager that in this circumstance this Assignment create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Assignment.

(b) After the occurrence of an Event of Default, Operator and Manager authorize Lender to collect, sue for and compromise Rents and direct each resident and tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender. However, until the occurrence of an Event of Default, Lender hereby grants to Operator and Manager a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and subject to the terms of the Operating Lease and Management Agreement, to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), resident and tenant improvements and other capital expenditures. So long as no Event of Default has occurred and is continuing, and subject to the terms of the Operating Lease and Management Agreement, the Rents remaining after application pursuant to the preceding sentence may be retained by Operator or Manager, as applicable, free and clear of, and released from, Lender’s rights with respect to Rents under this Assignment. From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Operator’s and Manager’s license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid. Operator and Manager shall pay to Lender upon demand all Rents to which Lender is entitled. At any time on or after the date of Lender’s demand for Rents, Lender may give, and Operator and Manager hereby irrevocably authorize Lender to give, notice to all residents and tenants of the Mortgaged Property instructing them to pay all Rents to Lender. No resident or tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no resident or tenant shall be obligated to pay to Operator or Manager any amounts which are actually paid to Lender in response to such a notice. Any such notice by Lender shall be delivered to each resident and tenant personally, by mail or by delivering such demand to each rental unit. Neither Operator nor Manager shall interfere with Lender’s collection of such Rents

and both Operator and Manager shall cooperate with Lender’s collection of such Rents. After an Event of Default, Lender is further authorized to give notice to all Third Party Payment payors (other than governmental entities) at Lender’s option, instructing them to pay all Third Party Payments which would be otherwise paid to Operator or Manager to Lender, to the extent permitted by law.

(c) Operator and Manager represent and warrant to Lender that neither Operator nor Manager has executed any prior assignment of Rents that Operator or Manager, respectively, have not performed, and Operator and Manager covenant and agree that they will not perform any acts and have not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Assignment there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents. Neither Operator nor Manager shall collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender’s security or the solvency of Operator or Manager and even in the absence of waste, to the extent permitted by applicable law, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of Contracts and Leases providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Assignment, or for such other purposes as Lender in its discretion may deem necessary or desirable. Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender’s security, without regard to Operator’s or Manager’s solvency and without the necessity of giving prior notice (oral or written) to Operator or Manager, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence. If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Operator and Manager, by their execution of this Assignment, expressly consent to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law. Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property. Immediately upon appointment of a receiver or immediately upon Lender’s entering upon and taking possession and control of the Mortgaged Property, Operator and Manager shall, to the extent permitted by applicable law, surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents. In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Operator, Manager and their representatives from the Mortgaged Property. Operator and Manager acknowledge and agree that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower, Operator and Manager only for those Rents actually received. Lender shall not be liable to Operator, Manager, Borrower, anyone claiming under or through Operator, Manager or Borrower, or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Operator, Manager and Borrower hereby release and discharge Lender from any such liability to the fullest extent permitted by law.

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness, as provided in Section 12 of the Instrument.

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Assignment shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Assignment or in the Instrument.

4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a) As consideration for the material financial benefit to be derived by Operator from Lender’s approval of the Operating Lease and consenting to the Transfer, and by Manager from Lender’s approval of the Management Agreement and consenting to the Transfer, to the extent permitted by applicable law, Operator and Manager absolutely and unconditionally assign and transfer to Lender all of Operator’s and Manager’s respective right, title and interest in, to and under the Leases, including Operator’s and Manager’s respective right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease. To the extent permitted by applicable law, it is the intention of Operator and Manager to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Operator’s and Manager’s respective right, title and interest in, to and under the Leases. To the extent permitted by applicable law, Operator, Manager and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then it is the intention of Operator and Manager that in this circumstance this Assignment create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Assignment.

(b) Until Lender gives notice to Operator or Manager of Lender’s exercise of its rights under this Section 4, Operator or Manager shall have all rights, power and authority granted to Operator or Manager, respectively, under any Lease (except as otherwise limited by this Section or any other provision of this Assignment), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease, with the exception of the Operating Lease. Upon the occurrence of an Event of Default and at the option of Lender, the permission given to Operator and Manager pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall terminate. Operator and Manager shall comply with and observe their respective obligations under all Leases, including any obligations of Operator or Manager pertaining to the maintenance and disposition of resident or tenant security deposits.

(c) Operator and Manager acknowledge and agree that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements. The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Assignment or to expend any money or to incur any expenses. Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property. Prior to Lender’s actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to any Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property. The execution of this Assignment by Operator and Manager shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Operator and Manager, as applicable, prior to such actual entry and taking of possession.

(d) Upon delivery of notice by Lender to Operator or Manager of Lender’s exercise of Lender’s rights under this Section 4 at any time after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have, to the extent permitted by applicable law, all rights, powers and authority granted to Operator and/or Manager under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e) Operator and Manager shall, promptly upon Lender’s request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be on initial terms of at least six (6) months and not more than two years, and shall not include options to purchase. If customary in the applicable market, residential Leases with a month-to-month term or with terms of less than six months shall be permitted with Lender’s prior written consent.

(f) Neither Operator nor Manager shall lease any portion of the Mortgaged Property for non-residential use except with the prior written consent and approval of Lender with the exception of the Operating Lease which has previously been approved by Lender. Neither Operator nor Manager shall modify the terms of, extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Assignment) without the prior written consent of Lender. Operator and Manager shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed. All non-residential Leases (including, without limitation, the Operating Lease) and renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of the Instrument (unless waived in writing by Lender); (2) the resident or tenant shall

attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the resident or tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender’s or such purchaser’s option, accept or terminate such Lease; and (6) the resident or tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g) Neither Operator nor Manager shall receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5. ASSIGNMENT OF CONTRACTS; CONTRACTS AFFECTING THE MORTGAGED PROPERTY.

(a) Operator and Manager, in the name of or on behalf of Operator, have entered into the Contracts identified on Exhibit B for the provision of goods or services, at or otherwise in connection with the operation, use or management of the Mortgaged Property. Operator and Manager, in the name of or on behalf of Operator, may in the future enter into Contracts for the provision of additional goods or services at or otherwise in connection with the operation, use or management of the Mortgaged Property.

(b) As consideration for the material financial benefit to be derived by Operator from Lender’s approval of the Operating Lease and consenting to the Transfer, and by Manager from Lender’s approval of the Management Agreement and consenting to the Transfer, to the extent permitted by applicable law, Operator and Manager absolutely and unconditionally assign and transfer to Lender all of Operator’s and Manager’s respective right, title and interest in, to and under the Contracts, including Operator’s and Manager’s respective right, power and authority to modify the terms of, extend or terminate any such Contract. To the extent permitted by applicable law, it is the intention of Operator and Manager to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Operator’s and Manager’s respective right, title and interest in, to and under the Contracts. To the extent permitted by applicable law, Operator, Manager and Lender intend this assignment of the Contracts to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. However, if this present, absolute and unconditional assignment of the Contracts is not enforceable by its terms under the laws of the Property Jurisdiction, then it is the intention of Operator and Manager that in this circumstance this Assignment create and perfect a lien on the Contracts in favor of Lender, which lien shall be effective as of the date of this Assignment. The acceptance by Lender of this assignment of the Contracts shall not at any time or in any event obligate Lender to take any action under this Assignment or to expend any money or to incur any expenses.

(c) Until Lender gives notice to Operator or Manager of Lender’s exercise of its rights under this Section 5, Operator and Manager shall have all rights, power and authority granted to Operator and Manager, respectively, under any Contract (except as otherwise limited

by this Section or any other provision of this Assignment), including the right, power and authority to modify the terms of any Contract or extend or terminate any Contract, with the exception of the Operating Lease and Management Agreement. Upon the occurrence of an Event of Default and at the option of Lender, the permission given to Operator and Manager pursuant to the preceding sentence to exercise all rights, power and authority under Contracts shall terminate.

(d) Upon Lender’s delivery of notice to Operator or Manager of an Event of Default, Lender shall immediately have all rights, powers and authority granted to Operator and Manager under any Contract, including the right, power and authority to modify the terms of, extend or terminate any such Contract.

(e) Operator and Manager hereby represent and warrant and agree with Lender that: (1) the Contracts are assignable and no previous assignment of Operator’s interest nor Manager’s interest in the Contracts has been made other than the assignment of the existing Contracts by Transferor to Borrower on the date hereof; (2) the Contracts are in full force and effect in accordance with their respective terms and there are no defaults thereunder; (3) Operator and Manager shall fully perform all of their respective obligations under the Contracts, and Operator and Manager agree not to amend, modify, assign, sell, pledge, transfer, mortgage or otherwise encumber their respective interests in any of the Contracts so long as this Assignment is in effect, or consent to any transfer, assignment or other disposition thereof without the written approval of Lender; and (4) each Contract entered into by Operator or Manager subsequent to the date hereof, the average annual consideration of which, directly or indirectly, is at least $20,000, shall provide: (i) that it shall be terminable for cause; and (ii) that it shall be terminable, at Lender’s option, upon the occurrence of an Event of Default.

6. ASSIGNMENT; BORROWER, OPERATOR AND MANAGER REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

(a) Operator and Manager hereby transfer, assign and set over to Lender, its successors and assigns, all their right, title and interest in and to the Management Agreement. The foregoing assignment is being made by Operator and Manager to Lender as collateral security for the full payment and performance by Borrower of all of its obligations under the Loan Documents. However, until the occurrence of an Event of Default (as such term is defined in the Loan Documents), Operator may exercise all rights as operator of the Mortgaged Property under the Management Agreement and Manager may exercise all rights as manager of the Mortgaged Property under the Management Agreement, except as otherwise provided in this Assignment. The foregoing assignment shall remain in effect as long as the Loan, or any part thereof, remains unpaid, but shall automatically terminate upon the release of the Instrument as a lien on the Mortgaged Property.

(b) Borrower, Operator and Manager represent and warrant to Lender that (i) Borrower, Operator and/or Manager will have sufficient working capital, including cash flow from the Mortgaged Property or other assets, to adequately own and/or maintain the Mortgaged Property and pay all outstanding debts associated with the Mortgaged Property as they become due, (ii) the Operating Lease and Management Agreement are unmodified and are in full force and effect, (iii) the Operating Lease and Management Agreement are valid and binding

agreements enforceable against the parties in accordance with their terms, and (iv) no party is in default in performing any of their obligations under the Operating Lease or Management Agreement. Borrower, Operator and Manager hereby agree that any default by Borrower, Operator or Manager under this Assignment, the Operating Lease or the Management Agreement which continues beyond any applicable cure period shall at Lender’s option, constitute an Event of Default under the Instrument.

7. BORROWER AND OPERATOR COVENANTS.

(a) Borrower hereby covenants with Lender that during the term of this Assignment: (i) Borrower shall not transfer the responsibility for the operation of the Mortgaged Property from Operator to any other person or entity without the prior written consent of Lender; (ii) Borrower shall not terminate or amend any of the terms or provisions of the Operating Lease nor shall Borrower assign its rights under the Operating Lease without the prior written consent of Lender; (iii) within 5 days of Borrower’s receipt, Borrower shall give Lender written notice of any notice or information that Borrower receives which indicates that either Borrower or Operator is in default under the terms of the Operating Lease, Operator is terminating the Operating Lease or that Operator is otherwise discontinuing its operation of the Mortgaged Property; and (iv) Borrower agrees that after Borrower receives notice (or otherwise has actual knowledge) of an Event of Default under the Instrument, it will not make any payment of fees under or pursuant to the Operating Lease without Lender’s prior written consent.

(b) Operator hereby covenants with Lender that during the term of this Assignment: (i) Operator shall not transfer the responsibility for the management of the Mortgaged Property from Manager to any other person or entity without the prior written consent of Lender; (ii) Operator shall not terminate or amend any of the terms or provisions of the Management Agreement nor shall Operator assign its rights under the Management Agreement without the prior written consent of Lender; (iii) within 5 days of Operator’s receipt, Operator shall give Lender written notice of any notice or information that Operator receives which indicates that either Operator or Manager is in default under the terms of the Management Agreement, Manager is terminating the Management Agreement or that Manager is otherwise discontinuing its management of the Mortgaged Property; and (iv) Operator agrees that after Operator receives notice (or otherwise has actual knowledge) of an Event of Default under the Instrument, it will not make any payment of fees under or pursuant to the Management Agreement without Lender’s prior written consent.

8. EVENT OF DEFAULT. Upon receipt by Operator or Manager of written notice from Lender that an Event of Default has occurred and is continuing, Lender shall have the right to exercise all rights as owner of the Mortgaged Property under the Operating Lease and operator of the Mortgaged Property under the Management Agreement and Operator shall pay to Lender directly all Rents and other sums due under the Operating Lease and Manager shall pay to Lender directly all sums due under the Management Agreement. Lender shall be entitled to mandate the use of a lockbox bank account or other depositary account, to be maintained under the control and supervision of Lender, for all income of the Mortgaged Property, including but not limited to Rents, service charges, insurance payments and Third Party Payments. In order to induce Lender to lend funds hereunder, Borrower, Operator and Manager hereby agree, that, upon the occurrence of an Event of Default and at the option of Lender, Operator and Manager

shall continue to provide all necessary services required under any applicable licensing or regulatory requirements and shall fully cooperate with Lender and any receiver as may be appointed by a court, in performing these services until such time as Lender has arranged for a replacement operator or manager, and in arranging an orderly transition to a replacement operator, manager or provider of the necessary services. Borrower, Operator and Manager agree to cooperate with Lender in arranging an orderly transfer to a replacement operator of all Licenses and governmental approvals necessary or reasonably required to operate the Mortgaged Property as a Seniors Housing Facility, and to execute promptly all applications, assignments, consents and documents requested by Lender to facilitate such transition.

9. OPERATING LEASE AND MANAGEMENT AGREEMENT TERMINATION. After the occurrence of an Event of Default, Lender shall have the right any time thereafter to terminate the Operating Lease and/or Management Agreement, without cause and without liability, by giving written notice to Operator or Manager, as applicable, of its election to do so. Lender’s notice shall specify the date of termination, which shall not be less than 30 days after the date of such notice, except such lesser notice as Lender deems to be appropriate in the event of an emergency.

10. TURNOVER OF BOOKS AND RECORDS. On the effective date of termination of the Operating Lease or Management Agreement, Operator or Manager, as applicable, shall turn over to Lender all books and records relating to the Mortgaged Property and the residents and tenants (copies of which may be retained by Operator or Manager, at Operator’s or Manager’s expense), together with such authorizations and letters of direction addressed to residents, tenants, suppliers, employees, banks and other parties as Lender may reasonably require. Operator and Manager shall cooperate with Lender in the transfer of operating and management responsibilities to Lender, any receiver, or their designees. A final accounting of unpaid fees (if any) due to Operator under the Operating Lease or Manager under the Management Agreement shall be made within 60 days after the effective date of termination, but Lender shall not have any liability or obligation to Operator or Manager for unpaid fees or other amounts payable under the Operating Lease or Management Agreement which accrue before Lender acquires title to the Mortgaged Property, or before Lender becomes a mortgagee in possession.

11. NOTICE. Operator’s address for notice is                     . Manager’s address for notice is 3715 SW 29^th Street, Topeka, Kansas 66614. Borrower’s address for notice is 12115 NE 99^th Street, Suite 1800, Vancouver, Washington 98682. Lender’s address for notice is c/o Red Mortgage Capital, LLC, Two Miranova Place, 12^th Floor, Columbus, Ohio 43215.

All notices to be given by Lender to Operator or Manager shall be given in the same manner as notices to Borrower pursuant to the notice provisions contained in the Instrument.

12. NO ASSUMPTION OF OBLIGATIONS. The Borrower, Operator and Manager, by executing this Assignment, agree that Lender does not assume any obligations or duties of the Borrower and Operator concerning the Operating Lease nor any obligations or duties of the Operator and Manager concerning the Management Agreement until and unless Lender shall exercise its rights hereunder.

13. POWER OF ATTORNEY. Borrower, Operator and Manager hereby irrevocably constitute and appoint Lender as Borrower’s, Operator’s and Manager’s attorney-in-fact to demand, receive and enforce their rights with respect to the provisions set forth in this Assignment, to give appropriate receipts, releases and satisfactions for and on Borrower’s, Operator’s and Manager’s behalf and to do any and all acts in Borrower’s, Operator’s and Manager’s names or in the name of Lender with the same force and effect as Borrower, Operator or Manager could do if this Assignment had not been made. The foregoing appointment shall be deemed to be coupled with an interest and irrevocable.

14. OPERATOR AND MANAGER REPRESENTATIONS AND OBLIGATIONS. Operator and Manager represent, warrant and agree to the following:

(a) Operator and Manager will use their best efforts to cooperate with Lender, including attendance at any meetings requested by Lender (after reasonable prior notice) furnishing financial statements of Operator and Manager and operating statements for the Mortgaged Property, and allowing Lender to undertake inspections of the Mortgaged Property. In addition, Operator and Manager acknowledge that each have received from Borrower and reviewed a fully executed copy of the Instrument and covenants therein and agree to comply with all provisions and covenants therein applicable to the use and operation of the Mortgaged Property (the “Operating Covenants”), including without limitation, arranging for the escrow of Taxes and insurance with Lender and, if necessary, providing insurance coverage in accordance with Lender’s requirements. In the event Operator or Manager fails to so use and operate the Mortgaged Property, Lender shall have the right to enforce the Operating Covenants directly against Operator and Manager upon Borrower’s failure to do so, in accordance with the provisions of the Instrument and this Assignment. Operator’s or Manager’s failure to comply with these obligations shall constitute a default under the Operating Lease and Management Agreement, as applicable, a default under this Assignment, and an Event of Default under the Loan Documents. Operator and Manager agree to comply with all of their respective obligations under the Operating Lease and Management Agreement pertaining to their payment and performance of any repairs and capital improvements at the Mortgaged Property;

(b) the Operating Lease and Management Agreement are and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the Instrument and the other Loan Documents, and to all renewals, modifications, consolidations, replacements and extensions thereof, and to all advances heretofore made or which may hereafter be made pursuant to the Instrument (including all sums advanced for the purposes of (x) protecting or further securing the lien of the Instrument, curing defaults by Borrower under the Loan Documents or for any other purposes expressly permitted by the Instrument, or (y) constructing, renovating, repairing, furnishing, fixturing or equipping the Mortgaged Property);

(c) any fees payable to Operator by Borrower pursuant to the Operating Lease or to Manager by Operator pursuant to the Management Agreement are and shall be subordinated in right of payment to the prior payment in full of the Indebtedness;

(d) if, by reason of its exercise of any other right or remedy under the Operating Lease, Operator acquires by right of subrogation or otherwise a lien on the Mortgaged Property which (but for this subsection) would be senior to the lien of the Instrument or if, by

reason of its exercise of any other right or remedy under the Management Agreement, Manager acquires by right of subrogation or otherwise a lien on the Mortgaged Property which (but for this subsection) would be senior to the lien of the Instrument, then, in either event, such lien shall be subject and subordinate to the lien of the Instrument;

(e) until Operator, Manager or Borrower receives notice (or otherwise acquires actual knowledge) of an Event of Default, Operator shall be entitled to retain for its own account all payments made under or pursuant to the Operating Lease, subject to the terms of this Assignment and Manager shall be entitled to retain for its own account all payments made under or pursuant to the Management Agreement, subject to the terms of this Assignment;

(f) after Operator or Borrower receives notice (or otherwise acquires actual knowledge) of an Event of Default, Operator will not accept or retain any payment of fees under or pursuant to the Operating Lease, without Lender’s prior written consent;

(g) after Manager or Borrower receives notice (or otherwise acquires actual knowledge) of an Event of Default, Manager will not accept or retain any payment of fees under or pursuant to the Management Agreement, without Lender’s prior written consent;

(h) if, after Operator, Manager or Borrower receives notice (or otherwise acquires actual knowledge) of an Event of Default, Operator receives any payment of fees under the Operating Lease other than from Lender, Operator receives any other payment or distribution of any kind from Borrower or from any other person or entity other than from Lender in connection with the Operating Lease which Operator is not permitted by this Assignment to retain for its own account, Manager receives any payment of fees under the Management Agreement other than from Lender, Manager receives any other payment or distribution of any kind from Borrower or from any other person or entity other than from Lender in connection with the Management Agreement which Manager is not permitted by this Assignment to retain for its own account, such payment or other distribution will be received and held in trust for Lender and unless Lender otherwise notifies Operator or Manager, will be promptly remitted, in cash or readily available funds, to Lender, properly endorsed to Lender, to be applied to the principal of, interest on and other amounts due under the Loan Documents in such order and in such manner as Lender shall determine in its sole and absolute discretion. Operator and Manager hereby irrevocably designate, make, constitute and appoint Lender (and all persons or entities designated by Lender) as Operator’s and Manager’s true and lawful attorney in fact with power to endorse the name of Operator and Manager upon any checks representing payments referred to in this subsection;

(i) during the term of this Assignment, neither Operator nor Manager will commence, or join with any other creditor in commencing any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings with respect to Borrower, without Lender’s prior written consent, and neither Operator nor Manager has filed or is subject to any filing for bankruptcy or reorganization under any applicable bankruptcy or insolvency laws;

(j) Operator will deliver to Lender at the address indicated above and at the same time as such notice is given to Borrower, any notice of default under the Operating Lease;

(k) Manager will deliver to Lender at the address indicated above and at the same time as such notice is given to Operator, any notice of default under the Management Agreement;

(l) Operator has not assigned or sublet and is now the sole owner of the interest or leasehold estate created by the Operating Lease, and shall not hereafter transfer the Operating Lease except as permitted by the terms thereof and with Lender’s prior written approval;

(m) Manager has not assigned and is now the sole owner of the interest created by the Management Agreement, and shall not hereafter transfer the Management Agreement except as permitted by the terms thereof and with Lender’s prior written approval;

(n) Operator will not seek to terminate the Operating Lease by reason of any default of Borrower without prior written notice thereof to Lender and the lapse thereafter of such time as under the Operating Lease was offered to Borrower in which to remedy the default, and the lapse of 30 days after the expiration of such time as Borrower was permitted to cure such default; provided, however, that with respect to any default of Borrower under the Operating Lease which cannot be remedied within such time, if Lender commences to cure such default within such time and thereafter diligently proceeds with such efforts and pursues the same to completion, Lender shall have such time as is reasonably necessary to complete curing such default. Notwithstanding the foregoing, in the event either Lender or Borrower do not cure or commence curing such default within the time provided to Borrower under the Operating Lease and the nature of the default threatens Operator’s ability to conduct its daily business or threatens to materially or adversely damage its property located on the Mortgaged Property, Operator shall be permitted to exercise its rights under the Operating Lease;

(o) Manager will not seek to terminate the Management Agreement by reason of any default of Operator without prior written notice thereof to Lender and the lapse thereafter of such time as under the Management Agreement was offered to Operator in which to remedy the default, and the lapse of 30 days after the expiration of such time as Operator was permitted to cure such default; provided, however, that with respect to any default of Operator under the Management Agreement which cannot be remedied within such time, if Lender commences to cure such default within such time and thereafter diligently proceeds with such efforts and pursues the same to completion, Lender shall have such time as is reasonably necessary to complete curing such default. Notwithstanding the foregoing, in the event either Lender or Operator do not cure or commence curing such default within the time provided to Operator under the Management Agreement and the nature of the default threatens Manager’s ability to conduct its daily business or threatens to materially or adversely damage its property located on the Mortgaged Property, Manager shall be permitted to exercise its rights under the Management Agreement. Manager further covenants with Lender that during the term of this Assignment, within 5 days of Manager’s receipt, Manager shall give Lender written notice of any notice or information that Manager receives which indicates that either Operator or Manager is in default under the terms of the Management Agreement, that Operator is terminating the Management Agreement or that Manager is otherwise discontinuing its management of the Mortgaged Property;

(p) Operator will not pay any rent, fees or other sums due or to become due under the Operating Lease (“Rent”) more than 30 days in advance of the date on which the same are due or to become due under the Operating Lease;

(q) Operator will certify promptly in writing to Lender in connection with any proposed assignment of the Instrument, whether or not any default on the part of Borrower then exists under the Operating Lease, and will execute such estoppel certificates and subordination agreements as Lender shall reasonably require; and

(r) Manager will certify promptly in writing to Lender in connection with any proposed assignment of the Instrument, whether or not any default on the part of Operator then exists under the Management Agreement, and will execute such estoppel certificates and subordination agreements as Lender shall reasonably require

15. OPERATOR CERTIFICATIONS. Operator certifies as follows:

(a) Operator has unconditionally accepted delivery of the Mortgaged Property pursuant to the terms of the Operating Lease and is operating the Mortgaged Property as a Seniors Housing Facility;

(b) The Operating Lease does not provide for free Rent, partial Rent, Rent concessions of any kind, for the advance payment of Rent other than as set forth in Section 14(p) above, Rent abatement or offsetting of Rent, and no Rent has been paid for more than 30 days in advance;

(c) Operator has fully inspected the Mortgaged Property and found the same to be as required by the Operating Lease in good order and repair, and all conditions and duties of an inducement nature under the Operating Lease to be performed by the Borrower have been satisfied, including but not limited to payment to Operator of any Borrower contributions for Improvements, completion by Borrower of the construction of any Improvements to be constructed by the Borrower, and payment to Operator of any consulting fees;

(d) the primary term of the Operating Lease commenced on             , 2012 and continues to                      and contains                      renewal options of              year(s) each. Operator has no rights or options of purchase or first refusal under the Operating Lease or with respect to the Mortgaged Property or any part thereof;

(e) payment of monthly rent under the Operating Lease commenced on             , 2012 and is paid through             , 2012;

(f) as of the date of this Assignment, to the best of Operator’s knowledge, neither the Borrower nor Operator is in default under any of the terms, conditions, provisions or agreements of the Operating Lease and Operator has no offsets, claims or defenses against the Borrower with respect to the Operating Lease;

(g) Operator has paid a security or other deposit to Borrower, pursuant to the terms of the Operating Lease;

(h) Operator does not, has not and will not use the Mortgaged Property for the storage, treatment, manufacturing, generation, disposal or release into the environment of any petroleum product or substance which is classified as a hazardous substance, pollutant or contaminant under the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) or other applicable federal, state and local laws and regulations except for the safe and lawful use and storage of quantities of pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable Senior Housing Facilities;

(i) Operator shall not look to Lender, any mortgagee in possession, or successor in title to the Mortgaged Property for accountability for any security deposit or other deposit held by Borrower;

(j) Operator currently holds the Licenses identified on Exhibit C with regard to the Mortgaged Property, and is unaware of any other Licenses required to lawfully operate the Mortgaged Property as an Assisted Living Facility. Each of the items listed on Exhibit C have been lawfully issued to Operator and are in full force and effect. There is no legal action pending or to the best of Manager’s or Operator’s knowledge threatened which would adversely affect the Licenses or the operations at the Mortgaged Property. Operator is not currently operating under a consent order or decree, or any other agreement or decree mandated by the courts or a governmental entity that restricts or otherwise affects the operation of the Mortgaged Property;

(k) the Mortgaged Property is operated as an Assisted Living Facility pursuant to its Certificate of Occupancy and pursuant to its Licenses. The Certificate of Occupancy and Licenses are current and there are no violations of record. The operations at the Mortgaged Property comply with the terms and conditions of the Certificate of Occupancy and the Licenses. The Certificate of Occupancy has no termination date. The Licenses are valid until                     . The Licenses must be renewed every year;

(l) renewal of the Licenses must be applied for no later than      days prior to the expiration of the Licenses;

(m) foreclosure of the Mortgaged Property by Lender or any other transfer of the Mortgaged Property as a result of an Event of Default by Borrower under the Instrument will result in a revocation, suspension or limitation of the Licenses; and

(n) to the best of Operator’s knowledge, there currently exist no grounds for the revocation, suspension or limitation of the Certificate of Occupancy or any of the Licenses for the Mortgaged Property.

16. MANAGER CERTIFICATIONS. Manager certifies as follows:

(a) Manager is managing the Mortgaged Property as a Seniors Housing Facility;

(b) The primary term of the Management Agreement commenced on             , 2012 and contains                     renewal option of             year(s) each. Manager has no rights or options of purchase or first refusal under the Management Agreement or with respect to the Mortgaged Property or any part thereof;

(c) as of the date of this Assignment, to the best of Manager’s knowledge, neither the Operator nor Manager is in default under any of the terms, conditions, provisions or agreements of the Management Agreement and Manager has no offsets, claims or defenses against the Operator with respect to the Management Agreement; and

(d) Manager does not, has not and will not use the Mortgaged Property for the storage, treatment, manufacturing, generation, disposal or release into the environment of any petroleum product or substance which is classified as a hazardous substance, pollutant or contaminant under the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) or other applicable federal, state and local laws and regulations except for the safe and lawful use and storage of quantities of pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable Senior Housing Facilities.

17. INTENTIONALLY DELETED.

18. CONSIDERATION. The Borrower, Operator and Manager acknowledge that Operator and Manager are owned by parties who directly or indirectly have an ownership interest in the Borrower, are under common management and control and that the Borrower and Operator and Manager will benefit from the Loan. Accordingly, the Borrower, Operator and Manager each acknowledge receipt of good and valuable consideration for Operator’s, Manager’s and Borrower’s entry into this Assignment.

19. COLLECTIONS. Operator and Manager agree that all monies collected on behalf of the Borrower shall be deposited in one or more bank accounts in the name of Operator and Operator and Manager hereby pledge a security interest in the bank accounts to Lender, so that such bank accounts are security for the Loan and shall be subject to the terms of the Instrument and other Loan Documents.

20. MODIFICATIONS TO LOAN DOCUMENTS. Any amendments heretofore or hereafter made to any of the Loan Documents, other than this Assignment, shall not require the consent of Operator or Manager.

21. LENDER REQUESTS. Within 10 days of written request of Lender, Operator and Manager will promptly furnish to Lender copies of all Leases, Contracts, Licenses, books, records, monthly reports, statements of account, budgets, third party payment documentation including but not limited to reimbursement agreements, surveys, statements of deficiencies and plans of correction, and cost reports related to any payments or the right to receive payments from federal, state or local programs, boards, bureaus or agencies, and other items which Operator or Manager is required to maintain or otherwise maintains under the Operating Lease or Management Agreement, respectively, or which Operator or Manager maintains for its own purposes with respect to the Mortgaged Property. Upon an Event of Default under the Instrument, Operator and Manager will furnish promptly to Lender evidence of deposits and withdrawals from any account held or controlled by Operator or Manager relating to the Mortgaged Property.

22. OPERATOR AND MANAGER ASSIGNMENT. As additional collateral security for the Loan and the observance and performance by Borrower of the terms, covenants and conditions of the Loan Documents, Operator and Manager, to the extent permissible under applicable law and regulations, hereby transfer, set over and assign to Lender all of Operator’s and Manager’s respective right, title and interest in and to all Licenses and any other agreements or permits of any nature whatsoever now or hereafter obtained or entered into by Operator or Manager with respect to the occupancy, use, operation, maintenance and administration of the Mortgaged Property as a Seniors Housing Facility.

23. COUNTERPARTS. This Assignment may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall constitute one and the same instrument.

24. GOVERNING LAW.

(a) This Assignment shall be governed by and construed in accordance with the laws of the Property Jurisdiction, and applicable federal law.

(b) Operator and Manager agree that any controversy arising under or in relation to this Assignment shall be litigated exclusively in the Property Jurisdiction, and Operator, Manager and Borrower irrevocably consent to service, jurisdiction, and venue of such course for any such litigation and waive any other venue to which Operator, Manager or Borrower might be entitled by virtue of domicile, habitual residence or otherwise.

25. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon Borrower, Operator, Manager and Lender and their respective successors, transferees and assigns, and shall inure to the benefit of and may be enforced by Lender and its successors, transferees and assigns. Borrower, Operator or Manager shall not assign any of their respective rights and obligations under this Assignment without the prior written consent of Lender.

26. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Assignment contains the complete and entire understanding of the parties as to its subject matter. No amendment to this Assignment will be valid unless it is made in writing and executed by the parties to this Assignment. No specific waiver or forbearance for any breach of any of the terms of this Assignment shall be considered as a general waiver of that or any other term of this Assignment.

27. RELATIONSHIP OF PARTIES. Nothing contained in this Assignment shall constitute Lender as a joint venturer, partner or agent of Borrower, Operator or Manager, or render Lender liable for any debts, obligations, acts, omissions or representations of Borrower, Operator or Manager except as provided herein.

28. ENFORCEABILITY. The determination of invalidity, illegality, or unenforceability of any provision of this Assignment, pursuant to judicial decree, shall not affect the validity or enforceability of any other provision of this Assignment, each of which shall remain in full force and effect.

[SIGNATURES APPEAR ON THE FOLLOWING PAGES]

IN WITNESS WHEREOF, Borrower, Lender, Operator and Manager have executed this Assignment under seal as of the day and year first above written.

BORROWER:
AMBER GLEN LANDLORD, LLC, a                      limited liability company
By:	(SEAL)
Name:
Title:

STATE OF	)
	) ss:
COUNTY of	)

I,                     , a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Jerry Erwin personally known to me to be the                     of AMBER GLEN LANDLORD, LLC, a                     limited liability company, and personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and severally acknowledged that as such                     , he signed and delivered the said instrument, pursuant to authority, given by the                     of said company as its free and voluntary act, and as the free and voluntary act and deed of said                     , for the uses and purposes therein set forth.

Given under my hand and official seal, this      day of             , 2012.

Notary Public

Commission expires                     

LENDER:
AMBER GLEN LANDLORD, LLC, a                     limited liability company
By:	(SEAL)
Name:
Title:

STATE OF	)
	) ss:
COUNTY of	)

I,                     , a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Jerry Erwin personally known to me to be the                     of AMBER GLEN LANDLORD, LLC, a                     limited liability company, and personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and severally acknowledged that as such                     , he signed and delivered the said instrument, pursuant to authority, given by the                     of said company as its free and voluntary act, and as the free and voluntary act and deed of said                     , for the uses and purposes therein set forth.

Given under my hand and official seal, this      day of             , 2012.

Notary Public

Commission expires             

OPERATOR:
AMBER GLEN TRS, LLC,
a                      limited liability company
By:	(SEAL)
Name:
Title:

STATE OF	)
	) ss:
COUNTY of	)

I,                     , a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that Jerry Erwin personally known to me to be the                     of AMBER GLEN TRS, LLC, a                     limited liability company, and personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and severally acknowledged that as such                     , he signed and delivered the said instrument, pursuant to authority, given by the                     of said company as its free and voluntary act, and as the free and voluntary act and deed of said                     , for the uses and purposes therein set forth.

Given under my hand and official seal, this      day of             , 2012.

Notary Public

Commission expires

MANAGER:

JERRY ERWIN ASSOCIATES, INC.,

a Washington corporation,

d/b/a JEA Senior Living

By:

Name:

Title:

STATE OF	)
	) ss:
COUNTY of	)

I,                     , a Notary Public in and for the said County, in the State aforesaid, DO HEREBY CERTIFY that                      personally known to me to be the                     of JERRY ERWIN ASSOCIATES, INC., a Washington corporation, and personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and severally acknowledged that as such                     , he signed and delivered the said instrument, pursuant to authority, given by the                     of said corporation as its free and voluntary act, and as the free and voluntary act and deed of said corporation, for the uses and purposes therein set forth.

Given under my hand and official seal, this      day of             , 2012.

Notary Public

Commission expires             

EXHIBIT A

Legal Description

[See Attached]

EXHIBIT B

Contracts

[list Contracts that currently serve the Mortgaged Property]

EXHIBIT C

Licenses

1. [Describe new Assisted Living Facility License issued to the Operator].

EX-31.1

Exhibit 31.1

CERTIFICATION

I, John Mark Ramsey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sentio Healthcare Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ JOHN MARK RAMSEY
Date: November 14, 2012	John Mark Ramsey
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Sharon C. Kaiser, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sentio Healthcare Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ SHARON C. KAISER
Date: November 14, 2012	Sharon C. Kaiser
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. Sec.1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

John Mark Ramsey does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge, the Quarterly Report of Sentio Healthcare Properties, Inc. on Form 10-Q for the three-month period ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Sentio Healthcare Properties, Inc.

	/s/ JOHN MARK RAMSEY
Date: November 14, 2012	John Mark Ramsey
	President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. Sec.1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Sharon C. Kaiser does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of her knowledge, the Quarterly Report of Sentio Healthcare Properties, Inc. on Form 10-Q for the three-month period ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Sentio Healthcare Properties, Inc.

	/s/ SHARON C. KAISER
Date: November 14, 2012	Sharon C. Kaiser
	Chief Financial Officer (Principal Financial Officer)

XML

Allowance for Doubtful Accounts (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Allowance for Doubtful Accounts (Textual) [Abstract]
Allowances for doubtful accounts related to tenants and other receivables	$ 71,000	$ 76,000

XML

Related Party Transactions (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Related Party Transactions (Textual) [Abstract]
Total organizational and offering costs	$ 5,100,000		$ 5,100,000		$ 5,100,000
Percentage of proceeds from gross offering	3.50%		3.50%
Percentage of manager fee excess of gross offering	13.50%		13.50%
Net loss	(81,000)	114,000	1,341,000	(3,752,000)
Sales commission and dealer manager fee			1,600,000
Related Party Transactions (Additional Textual) [Abstract]
Organizational cost	100,000		100,000
Offering costs	5,000,000		5,000,000		5,000,000
Initial public offering cost	4,000,000		4,000,000		4,000,000
Follow-on offering cost	1,000,000		1,000,000		1,000,000
Acquisition expenses	1,016,000	22,000	1,229,000	1,453,000
Acquisition fees not allocated		900,000		900,000
Asset management fee	0.08%
Management fees	600,000	200,000	1,500,000	600,000
Asset management fee included in management fee	200,000		500,000
Percentage of average invested assets	2.00%
Percentage of net income	25.00%
Management fee and expenses and operating expenses	4,400,000
Disposition fee			1.00%
Real estate commission			6.00%
Percent of investment invested in capital plus			7.00%
Payment percentage on subordinated participation in net sale or refinancing proceeds			10.00%
Promissory note bearing simple interest rate			5.00%
Acquisition cost earned by Prior Advisor	0.0		0.5
Comparable fees			0
Increase in net loss			700,000
Maximum [Member]
Related Party Transactions (Textual) [Abstract]
Percentage of gross proceeds from sales in primary offerings			0.50%
2012 Advisory Agreement [Member]
Related Party Transactions (Textual) [Abstract]
Related party transactions , agreement date			Jan. 01, 2012
Percentage of acquisition fees equal to investments			1.00%
Operating expenses reimbursed and included in general and administrative expenses	0		0
Financing coordination fees	28,000		300,000
2011 Advisory Agreement [Member]
Related Party Transactions (Textual) [Abstract]
Related party transactions , agreement date			Jul. 29, 2011
Percentage of acquisition fees equal to investments			2.00%
Operating expenses reimbursed and included in general and administrative expenses		200,000		900,000
Percentage of gross proceeds from sales in primary offerings			13.50%
Omnibus Agreement [Member]
Related Party Transactions (Textual) [Abstract]
Total organizational and offering costs	800,000		800,000		800,000
Pacific Cornerstone Capital, Inc. [Member]
Related Party Transactions (Textual) [Abstract]
Sales commission and dealer manager fee	$ 0
Pacific Cornerstone Capital, Inc. [Member] | Maximum [Member]
Related Party Transactions (Textual) [Abstract]
Percentage of proceeds from gross offering	7.00%		7.00%
Percentage of manager fee excess of gross offering	3.00%		3.00%

XML

Notes Payable (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Summary of covenants and requirements outstanding
Outstanding Principal Beginning Balance	$ 144,973,000	$ 85,978,000
Add: premium	487,000
Notes payable, net	145,460,000	85,978,000
Amber Glen [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year
Interest-Rate	6.40%—fixed
Outstanding Principal Beginning Balance	8,650,000	(5)
Maturity Date	Jun. 01, 2019
Carriage Court of Hilliard [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 35-year amortization rate
Interest-Rate	5.40% — fixed
Outstanding Principal Beginning Balance	13,325,000	13,440,000
Maturity Date	Aug. 01, 2044
Caruth Haven Court [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	6.43% — fixed
Outstanding Principal Beginning Balance	9,707,000	9,793,000
Maturity Date	Dec. 16, 2019
Greentree [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	4.45% — fixed
Outstanding Principal Beginning Balance	3,856,000	2,832,000
Maturity Date	Jul. 01, 2019
Forestview Manor [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	4.45% — fixed
Outstanding Principal Beginning Balance	8,754,000	5,935,000
Maturity Date	Jul. 01, 2019
Global Rehab Inpatient Rehab Facility [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	6.25% — fixed for 3 years; thereafter the greater of 6.25% and 3yr LIBOR+ 3.25%
Outstanding Principal Beginning Balance	7,373,000	7,441,000
Maturity Date	Dec. 22, 2016
Hedgcoxe Health Plaza [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	4.9% — fixed
Outstanding Principal Beginning Balance	5,600,000	5,060,000
Maturity Date	Aug. 14, 2022
Hudson Creek [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year
Interest-Rate	6.11%—fixed
Outstanding Principal Beginning Balance	7,997,000	(5)
Maturity Date	Jun. 01, 2019
Mesa Vista Inn Health Center [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 20-year amortization rate
Interest-Rate	6.50% — fixed
Outstanding Principal Beginning Balance	6,981,000	7,136,000
Maturity Date	Jan. 05, 2015
Mill Creek [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year
Interest-Rate	6.40%—fixed
Outstanding Principal Beginning Balance	8,349,000	(5)
Maturity Date	Jun. 01, 2019
Oakleaf Village Portfolio [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	5.45% plus the greater of 1% or the 3 month LIBOR
Outstanding Principal Beginning Balance	17,485,000	17,644,000
Maturity Date	Apr. 30, 2015
River's Edge of Yardley [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	4.45% — fixed
Outstanding Principal Beginning Balance	6,484,000	2,500,000
Maturity Date	Jul. 01, 2019
Rome LTACH Project [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	4.5% — fixed
Outstanding Principal Beginning Balance	13,461,000	(4)
Maturity Date	Mar. 31, 2017
Sugar Creek [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year
Interest-Rate	6.20%—fixed
Outstanding Principal Beginning Balance	7,836,000	(5)
Maturity Date	Jun. 01, 2019
The Oaks Bradenton [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	4.45% — fixed
Outstanding Principal Beginning Balance	4,085,000	2,697,000
Maturity Date	Jul. 01, 2019
Terrace at Mountain Creek [Member]
Summary of covenants and requirements outstanding
Payment Type	Principal and interest at a 30-year amortization rate
Interest-Rate	4.45% — fixed
Outstanding Principal Beginning Balance	8,754,000	5,700,000
Maturity Date	Jul. 01, 2019
Woodland Terrace at the Oaks [Member]
Summary of covenants and requirements outstanding
Payment Type	Months 1-22 interest only. Month 23 to maturity principal and interest at a 25-year amortization rate
Interest-Rate	3Mo LIBOR +3.75% with a floor of 5.75%
Outstanding Principal Beginning Balance	$ 6,276,000	$ 5,800,000
Maturity Date	May 01, 2014

XML

Business Combinations (Details) (USD $)	3 Months Ended		9 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Forestview Manor [Member]	Jan. 14, 2011 Forestview Manor [Member]	Sep. 30, 2012 Sunrise of Allentown [Member]	Apr. 14, 2011 Sunrise of Allentown [Member]	Sep. 30, 2012 Rome LTACH Project [Member]	Sep. 30, 2012 Leah Bay Portfolio [Member]
Summary of purchase price of the acquired property
Land					$ 1,320,000		$ 1,000,000			$ 2,481,000
Buildings & improvements					6,803,000		6,395,000		17,800,000	41,364,000
Site improvements					1,040,000		350,000			1,539,000
Furniture & fixtures					350,000	10,800,000	220,000	9,000,000		1,199,000
Intangible assets					960,000		590,000		1,100,000	2,904,000
Goodwill					277,000		445,000
Real estate acquisition					10,750,000		9,000,000		18,900,000	49,487,000
Acquisition expenses	$ 1,016,000	$ 22,000	$ 1,229,000	$ 1,453,000	$ 160,000		$ 142,000		$ 182,000	$ 908,000

XML

Segment Reporting (Details 1) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Investments in real estate:
Total reportable segments	$ 191,917,000	$ 127,827,000
Reconciliation to consolidated assets:
Cash and cash equivalents	21,741,000	27,972,000	30,689,000	29,718,000
Deferred financing costs, net	1,715,000	824,000
Investment in an unconsolidated entities	3,499,000	3,387,000
Tenant and other receivables, net	1,677,000	1,366,000
Deferred costs and other assets	1,686,000	1,938,000
Restricted cash	3,664,000	3,806,000
Goodwill	5,965,000	5,965,000
Total assets	231,864,000	173,085,000
Senior living operations [Member]
Investments in real estate:
Total reportable segments	139,471,000	92,975,000
Reconciliation to consolidated assets:
Goodwill	6,000,000	6,000,000
Triple-net leased properties [Member]
Investments in real estate:
Total reportable segments	44,197,000	26,366,000
Medical office building [Member]
Investments in real estate:
Total reportable segments	$ 8,249,000	$ 8,486,000

XML

Summary of Significant Accounting Policies (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Summary of Significant Accounting Policies (Textual) [Abstract]
Fair value of notes payable	$ 147,100,000	$ 87,000,000
Carrying values of notes payable	145,460,000	85,978,000
Fair value of recorded equity method investment	6,000,000
Gain on equity method investment	$ 1,300,000

XML

Business Combinations (Details Textual) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended				3 Months Ended	9 Months Ended						1 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Forestview Manor [Member]	Sep. 30, 2011 Forestview Manor [Member]	Sep. 30, 2012 Forestview Manor [Member]	Sep. 30, 2011 Forestview Manor [Member]	Jan. 14, 2011 Forestview Manor [Member]	Sep. 30, 2012 Sunrise of Allentown [Member]	Sep. 30, 2011 Sunrise of Allentown [Member]	Sep. 30, 2012 Sunrise of Allentown [Member]	Sep. 30, 2011 Sunrise of Allentown [Member]	Apr. 14, 2011 Sunrise of Allentown [Member]	Jan. 12, 2010 Floyd Medical Center [Member]	Sep. 30, 2012 Rome LTH Partners, LP [Member]	Sep. 30, 2012 Rome LTH Partners, LP [Member]	Jan. 12, 2010 Rome LTH Partners, LP [Member]	Jan. 12, 2010 Rome LTH Partners, LP [Member] Cornerstone Private Equity Fund Operating Partnership, LP [Member]	Jan. 12, 2010 Rome LTH Partners, LP [Member] The Cirrus Group Affiliates [Member]	Jan. 12, 2010 Rome LTH Partners, LP [Member] The Cirrus Group's Fourth Affiliate [Member]	Apr. 30, 2012 Rome LTH Partners, LP [Member] Cornerstone Private Equity Fund Operating Partnership, L.P and Cirrus Group Affiliates [Member]	Aug. 31, 2012 Leah Bay Portfolio [Member]	Sep. 30, 2012 Leah Bay Portfolio [Member]	Sep. 30, 2012 Leah Bay Portfolio [Member]
Business Combinations (Textual) [Abstract]
Purchase price of assisted-living property						$ 350,000		$ 350,000		$ 10,800,000	$ 220,000		$ 220,000		$ 9,000,000										$ 1,199,000	$ 1,199,000
Contribution by the Company to acquire limited partnership interest																			2,700,000
Percentage of limited partnership interest acquired by the company	100.00%		100.00%		75.00%														75.00%	15.00%	9.50%	0.50%
Acquisition cost funded by related parties																				500,000	300,000
Revenues	14,532,000	13,040,000	42,920,000	38,496,000		1,100,000	1,000,000	3,100,000	2,800,000		900,000	700,000	2,400,000	1,300,000			600,000	1,200,000							1,100,000	1,100,000
Net loss	(81,000)	114,000	1,341,000	(3,752,000)		200,000	300,000	100,000	500,000		100,000	100,000	300,000	500,000			200,000	1,500,000							900,000	900,000
The aggregate acquisition cost																16,300,000							5,200,000
Wholly-owned subsidiaries invested			$ 2,490,000	$ 896,000																				$ 49,500,000
Payments to acquire equity method investments interest																								80.00%

XML

Concentration of Risks (Tables)

9 Months Ended

Sep. 30, 2012

Segment Reporting Information [Line Items]

Geographic risks by operating segment

	Three Months Ended						Nine Months Ended
State	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Senior living operations
South Carolina		17.2	%		14.6	%		18.4	%		15.7	%
Texas		17.7	%		15.1	%		17.9	%		15.4	%
Ohio		11.6	%		9.9	%		12.6	%		10.7	%
Pennsylvania		16.7	%		14.3	%		17.2	%		14.7	%
New Hampshire		9.9	%		8.5	%		10.7	%		9.1	%
Tennessee		9.6	%		8.2	%		10.3	%		8.8	%
Illinois		8.2	%		7.0	%		3.0	%		2.5	%
Indiana		4.8	%		4.1	%		5.3	%		4.5	%
Florida		4.3	%		3.6	%		4.6	%		4.2	%
Triple-net leased properties
Texas		63.0	%		7.7	%		71.4	%		8.5	%
Georgia		37.0	%		4.5	%		28.6	%		3.4	%
Medical office building
Texas		100	%		2.5	%		100	%		2.5	%

Senior living operations [Member]

Segment Reporting Information [Line Items]

Summary of segment concentration

	Three Months Ended						Nine Months Ended
Operators	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Good Neighbor Care		29.6	%		25.3	%		31.1	%		26.6	%
Royal Senior Care		17.1	%		14.6	%		18.3	%		15.7	%
Woodbine Senior Living		18.2	%		15.5	%		19.7	%		16.9	%
12 Oaks Senior Living		15.7	%		13.4	%		17.2	%		14.7	%
JEA Senior Living		10.3	%		8.7	%		3.7	%		3.2	%
Provision Living		4.8	%		4.1	%		5.3	%		4.5	%
Legend Senior Living		4.3	%		3.7	%		4.7	%		4.0	%
		100	%		85.3	%		100	%		85.6	%

Triple-net leased properties [Member]

Segment Reporting Information [Line Items]

Summary of segment concentration

	Three Months Ended						Nine Months Ended
Tenant	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Babcock PM Management		32.8	%		4.0	%		37.2	%		4.4	%
Global Rehab Hospitals		30.2	%		3.7	%		34.2	%		4.1	%
The Specialty Hospital		29.6	%		3.6	%		22.9	%		2.7	%
Floyd Healthcare Management		7.4	%		0.9	%		5.7	%		0.7	%
		100	%		12.2	%		100	%		11.9	%

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Notes Payable (Details Textual) (USD $)	1 Months Ended		3 Months Ended		9 Months Ended
	Jun. 30, 2012	Aug. 31, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Aug. 31, 2012	Dec. 31, 2011
Notes Payable (Additional Textual) [Abstract]
Notes payable			$ 145,460,000		$ 145,460,000			$ 85,978,000
Notes payable, net of premium			145,000,000		145,000,000
Fixed and variable rate secured mortgage loans with average effective interest rate			5.70%		5.70%			5.91%
Fixed rate debt			113,800,000		113,800,000			32,700,000
Fixed rate debt, notes payable			79.00%		79.00%			38.00%
Fixed rate debt, weighted average interest rate			5.66%		5.66%			6.01%
Variable rate debt			31,100,000		31,100,000			53,300,000
Variable rate debt, notes payable			21.00%		21.00%			62.00%
Variable rate debt, weighted average interest rate			5.83%		5.83%			5.85%
Notes payable, net			145,460,000		145,460,000			85,978,000
Interest on loan refinanced	4.45%
Terms on refinanced loan					7 years
Proceeds from the loans					32,000,000
Debt repaid and loan fees and expenses					11,500,000
Fees and expenses for documentation and closing of the loan					791,000
Loss on debt extinguishment					148,000
Revolving credit facility amount			25,000,000		25,000,000
Amount outstanding under revolving credit facility			0		0			16,300,000
Revised maturity date		Jul. 31, 2012
Existing indebtedness							32,900,000
Net deferred financing costs			1,715,000		1,715,000			824,000
Capitalized interest			1,800,000	1,400,000	356,000	321,000
Deferred financing costs			$ 1,700,000	$ 800,000	$ (1,247,000)	$ (274,000)
Maximum [Member]
Notes Payable (Textual) [Abstract]
Fixed and variable rate secured mortgage loans with effective interest rates			6.50%		6.50%			6.50%
Minimum [Member]
Notes Payable (Textual) [Abstract]
Fixed and variable rate secured mortgage loans with effective interest rates			4.45%		4.45%			3.45%

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Concentration of Risks (Details 2)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Senior living operations [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	100.00%		100.00%
Percentage of Total Revenues	85.30%	82.40%	85.60%	83.20%
Senior living operations [Member] | South Carolina [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	17.20%		18.40%
Percentage of Total Revenues	14.60%		15.70%
Senior living operations [Member] | Texas [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	17.70%		17.90%
Percentage of Total Revenues	15.10%		15.40%
Senior living operations [Member] | Ohio [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	11.60%		12.60%
Percentage of Total Revenues	9.90%		10.70%
Senior living operations [Member] | Pennsylvania [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	16.70%		17.20%
Percentage of Total Revenues	14.30%		14.70%
Senior living operations [Member] | New Hampshire [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	9.90%		10.70%
Percentage of Total Revenues	8.50%		9.10%
Senior living operations [Member] | Tennessee [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	9.60%		10.30%
Percentage of Total Revenues	8.20%		8.80%
Senior living operations [Member] | Illinois [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	8.20%		3.00%
Percentage of Total Revenues	7.00%		2.50%
Senior living operations [Member] | Indiana [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	4.80%		5.30%
Percentage of Total Revenues	4.10%		4.50%
Senior living operations [Member] | Florida [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	4.30%		4.60%
Percentage of Total Revenues	3.60%		4.20%
Triple-net leased properties [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	100.00%		100.00%
Percentage of Total Revenues	12.20%	10.20%	11.90%	9.80%
Triple-net leased properties [Member] | Texas [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	63.00%		71.40%
Percentage of Total Revenues	7.70%		8.50%
Triple-net leased properties [Member] | Georgia [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	37.00%		28.60%
Percentage of Total Revenues	4.50%		3.40%
Medical office building [Member]
Geographic risks by operating segment
Percentage of Total Revenues	2.50%	2.40%	2.50%	2.50%
Medical office building [Member] | Texas [Member]
Geographic risks by operating segment
Percentage of Segment Revenues	100.00%		100.00%
Percentage of Total Revenues	2.50%		2.50%

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Investment in Real Estate and Unconsolidated Entities (Details Textual) (USD $)	3 Months Ended		9 Months Ended							1 Months Ended	3 Months Ended	9 Months Ended				3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Maximum [Member]	Sep. 30, 2012 Minimum [Member]	Apr. 30, 2012 Rome LTACH Project [Member]	Sep. 30, 2012 Littleton Specialty Rehabilitation Facility [Member]	Apr. 02, 2012 Physicians Centre MOB [Member]	Jan. 31, 2012 Columbus, IN [Member] GreenTree at Westwood [Member]	Sep. 30, 2011 Columbus, IN [Member] GreenTree at Westwood [Member]	Sep. 30, 2011 Columbus, IN [Member] GreenTree at Westwood [Member]	Sep. 30, 2012 Columbus, IN [Member] GreenTree at Westwood [Member]	Dec. 31, 2011 Columbus, IN [Member] GreenTree at Westwood [Member]	Sep. 30, 2012 Rome, GA [Member] Rome LTACH Project [Member]	Jun. 30, 2011 Chattanooga, TN [Member] Terrace at Mountain Creek [Member]	Sep. 30, 2012 Chattanooga, TN [Member] Terrace at Mountain Creek [Member]	Sep. 30, 2012 Littleton, CO [Member] Littleton Specialty Rehabilitation Facility [Member]
Investment in Real Estate (Textual) [Abstract]
Fair value of earn-out agreement							$ 18,900,000							$ 1,000,000			$ 1,000,000
Earn-out payment			980,000	1,000,000						1,000,000						1,000,000
Real estate acquisition costs and contingent consideration	1,016,000	22,000	1,229,000	1,453,000							200,000	500,000
Purchase Price							5,200,000	7,100,000	2,500,000				5,150,000		18,900,000		8,500,000	(4)
Investment in real estate								1,600,000
Useful lives of intangible assets					17 years	1 year
Percentage of acquisition							100.00%
Investment in Real Estate (Additional Textual) [Abstract]
Depreciation expense associated with buildings and improvements, site improvements and furniture and fixtures	1,200,000	1,000,000	3,200,000	2,700,000
Amortization associated with the intangible assets	$ 500,000	$ 1,000,000	$ 1,500,000	$ 3,000,000
Weighted-average amortization period for intangible assets			7 years

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Stockholders' Equity (Details 1) (USD $)	1 Months Ended									3 Months Ended			9 Months Ended
	Sep. 30, 2012	Aug. 31, 2012	Jul. 31, 2012	Jun. 30, 2012	May 31, 2012	Apr. 30, 2012	Mar. 31, 2012	Feb. 29, 2012	Jan. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2012
Summary of repurchased shares
Total Number of Shares Redeemed	13,500	3,000			17,582	9,203			33,008	16,500	26,785	33,008	76,293
Average Price Paid per Share	$ 9.00	$ 9.00			$ 9.00	$ 9.00			$ 9.98		$ 9.00	$ 9.98

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Immaterial Corrections to Prior Period Financial Statements (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ (545,000)	$ (1,413,000)	$ (129,000)	$ (4,750,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs	1,800,000	1,400,000	356,000	321,000
Depreciation and amortization	1,689,000	1,946,000	4,653,000	5,658,000
Straight-line rent amortization			(527,000)	(375,000)
Real estate acquisition costs and contingent consideration			110,000	535,000
Equity loss from unconsolidated entities	(14,000)	(121,000)	363,000	105,000
Bad debt expense			40,000	0
Changes in operating assets and liabilities:
Tenant and other receivables			205,000	180,000
Prepaid expenses and other assets			441,000	(1,091,000)
Restricted cash			95,000	(774,000)
Prepaid rent and security deposits			142,000	737,000
Payable to related parties				(38,000)
Accounts payable and accrued liabilities			3,172,000	2,509,000
Net cash provided by operating activities			7,448,000	2,791,000
Cash flows from investing activities:
Real estate acquisitions			(20,941,000)	(19,751,000)
Additions to real estate			(620,000)	(342,000)
Payments for Construction in progress				(471,000)
Changes in restricted cash			47,000	(31,000)
Acquisition deposits			0	100,000
Distributions from unconsolidated joint ventures			143,000	466,000
Net cash used in investing activities			(23,861,000)	(20,925,000)
Cash flows from financing activities:
Proceeds from issuance of common stock				14,160,000
Redeemed shares			(719,000)	(1,891,000)
Proceeds from issuance of notes payable			40,763,000	14,561,000
Repayments of notes payable			(25,529,000)	(584,000)
Payment of real estate earn out costs			(980,000)	(1,000,000)
Offering costs				(1,917,000)
Deferred financing costs	1,700,000	800,000	(1,247,000)	(274,000)
Noncontrolling interest contribution			3,444,000
Distributions paid to stockholders			(2,407,000)	(3,950,000)
Distributions paid to noncontrolling interests			(302,000)
Net cash provided by financing activities			10,182,000	19,105,000
Net (decrease) increase in cash and cash equivalents			(6,231,000)	971,000
Cash and cash equivalents - beginning of period			27,972,000	29,718,000
Cash and cash equivalents - end of period	21,741,000	30,689,000	21,741,000	30,689,000
Supplemental disclosure of cash flow information:
Cash paid for interest			4,694,000	3,761,000
Cash paid for income taxes			549,000	509,000
Supplemental disclosure of non-cash financing and investing activities:
Distributions declared not paid	807,000	817,000	807,000	817,000	814,000
Distribution reinvested				1,484,000
Accrued real estate development costs				1,404,000
Retained Earnings (Accumulated Deficit)
Beginning of year - December 31,2010			(17,054,000)
End of year - September 30,2011	(17,291,000)		(17,291,000)
As Previously Reported [Member]
Cash flows from operating activities:
Net income (loss)		(1,373,000)		(4,713,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs				414,000
Depreciation and amortization		2,100,000		6,090,000
Straight-line rent amortization				(695,000)
Real estate acquisition costs and contingent consideration				745,000
Bad debt expense
Changes in operating assets and liabilities:
Tenant and other receivables				440,000
Prepaid expenses and other assets				(1,030,000)
Restricted cash				(774,000)
Prepaid rent and security deposits				763,000
Payable to related parties				(38,000)
Accounts payable and accrued liabilities				2,403,000
Receivable from related parties
Net cash provided by operating activities				3,605,000
Cash flows from investing activities:
Real estate acquisitions				(19,751,000)
Additions to real estate				(342,000)
Changes in restricted cash				(98,000)
Development of real estate				(4,024,000)
Acquisition deposits				100,000
Net cash used in investing activities				(24,115,000)
Cash flows from financing activities:
Proceeds from issuance of common stock				14,160,000
Redeemed shares				(1,891,000)
Proceeds from issuance of notes payable				17,251,000
Repayments of notes payable				(584,000)
Payment of real estate earn out costs				(1,000,000)
Offering costs				(1,917,000)
Deferred financing costs				(324,000)
Distributions paid to stockholders				(3,950,000)
Distributions paid to noncontrolling interests				(133,000)
Net cash provided by financing activities				21,612,000
Net (decrease) increase in cash and cash equivalents				1,102,000
Cash and cash equivalents - beginning of period				29,819,000	28,258,000
Cash and cash equivalents - end of period		30,921,000		30,921,000	28,258,000
Supplemental disclosure of cash flow information:
Cash paid for interest				4,226,000
Cash paid for income taxes				509,000
Supplemental disclosure of non-cash financing and investing activities:
Distributions declared not paid		817,000		817,000	814,000
Distribution reinvested				1,484,000
Accrued promote monetization liability				2,018,000
Deferred financing amortization capitalized to real estate				27,000
Retained Earnings (Accumulated Deficit)
Beginning of year - December 31,2010				(11,722,000)	(17,054,000)
End of year - September 30,2011		(16,406,000)		(16,406,000)	(17,054,000)
As Corrected [Member]
Cash flows from operating activities:
Net income (loss)		(1,413,000)		(4,750,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs				321,000
Depreciation and amortization		1,946,000		5,658,000
Straight-line rent amortization				(375,000)
Real estate acquisition costs and contingent consideration				535,000
Equity loss from unconsolidated entities		(121,000)		105,000
Bad debt expense
Changes in operating assets and liabilities:
Tenant and other receivables				180,000
Prepaid expenses and other assets				(1,091,000)
Restricted cash				(774,000)
Prepaid rent and security deposits				737,000
Payable to related parties				(38,000)
Accounts payable and accrued liabilities				2,509,000
Receivable from related parties
Net cash provided by operating activities				2,791,000
Cash flows from investing activities:
Real estate acquisitions				(19,751,000)
Additions to real estate				(342,000)
Payments for Construction in progress				(471,000)
Purchase of an interest in an unconsolidated entity				(896,000)
Changes in restricted cash				(31,000)
Acquisition deposits				100,000
Distributions from unconsolidated joint ventures				466,000
Net cash used in investing activities				(20,925,000)
Cash flows from financing activities:
Proceeds from issuance of common stock				14,160,000
Redeemed shares				(1,891,000)
Proceeds from issuance of notes payable				14,561,000
Repayments of notes payable				(584,000)
Payment of real estate earn out costs				(1,000,000)
Offering costs				(1,917,000)
Deferred financing costs				(274,000)
Distributions paid to stockholders				(3,950,000)
Net cash provided by financing activities				19,105,000
Net (decrease) increase in cash and cash equivalents				971,000
Cash and cash equivalents - beginning of period				29,718,000	27,972,000
Cash and cash equivalents - end of period		30,689,000		30,689,000	27,972,000
Supplemental disclosure of cash flow information:
Cash paid for interest				3,761,000
Cash paid for income taxes				509,000
Supplemental disclosure of non-cash financing and investing activities:
Distributions declared not paid		817,000		817,000	814,000
Distribution reinvested				1,484,000
Retained Earnings (Accumulated Deficit)
Beginning of year - December 31,2010				(11,722,000)	(17,054,000)
End of year - September 30,2011		$ (16,406,000)		$ (16,406,000)	$ (17,054,000)

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Segment Reporting (Details Textual) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Segment Reporting (Textual) [Abstract]
Goodwill	$ 5,965,000	$ 5,965,000
Senior living operations [Member]
Segment Reporting (Textual) [Abstract]
Goodwill	$ 6,000,000	$ 6,000,000

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies

For more information regarding our significant accounting policies and estimates, please refer to “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2011.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In accordance with the guidance for the consolidation of variable interest entities (“VIEs”), we analyze our variable interests, including investments in partnerships and joint ventures, to determine if the entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews, based on our review of the design of the entity, its organizational structure including decision-making ability, risk and reward sharing experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions and financial agreements. We also use quantitative and qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary.

Investments in Unconsolidated Entities

We account for our investments in unconsolidated joint ventures under the equity method of accounting. We exercise significant influence, but do not control these entities or direct the activities that most significantly impact the venture’s performance. Investments in unconsolidated entities are recorded initially at cost and subsequently adjusted for cash contributions and distributions. We recognize our allocable share of the equity in earnings of our unconsolidated entities based on the respective venture’s structure and preferences.

Use of Estimates

The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted.

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2011-05, Comprehensive Income: Presentation of Comprehensive Income, which eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity and requires the presentation of components of net income and components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB deferred the requirement to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements.

As of September 30, 2012, the Company had no components of other comprehensive income. Accordingly, net loss is equal to comprehensive loss for all periods presented.

Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. Our accompanying interim condensed consolidated financial statements should be read in conjunction with our audited condensed consolidated financial statements and the notes thereto included on our 2011 Annual Report on Form 10-K, as filed with the SEC.

Fair Value of Financial Instruments and Fair Value Measurements

FASB Accounting Standards Codification (“ASC”) 825-10, “Financial Instruments”, requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of ASU 2011-04 on January 1, 2012 did not have a material impact on the Company’s consolidated financial position or results of operations. The impact on the Company’s disclosures was not material. Financial assets and liabilities recorded at fair value on the condensed consolidated balance sheets and disclosed in the financial statements are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical instruments.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets when such information is available or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our balance sheets include the following financial instruments: cash and cash equivalents, tenant and other receivables, restricted cash, security deposits, accounts payable and accrued liabilities, distributions payable, and notes payable. With the exception of an equity method investment the Company obtained control of in April 2012 and notes payable discussed below, we consider the carrying values of our financial instruments to approximate fair value because they generally expose the Company to limited credit risk and because of the short period of time between origination of the financial assets and liabilities and their expected settlement.

The fair market value of notes payable is estimated using lending rates available to us for financial instruments with similar terms and maturities and are classified as Level 2. As of September 30, 2012 and December 31, 2011, the fair value of notes payable was $147.1 million and $87.0 million, compared to the carrying values of $145.0 million and $86.0 million, respectively. Upon acquiring control of a previously unconsolidated entity, the Company recorded its equity method investment at fair value of $6.0 million, and recorded a gain of approximately $1.3 million. The fair value of the equity method investment was estimated using appraisals of the respective investment.

There were no transfers between Levels 1 or 2 during the three months and nine months ended September 30, 2012. The Company has no financial instruments classified using level 3 measurements as of September 30, 2012.

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Immaterial Corrections to Prior Period Financial Statements (Details Textual) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
New Accounting Pronouncements or Change in Accounting Principal (Textual) [Abstract]
Noncontrolling interests	$ 4,492,000	$ 1,242,000
Total equity	80,746,000	80,859,000	83,275,000	81,691,000
Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principal (Textual) [Abstract]
Noncontrolling interests			2,600,000	2,800,000
Total equity			84,300,000	82,800,000
Restatement Adjustment [Member]
New Accounting Pronouncements or Change in Accounting Principal (Textual) [Abstract]
Noncontrolling interests			1,600,000	1,700,000
Total equity			$ 83,300,000	$ 81,700,000

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Concentration of Risks (Details Textual)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Senior living operations [Member]
Concentration of Risks (Textual) [Abstract]
Percentage of total revenues	85.30%	82.40%	85.60%	83.20%
Triple-net leased properties [Member]
Concentration of Risks (Textual) [Abstract]
Percentage of total revenues	12.20%	10.20%	11.90%	9.80%
Medical office building [Member]
Concentration of Risks (Textual) [Abstract]
Percentage of total revenues	2.50%	2.40%	2.50%	2.50%
Number of properties owned	20		20
Number of states properties owned located	10		10

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Business Combinations (Tables)

9 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Summary of purchase price of the acquired property

	Forestview Manor		Sunrise of Allentown		Rome LTACH Project		Leah Bay Portfolio
Land	$	1,320,000	$	1,000,000	$	—	$	2,481,000
Buildings & improvements		6,803,000		6,395,000		17,800,000		41,364,000
Site improvements		1,040,000		350,000		—		1,539,000
Furniture & fixtures		350,000		220,000		—		1,199,000
Intangible assets		960,000		590,000		1,100,000		2,904,000
Goodwill		277,000		445,000		—		—
Real estate acquisition	$	10,750,000		9,000,000		18,900,000		49,487,000
Acquisition expenses	$	160,000	$	142,000	$	182,000	$	908,000

Pro forma incremental effect information as part of acquisitions

	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011
Revenues	$	14,532,000		$	13,040,000
Net (loss) income	$	(81,000	)	$	114,000
Basic and diluted net (loss) income per common share attributable to common stockholders	$	(0.01	)	$	0.01

	Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Revenues	$	42,920,000	$	38,496,000
Net income (loss)	$	1,341,000	$	(3,752,000	)
Basic and diluted net income (loss) per common share attributable to common stockholders	$	0.10	$	(0.30	)

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

Summary of distributions declared

	Distribution Declared (1)
Period	Cash		Reinvested		Total
First quarter 2011	$	1,152,000	$	1,124,000	$	2,276,000
Second quarter 2011	$	2,436,000	$	—	$	2,436,000
Third quarter 2011	$	817,000	$	—	$	817,000
First quarter 2012	$	801,000	$	—	$	801,000
Second quarter 2012	$	799,000	$	—	$	799,000
Third quarter 2012	$	807,000	$	—	$	807,000

(1) Distributions declared represented a return of capital and taxable ordinary income for tax purposes. In order to meet the requirements for being treated as a REIT under the Internal Revenue Code, we must pay distributions to our stockholders each taxable year equal to at least 90% of our net ordinary taxable income. Some of our distributions have been paid from sources other than operating cash flow, such as offering proceeds. Until proceeds from our offering are fully invested and generating operating cash flow sufficient to fully cover distributions to stockholders, we intend to pay all or a portion of our distributions from the proceeds of our offerings or from borrowings in anticipation of future cash flow.

Summary of repurchased shares

Period	Total Number of Shares Redeemed		Average Price Paid per Share
January		33,008	$	9.98
February		—	$	—
March		—	$	—
First quarter 2012		33,008	$	9.98
April		9,203	$	9.00
May		17,582	$	9.00
June		—	$	—
Second quarter 2012		26,785	$	9.00
July		—	$	—
August		3,000	$	9.00
September		13,500	$	9.00
Third quarter 2012		16,500	$	—
		76,293

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Business Combinations (Details 1) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Pro forma incremental effect information as part of acquisition
Revenues	$ 14,532,000	$ 13,040,000	$ 42,920,000	$ 38,496,000
Net loss	$ (81,000)	$ 114,000	$ 1,341,000	$ (3,752,000)
Basic and diluted net loss per common share attributable to common stockholders	$ (0.01)	$ 0.01	$ 0.10	$ (0.30)

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012 Subsidiary Facility	Sep. 30, 2011	Sep. 30, 2012 Subsidiary Facility	Sep. 30, 2011	Dec. 31, 2011
Income Taxes (Textual) [Abstract]
Number of assisted-living facilities acquired	14		14
Number of wholly owned taxable REIT subsidiaries formed	11		11
TRS recognized for Federal and State income taxes	$ 0.1	$ 0.1	$ 0.1	$ 0.1
Net deferred tax assets related to the TRS entities	$ 1.3		$ 1.3		$ 1.1

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Immaterial Corrections to Prior Period Financial Statements (Tables)

9 Months Ended

Sep. 30, 2012

Immaterial Corrections to Prior Period Financial Statements [Abstract]

Summary of the effects of the correction of immaterial errors on consolidated financial statements

	December 31, 2011
	As Previously Reported			As Corrected
ASSETS
Cash and cash equivalents	$	28,258,000		$	27,972,000
Investments in real estate
Land		21,270,000			20,713,000
Buildings and improvements, net		114,584,000			100,687,000
Furniture, fixtures and equipment, net		2,562,000			2,562,000
Construction in progress		5,218,000			—
Intangible lease assets, net		5,581,000			3,865,000
Total		149,215,000			127,827,000
Deferred financing costs, net		1,121,000			824,000
Investments in unconsolidated entities		—			3,387,000
Tenant and other receivables		1,808,000			1,366,000
Deferred costs and other assets		1,948,000			1,938,000
Restricted cash		3,873,000			3,806,000
Goodwill		5,965,000			5,965,000
Total assets	$	192,188,000		$	173,085,000
LIABILITIES AND EQUITY
Liabilities:
Notes payable	$	100,059,000		$	85,978,000
Accounts payable and accrued liabilities		7,683,000			3,899,000
Prepaid rent and security deposits		1,740,000			1,535,000
Dividends payable		814,000			814,000
Total liabilities		110,296,000			92,226,000
Stockholders’ equity (deficit):
Common stock		129,000			129,000
Additional paid-in capital		96,542,000			96,542,000
Accumulated deficit		(17,054,000	)		(17,054,000	)
Total controlling stockholders’ equity (deficit)		79,617,000			79,617,000
Noncontrolling interest		2,275,000			1,242,000
Total equity (deficit)		81,892,000			80,859,000
Total liabilities and equity	$	192,188,000		$	173,085,000

	2011 Three months ended September 30						2011 Nine months ended September 30
	As Previously Reported			As Corrected			As Previously Reported			As Corrected
Revenues:
Rental revenues	$	8,458,000		$	7,942,000		$	24,389,000		$	23,013,000
Resident fees and services		1,945,000			1,945,000			5,667,000			5,667,000
Tenant reimbursements and other income		433,000			362,000			1,064,000			876,000
		10,836,000			10,249,000			31,120,000			29,556,000
Expenses:
Property operating and maintenance expenses		6,821,000			6,750,000			18,973,000			18,751,000
General and administrative expenses		1,240,000			1,243,000			3,201,000			3,201,000
Asset management fees and expenses		390,000			390,000			1,197,000			1,197,000
Real estate acquisition costs and contingent consideration		22,000			22,000			1,663,000			1,453,000
Depreciation and amortization		2,100,000			1,946,000			6,090,000			5,658,000
		10,573,000			10,351,000			31,124,000			30,260,000
Income/(loss) from operations		263,000			(102,000	)		(4,000	)		(704,000	)
Other income (expense):
Interest income		4,000			4,000			10,000			10,000
Interest expense		(1,640,000	)		(1,436,000	)		(4,719,000	)		(4,161,000	)
Equity in income from unconsolidated entities		—			121,000			—			105,000
Net loss		(1,373,000	)		(1,413,000	)		(4,713,000	)		(4,750,000	)
Net income (loss) attributable to noncontrolling interests		20,000			(20,000	)		(29,000	)		(66,000	)
Net loss attributable to common stockholders	$	(1,393,000	)	$	(1,393,000	)	$	(4,684,000	)	$	(4,684,000	)
Basic and diluted net loss per common share attributable to common stockholders	$	(0.11	)	$	(0.11	)	$	(0.37	)	$	(0.37	)

	2011 Nine Months ended September 30
	As Previously Reported			As Corrected
Cash flows from operating activities:
Net loss	$	(4,713,000	)	$	(4,750,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs		414,000			321,000
Depreciation and amortization		6,090,000			5,658,000
Straight-line rent amortization		(695,000	)		(375,000	)
Real estate earn out costs		745,000			535,000
Equity loss from an unconsolidated entity		—			(121,000	)
Bad debt expense		—			—
Change in operating assets/liabilities:
Tenant and other receivables		440,000			180,000
Prepaid expenses and other assets		(1,030,000	)		(1,091,000	)
Restricted cash		(774,000	)		(774,000	)
Prepaid rent and security deposits		763,000			737,000
Payable to related parties		(38,000	)		(38,000	)
Accounts payable and accrued liabilities		2,403,000			2,509,000
Receivable from related parties		—			—
Net cash provided by operating activities		3,605,000			2,791,000
Cash flows from investing activities:
Real estate acquisitions		(19,751,000	)		(19,751,000	)
Additions to real estate		(342,000	)		(342,000	)
Payments for construction in progress		—			(471,000	)
Purchase of an interest in an unconsolidated entity		—			(896,000	)
Changes in Restricted cash		(98,000	)		(31,000	)
Development of real estate		(4,024,000	)		—
Acquisition deposits		100,000			100,000
Distributions from unconsolidated joint ventures		—			466,000
Net cash used in investing activities		(24,115,000	)		(20,925,000	)
Cash flows from financing activities:
Proceeds from issuance of common stock		14,160,000			14,160,000
Redeemed shares		(1,891,000	)		(1,891,000	)
Proceeds from issuance of notes payable		17,251,000			14,561,000
Repayment of notes payable		(584,000	)		(584,000	)
Payment of real estate earn out costs		(1,000,000	)		(1,000,000	)
Offering costs		(1,917,000	)		(1,917,000	)
Deferred financing costs		(324,000	)		(274,000	)
Distributions paid to stockholders		(3,950,000	)		(3,950,000	)
Distributions paid to noncontrolling interest		(133,000	)		—
Net cash provided by financing activities		21,612,000			19,105,000
Net increase in cash and cash equivalents		1,102,000			971,000
Cash and cash equivalents - beginning of period		29,819,000			29,718,000
Cash and cash equivalents - end of period	$	30,921,000		$	30,689,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,226,000		$	3,761,000
Cash paid for income taxes		509,000			509,000
Supplemental disclosure of non-cash financing and investing activities:
Distribution declared not paid		817,000			817,000
Distribution reinvested		1,484,000			1,484,000
Accrued real estate development costs		1,404,000			—
Accrued promote monetization liability		2,018,000			—
Deferred financing amortization capitalized to real estate development		27,000			—

	2011
	As Previously Reported			As Corrected
Retained Earnings (Accumulated Deficit)
Beginning of period – December 31, 2010	$	(11,722,000	)	$	(11,722,000	)
End of period – September 30, 2011		(16,406,000	)		(16,406,000	)

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Organization (Details)	9 Months Ended
	Sep. 30, 2012
Sentio Investments, LLC [Member]
Organization (Textual) [Abstract]
Formation date	December 20, 2011
Cornerstone Leveraged Realty Advisors, LLC [Member]
Organization (Textual) [Abstract]
Formation date	October 16, 2006
Sentio Healthcare Properties OP, LP [Member]
Organization (Textual) [Abstract]
Formation date	October 17, 2006
Operating Partnership and the HC Operating Partnership, LP [Member]
Organization (Textual) [Abstract]
Percentage of interest owned	100.00%

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Public Offering

9 Months Ended

Sep. 30, 2012

Public Offering [Abstract]

Public Offering

2. Public Offering

Our charter authorizes the issuance of up to 580,000,000 shares of common stock with a par value of $0.01 per share and 20,000,000 shares of preferred stock with a par value of $0.01 per share.

On June 20, 2008, we commenced an initial public offering of up to 50,000,000 shares of our common stock, consisting of 40,000,000 shares for sale pursuant to a primary offering and 10,000,000 shares for sale pursuant to our distribution reinvestment plan. We stopped making offers under our initial public offering on February 3, 2011 after raising gross offering proceeds of $123.9 million from the sale of 12.4 million shares, including shares sold under the distribution reinvestment plan.

On February 4, 2011, the U.S. Securities and Exchange Commission (“SEC”) declared the registration statement for our follow-on offering effective and we commenced a follow-on offering of up to 55,000,000 shares of our common stock, consisting of 44,000,000 shares for sale pursuant to a primary offering and 11,000,000 shares for sale pursuant to our dividend reinvestment plan. As of September 30, 2012, we had sold a total of 12.7 million shares of our common stock pursuant to our initial and follow-on public offerings for aggregate gross proceeds of $127.0 million.

On April 29, 2011 we informed our stockholders that the Independent Directors Committee of our board of directors had directed us to suspend our follow-on offering, our dividend reinvestment program and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with our Independent Directors Committee consideration of various strategic alternatives to enhance our stockholders’ value. On October 18, 2011, we announced that the Independent Directors Committee had suspended its analysis of strategic alternatives for the Company and concluded that the Company was well positioned as an investment program with a continued focus on healthcare real estate. The Independent Directors Committee identified strategies in its evaluation process that it believes will enhance this position and is implementing operating changes designed to increase portfolio cash flow and increase shareholder value. In particular, the Company is focused on enhancing portfolio performance by identifying investment and financing opportunities, implementing operational efficiencies and evaluating the potential for growth in the future. As of September 30, 2012, sales pursuant to our follow-on offering remained suspended.

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Public Offering (Details) (USD $) In Millions, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Feb. 03, 2011 Initial public offering [Member]	Jun. 20, 2008 Initial public offering [Member]	Feb. 04, 2011 Follow-on offering [Member]	Feb. 04, 2011 Primary offering [Member]	Jun. 20, 2008 Primary offering [Member]	Jun. 20, 2008 Distribution reinvestment plan [Member]	Feb. 04, 2011 Dividend reinvestment plan [Member]
Public Offering (Textual) [Abstract]
Common stock, shares authorized	580,000,000	580,000,000		50,000,000	55,000,000	44,000,000	40,000,000	10,000,000	11,000,000
Sale of common stock	12,700,000		12,400,000
Proceeds from sale of shares	$ 127.0		$ 123.9
Public Offering (Additional Textual) [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, par value	$ 0.01	$ 0.01

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Concentration of Risks (Details) (Senior living operations [Member])	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Summary of segment concentration
Percentage of Segment Revenues	100.00%		100.00%
Percentage of Total Revenues	85.30%	82.40%	85.60%	83.20%
Good Neighbor Care [Member]
Summary of segment concentration
Percentage of Segment Revenues	29.60%		31.10%
Percentage of Total Revenues	25.30%		26.60%
Royal Senior Care [Member]
Summary of segment concentration
Percentage of Segment Revenues	17.10%		18.30%
Percentage of Total Revenues	14.60%		15.70%
Woodbine Senior Living [Member]
Summary of segment concentration
Percentage of Segment Revenues	18.20%		19.70%
Percentage of Total Revenues	15.50%		16.90%
12 Oaks Senior Living [Member]
Summary of segment concentration
Percentage of Segment Revenues	15.70%		17.20%
Percentage of Total Revenues	13.40%		14.70%
JEA Senior Living [Member]
Summary of segment concentration
Percentage of Segment Revenues	10.30%		3.70%
Percentage of Total Revenues	8.70%		3.20%
Provision Living [Member]
Summary of segment concentration
Percentage of Segment Revenues	4.80%		5.30%
Percentage of Total Revenues	4.10%		4.50%
Legend Senior Living [Member]
Summary of segment concentration
Percentage of Segment Revenues	4.30%		4.70%
Percentage of Total Revenues	3.70%		4.00%

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Stockholders' Equity (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Oct. 01, 2012	Dec. 31, 2011	Dec. 22, 2011
Stockholders' Equity (Textual) [Abstract]
Common stock, shares authorized	580,000,000		580,000,000			580,000,000
Number of shares sold	12,840,319		12,840,319			12,916,612
Net income (loss)	$ (545,000)	$ (1,413,000)	$ (129,000)	$ (4,750,000)
Stockholder's Equity (Additional Textual) [Abstract]
Common stock, par value	$ 0.01		$ 0.01			$ 0.01
Preferred stock, shares authorized	20,000,000		20,000,000			20,000,000
Preferred stock, par value	$ 0.01		$ 0.01			$ 0.01
Net asset							$ 9.02
Net ordinary taxable income			90.00%
Annualized rate	$ 0.75	$ 0.25	$ 0.75	$ 0.25
Percentage of annualized rate	7.50%	2.50%	7.50%	2.50%	47.50%
Annualized rate per share	$ 10.00	$ 10.00	$ 10.00	$ 10.00	$ 10
Aggregate distributions			17,000,000
Repurchase cannot be exercised due to limitations			2,500
Number of days prior notice to stockholders regarding termination of program			30 days
Repurchase price of stockholders purchase price			100.00%
Repurchase of stock towards stock repurchase program		28,729		195,997
Period of distribution			365 days
Distribution reinvestment plan [Member]
Stockholders' Equity (Textual) [Abstract]
Common stock, shares authorized	10,000,000		10,000,000
Price paid by the purchaser for common stock	95.00%		95.00%
Number of shares sold	551,000		551,000			551,000
Repurchased stock			78,793
Net income (loss)			$ 17,300,000
Distribution reinvestment plan [Member] | Minimum [Member]
Stockholders' Equity (Textual) [Abstract]
Sale of stock, price per share	$ 9.50		$ 9.50

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Condensed Consolidated Balance Sheets (Unaudited) (USD $)	Sep. 30, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 21,741,000	$ 27,972,000
Investments in real estate:
Land	23,193,000	20,713,000
Buildings and improvements, net	158,880,000	100,687,000
Furniture, fixtures and equipment, net	3,473,000	2,562,000
Intangible lease assets, net	6,371,000	3,865,000
Total investments in real estate	191,917,000	127,827,000
Deferred financing costs, net	1,715,000	824,000
Investment in unconsolidated entities	3,499,000	3,387,000
Tenant and other receivables, net	1,677,000	1,366,000
Restricted cash	3,664,000	3,806,000
Deferred costs and other assets	1,686,000	1,938,000
Goodwill	5,965,000	5,965,000
Total assets	231,864,000	173,085,000
Liabilities:
Notes payable	145,460,000	85,978,000
Accounts payable and accrued liabilities	3,174,000	3,899,000
Prepaid rent and security deposits	1,677,000	1,535,000
Distributions payable	807,000	814,000
Total liabilities	151,118,000	92,226,000
Commitments and contingencies (Note 13)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value per share; 20,000,000 shares authorized; no shares were issued or outstanding at September 30, 2012 and December 31, 2011
Common stock, $0.01 par value per share; 580,000,000 shares authorized; 12,840,319, and 12,916,612 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	129,000	129,000
Additional paid-in capital	93,416,000	96,542,000
Accumulated deficit	(17,291,000)	(17,054,000)
Total stockholders' equity	76,254,000	79,617,000
Noncontrolling interests	4,492,000	1,242,000
Total equity (deficit)	80,746,000	80,859,000
Total liabilities and equity	$ 231,864,000	$ 173,085,000

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Segment Reporting (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reconciliation of segment activity to consolidated net income
Rental revenues	$ 8,422,000	$ 7,942,000	$ 24,525,000	$ 23,013,000
Resident services and fee income	3,655,000	1,945,000	8,243,000	5,667,000
Tenant reimbursements and other income	312,000	362,000	1,121,000	876,000
Total revenues	12,389,000	10,249,000	33,889,000	29,556,000
Property operating and maintenance expenses	7,473,000	6,750,000	20,921,000	18,751,000
Net operating income	1,229,000	(102,000)	3,911,000	(704,000)
General and administrative expenses	423,000	1,243,000	1,632,000	3,201,000
Asset management fees and expenses	559,000	390,000	1,543,000	1,197,000
Real estate acquisition costs and contingent consideration	1,016,000	22,000	1,229,000	1,453,000
Depreciation and amortization	1,689,000	1,946,000	4,653,000	5,658,000
Interest income	(2,000)	(4,000)	(10,000)	(10,000)
Interest expense	(1,790,000)	(1,436,000)	(4,818,000)	(4,161,000)
Other expenses			(151,000)
Equity in income (loss) from an unconsolidated entity	14,000	121,000	(363,000)	(105,000)
Fair value adjustment for equity method investment			1,282,000
Net loss	(545,000)	(1,413,000)	(129,000)	(4,750,000)
Net (loss) income attributable to noncontrolling interests	(16,000)	(20,000)	108,000	(66,000)
Net loss attributable to common stockholders	(529,000)	(1,393,000)	(237,000)	(4,684,000)
Senior living operations [Member]
Reconciliation of segment activity to consolidated net income
Rental revenues	6,910,000	6,915,000	20,453,000	19,983,000
Resident services and fee income	3,655,000	1,945,000	8,243,000	5,667,000
Tenant reimbursements and other income	15,000	73,000	294,000	248,000
Total revenues	10,580,000	8,933,000	28,990,000	25,898,000
Property operating and maintenance expenses	7,159,000	6,365,000	20,084,000	18,023,000
Net operating income	3,421,000	2,568,000	8,906,000	7,875,000
Triple-net leased properties [Member]
Reconciliation of segment activity to consolidated net income
Rental revenues	1,298,000	826,000	3,436,000	2,427,000
Tenant reimbursements and other income	222,000	234,000	593,000	462,000
Total revenues	1,520,000	1,060,000	4,029,000	2,889,000
Property operating and maintenance expenses	220,000	258,000	594,000	468,000
Net operating income	1,300,000	802,000	3,435,000	2,421,000
Medical office building [Member]
Reconciliation of segment activity to consolidated net income
Rental revenues	214,000	201,000	636,000	603,000
Tenant reimbursements and other income	75,000	55,000	234,000	166,000
Total revenues	289,000	256,000	870,000	769,000
Property operating and maintenance expenses	94,000	127,000	243,000	260,000
Net operating income	$ 195,000	$ 129,000	$ 627,000	$ 509,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net loss	$ (129,000)	$ (4,750,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs	356,000	321,000
Depreciation and amortization	4,653,000	5,658,000
Straight-line rent amortization	(527,000)	(375,000)
Real estate acquisition costs and contingent consideration	110,000	535,000
Fair value adjustment for equity method investment	(1,282,000)
Equity in loss (income) from unconsolidated entities	363,000	105,000
Bad debt expense	40,000	0
Change in deferred taxes	(191,000)
Changes in operating assets and liabilities:
Tenant and other receivables	205,000	180,000
Prepaid expenses and other assets	441,000	(1,091,000)
Restricted cash	95,000	(774,000)
Prepaid rent and security deposits	142,000	737,000
Payable to related parties		(38,000)
Accounts payable and accrued liabilities	3,172,000	2,509,000
Net cash provided by operating activities	7,448,000	2,791,000
Cash flows from investing activities:
Real estate acquisitions	(20,941,000)	(19,751,000)
Additions to real estate	(620,000)	(342,000)
Payments for Construction in progress		(471,000)
Purchase of an interest in an unconsolidated entity	(2,490,000)	(896,000)
Changes in restricted cash	47,000	(31,000)
Acquisition deposits	0	100,000
Distributions from unconsolidated joint ventures	143,000	466,000
Net cash used in investing activities	(23,861,000)	(20,925,000)
Cash flows from financing activities:
Proceeds from issuance of common stock		14,160,000
Redeemed shares	(719,000)	(1,891,000)
Proceeds from notes payable	40,763,000	14,561,000
Repayments of notes payable	(25,529,000)	(584,000)
Offering costs		(1,917,000)
Deferred financing costs	(1,247,000)	(274,000)
Proceeds from Noncontrolling Interests	603,000	0
Payment of real estate earn out costs	(980,000)	(1,000,000)
Distributions paid to stockholders	(2,407,000)	(3,950,000)
Distributions paid to noncontrolling interests	(302,000)
Net cash provided by financing activities	10,182,000	19,105,000
Net (decrease) increase in cash and cash equivalents	(6,231,000)	971,000
Cash and cash equivalents - beginning of period	27,972,000	29,718,000
Cash and cash equivalents - end of period	21,741,000	30,689,000
Supplemental disclosure of cash flow information:
Cash paid for interest	4,694,000	3,761,000
Cash paid for income taxes	549,000	509,000
Supplemental disclosure of non-cash financing and investing activities:
Distributions declared not paid	807,000	817,000
Distribution reinvested		1,484,000
Notes payable assumed and noncash equity contribution in connection with real estate acquisition	$ 47,082,000	$ 0

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Immaterial Corrections to Prior Period Financial Statements (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 21,741,000	$ 27,972,000	$ 30,689,000	$ 29,718,000
Investments in real estate:
Land	23,193,000	20,713,000
Buildings and improvements, net	158,880,000	100,687,000
Furniture, fixtures and equipment, net	3,473,000	2,562,000
Intangible lease assets, net	6,371,000	3,865,000
Total investments in real estate	191,917,000	127,827,000
Deferred financing costs, net	1,715,000	824,000
Investments in unconsolidated entities	3,499,000	3,387,000
Tenant and other receivables, net	1,677,000	1,366,000
Deferred costs and other assets	1,686,000	1,938,000
Restricted cash	3,664,000	3,806,000
Goodwill	5,965,000	5,965,000
Total assets	231,864,000	173,085,000
Liabilities:
Notes payable	145,460,000	85,978,000
Accounts payable and accrued liabilities	3,174,000	3,899,000
Prepaid rent and security deposits	1,677,000	1,535,000
Distributions payable	807,000	814,000	817,000
Total liabilities	151,118,000	92,226,000
Stockholders' equity (deficit):
Common stock	129,000	129,000
Additional paid-in capital	93,416,000	96,542,000
Accumulated deficit	(17,291,000)	(17,054,000)
Total stockholders' equity	76,254,000	79,617,000
Noncontrolling interests	4,492,000	1,242,000
Total equity (deficit)	80,746,000	80,859,000	83,275,000	81,691,000
Total liabilities and equity	231,864,000	173,085,000
As Previously Reported [Member]
ASSETS
Cash and cash equivalents		28,258,000	30,921,000	29,819,000
Investments in real estate:
Land		21,270,000
Buildings and improvements, net		114,584,000
Furniture, fixtures and equipment, net		2,562,000
Construction in progress		5,218,000
Intangible lease assets, net		5,581,000
Total investments in real estate		149,215,000
Deferred financing costs, net		1,121,000
Tenant and other receivables, net		1,808,000
Deferred costs and other assets		1,948,000
Restricted cash		3,873,000
Goodwill		5,965,000
Total assets		192,188,000
Liabilities:
Notes payable		100,059,000
Accounts payable and accrued liabilities		7,683,000
Prepaid rent and security deposits		1,740,000
Distributions payable		814,000	817,000
Total liabilities		110,296,000
Stockholders' equity (deficit):
Common stock		129,000
Additional paid-in capital		96,542,000
Accumulated deficit		(17,054,000)	(16,406,000)	(11,722,000)
Total stockholders' equity		79,617,000
Noncontrolling interests		2,275,000
Total equity (deficit)		81,892,000
Total liabilities and equity		192,188,000
As Corrected [Member]
ASSETS
Cash and cash equivalents		27,972,000	30,689,000	29,718,000
Investments in real estate:
Land		20,713,000
Buildings and improvements, net		100,687,000
Furniture, fixtures and equipment, net		2,562,000
Intangible lease assets, net		3,865,000
Total investments in real estate		127,827,000
Deferred financing costs, net		824,000
Investments in unconsolidated entities		3,387,000
Tenant and other receivables, net		1,366,000
Deferred costs and other assets		1,938,000
Restricted cash		3,806,000
Goodwill		5,965,000
Total assets		173,085,000
Liabilities:
Notes payable		85,978,000
Accounts payable and accrued liabilities		3,899,000
Prepaid rent and security deposits		1,535,000
Distributions payable		814,000	817,000
Total liabilities		92,226,000
Stockholders' equity (deficit):
Common stock		129,000
Additional paid-in capital		96,542,000
Accumulated deficit		(17,054,000)	(16,406,000)	(11,722,000)
Total stockholders' equity		79,617,000
Noncontrolling interests		1,242,000
Total equity (deficit)		80,859,000
Total liabilities and equity		$ 173,085,000

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Investment in Real Estate and Unconsolidated Entities (Details 1) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Total investments in real estate	$ 191,917,000	$ 127,827,000
Land [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	23,193,000	20,713,000
Accumulated depreciation and amortization
Total investments in real estate	23,193,000	20,713,000
Buildings and improvements [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	166,785,000	105,340,000
Accumulated depreciation and amortization	(7,905,000)	(4,653,000)
Total investments in real estate	158,880,000	100,687,000
Furniture, fixtures and equipment [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	5,052,000	3,578,000
Accumulated depreciation and amortization	(1,579,000)	(1,016,000)
Total investments in real estate	3,473,000	2,562,000
Intangible lease assets [Member]
Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles
Cost	14,757,000	10,649,000
Accumulated depreciation and amortization	(8,386,000)	(6,784,000)
Total investments in real estate	$ 6,371,000	$ 3,865,000

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Immaterial Corrections to Prior Period Financial Statements

9 Months Ended

Sep. 30, 2012

Immaterial Corrections to Prior Period Financial Statements [Abstract]

Immaterial Corrections to Prior Period Financial Statements

16. Immaterial Corrections to Prior Period Financial Statements

Subsequent to the issuance of our consolidated financial statements for the year ended December 31, 2011, the Company determined that it should have been accounting for certain investments in joint ventures on the equity method rather than by consolidating these investments. The Company reviewed the impact of these errors on the prior period financial statements and determined that the errors were not material to the financial statements. However, the Company has corrected the accompanying condensed consolidated financial statements and related footnotes to reflect these joint venture investments on the equity method of accounting.

A summary of the effects of the correction of these immaterial errors on our consolidated financial statements for the three and nine month periods ended September 30, 2011 and as of December 31, 2011 are presented in the tables below:

	December 31, 2011
	As Previously Reported			As Corrected
ASSETS
Cash and cash equivalents	$	28,258,000		$	27,972,000
Investments in real estate
Land		21,270,000			20,713,000
Buildings and improvements, net		114,584,000			100,687,000
Furniture, fixtures and equipment, net		2,562,000			2,562,000
Construction in progress		5,218,000			—
Intangible lease assets, net		5,581,000			3,865,000
Total		149,215,000			127,827,000
Deferred financing costs, net		1,121,000			824,000
Investments in unconsolidated entities		—			3,387,000
Tenant and other receivables		1,808,000			1,366,000
Deferred costs and other assets		1,948,000			1,938,000
Restricted cash		3,873,000			3,806,000
Goodwill		5,965,000			5,965,000
Total assets	$	192,188,000		$	173,085,000
LIABILITIES AND EQUITY
Liabilities:
Notes payable	$	100,059,000		$	85,978,000
Accounts payable and accrued liabilities		7,683,000			3,899,000
Prepaid rent and security deposits		1,740,000			1,535,000
Dividends payable		814,000			814,000
Total liabilities		110,296,000			92,226,000
Stockholders’ equity (deficit):
Common stock		129,000			129,000
Additional paid-in capital		96,542,000			96,542,000
Accumulated deficit		(17,054,000	)		(17,054,000	)
Total controlling stockholders’ equity (deficit)		79,617,000			79,617,000
Noncontrolling interest		2,275,000			1,242,000
Total equity (deficit)		81,892,000			80,859,000
Total liabilities and equity	$	192,188,000		$	173,085,000

	2011 Three months ended September 30						2011 Nine months ended September 30
	As Previously Reported			As Corrected			As Previously Reported			As Corrected
Revenues:
Rental revenues	$	8,458,000		$	7,942,000		$	24,389,000		$	23,013,000
Resident fees and services		1,945,000			1,945,000			5,667,000			5,667,000
Tenant reimbursements and other income		433,000			362,000			1,064,000			876,000
		10,836,000			10,249,000			31,120,000			29,556,000
Expenses:
Property operating and maintenance expenses		6,821,000			6,750,000			18,973,000			18,751,000
General and administrative expenses		1,240,000			1,243,000			3,201,000			3,201,000
Asset management fees and expenses		390,000			390,000			1,197,000			1,197,000
Real estate acquisition costs and contingent consideration		22,000			22,000			1,663,000			1,453,000
Depreciation and amortization		2,100,000			1,946,000			6,090,000			5,658,000
		10,573,000			10,351,000			31,124,000			30,260,000
Income/(loss) from operations		263,000			(102,000	)		(4,000	)		(704,000	)
Other income (expense):
Interest income		4,000			4,000			10,000			10,000
Interest expense		(1,640,000	)		(1,436,000	)		(4,719,000	)		(4,161,000	)
Equity in income from unconsolidated entities		—			121,000			—			105,000
Net loss		(1,373,000	)		(1,413,000	)		(4,713,000	)		(4,750,000	)
Net income (loss) attributable to noncontrolling interests		20,000			(20,000	)		(29,000	)		(66,000	)
Net loss attributable to common stockholders	$	(1,393,000	)	$	(1,393,000	)	$	(4,684,000	)	$	(4,684,000	)
Basic and diluted net loss per common share attributable to common stockholders	$	(0.11	)	$	(0.11	)	$	(0.37	)	$	(0.37	)

	2011 Nine Months ended September 30
	As Previously Reported			As Corrected
Cash flows from operating activities:
Net loss	$	(4,713,000	)	$	(4,750,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs		414,000			321,000
Depreciation and amortization		6,090,000			5,658,000
Straight-line rent amortization		(695,000	)		(375,000	)
Real estate earn out costs		745,000			535,000
Equity loss from an unconsolidated entity		—			(121,000	)
Bad debt expense		—			—
Change in operating assets/liabilities:
Tenant and other receivables		440,000			180,000
Prepaid expenses and other assets		(1,030,000	)		(1,091,000	)
Restricted cash		(774,000	)		(774,000	)
Prepaid rent and security deposits		763,000			737,000
Payable to related parties		(38,000	)		(38,000	)
Accounts payable and accrued liabilities		2,403,000			2,509,000
Receivable from related parties		—			—
Net cash provided by operating activities		3,605,000			2,791,000
Cash flows from investing activities:
Real estate acquisitions		(19,751,000	)		(19,751,000	)
Additions to real estate		(342,000	)		(342,000	)
Payments for construction in progress		—			(471,000	)
Purchase of an interest in an unconsolidated entity		—			(896,000	)
Changes in Restricted cash		(98,000	)		(31,000	)
Development of real estate		(4,024,000	)		—
Acquisition deposits		100,000			100,000
Distributions from unconsolidated joint ventures		—			466,000
Net cash used in investing activities		(24,115,000	)		(20,925,000	)
Cash flows from financing activities:
Proceeds from issuance of common stock		14,160,000			14,160,000
Redeemed shares		(1,891,000	)		(1,891,000	)
Proceeds from issuance of notes payable		17,251,000			14,561,000
Repayment of notes payable		(584,000	)		(584,000	)
Payment of real estate earn out costs		(1,000,000	)		(1,000,000	)
Offering costs		(1,917,000	)		(1,917,000	)
Deferred financing costs		(324,000	)		(274,000	)
Distributions paid to stockholders		(3,950,000	)		(3,950,000	)
Distributions paid to noncontrolling interest		(133,000	)		—
Net cash provided by financing activities		21,612,000			19,105,000
Net increase in cash and cash equivalents		1,102,000			971,000
Cash and cash equivalents - beginning of period		29,819,000			29,718,000
Cash and cash equivalents - end of period	$	30,921,000		$	30,689,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,226,000		$	3,761,000
Cash paid for income taxes		509,000			509,000
Supplemental disclosure of non-cash financing and investing activities:
Distribution declared not paid		817,000			817,000
Distribution reinvested		1,484,000			1,484,000
Accrued real estate development costs		1,404,000			—
Accrued promote monetization liability		2,018,000			—
Deferred financing amortization capitalized to real estate development		27,000			—

	2011
	As Previously Reported			As Corrected
Retained Earnings (Accumulated Deficit)
Beginning of period – December 31, 2010	$	(11,722,000	)	$	(11,722,000	)
End of period – September 30, 2011		(16,406,000	)		(16,406,000	)

The Company notes that certain balances within the condensed consolidated statement of equity from December 31, 2010 and September 30, 2011 were corrected as a result of the correction of the immaterial error noted above. The noncontrolling interest balance at December 31, 2010 was reported as $2.8 million and has been adjusted to $1.7 million, which changed total equity from a reported balance of $82.8 million to an adjusted balance of $81.7 million. The noncontrolling interest balance at September 30, 2011 was reported as $2.6 million and has been adjusted to $1.6 million, which changed total equity from a reported balance of $84.3 million to an adjusted balance of $83.3 million. There were no other changes in the condensed consolidated statement of equity as a result of the correction of the above noted immaterial error.

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Investment in Real Estate and Unconsolidated Entities (Details 2) (USD $)	Sep. 30, 2012
Estimated amortization
October 2012 - December 2012	$ 407,000
2013	2,712,000
2014	330,000
2015	330,000
2016	329,000
2017	328,000
2018 and thereafter	$ 1,935,000

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Investment in Real Estate and Unconsolidated Entities (Tables)

9 Months Ended

Sep. 30, 2012

Investment in Real Estate and Unconsolidated Entities [Abstract]

Summary of current property portfolio

Property	Location	Date Purchased	Gross Square Feet	Purchase Price			Sept. 30, 2012 Debt			Sept. 30, 2012 % Occupancy
Caruth Haven Court	Highland Park, TX	01/22/09	74,647	$	20,500,000		$	9,707,000			95	%
The Oaks Bradenton	Bradenton, FL	05/01/09	18,172	$	4,500,000		$	4,085,000			97	%
GreenTree at Westwood (1)	Columbus, IN	12/30/09	50,249	$	5,150,000		$	3,865,000			98	%
Mesa Vista Inn Health Center	San Antonio, TX	12/31/09	55,525	$	13,000,000		$	6,981,000			100	%
Rome LTACH Project (2)	Rome, GA	01/12/10	52,944	$	18,900,000		$	13,461,000			100	%
Oakleaf Village Portfolio
Oakleaf Village at — Lexington	Lexington, SC	04/30/10	67,000	$	14,512,000		$	9,391,000			89	%
Oakleaf Village at — Greenville	Greer, SC	04/30/10	65,000	$	12,488,000		$	8,094,000			70	%
Global Rehab Inpatient Rehab Facility	Dallas, TX	08/19/10	40,828	$	14,800,000		$	7,373,000			100	%
Terrace at Mountain Creek (3)	Chattanooga, TN	09/03/10	109,643	$	8,500,000		$	5,453,000			95	%
Littleton Specialty Rehabilitation Facility	Littleton, CO	12/16/10	26,808		(4	)		(4	)		100	%
Carriage Court of Hilliard	Hilliard, OH	12/22/10	69,184	$	17,500,000		$	13,325,000			94	%
Hedgcoxe Health Plaza	Plano, TX	12/22/10	32,109	$	9,094,000		$	5,600,000			100	%
River’s Edge of Yardley	Yardley, PA	12/22/10	26,146	$	4,500,000		$	6,484,000			100	%
Forestview Manor	Meredith, NH	01/14/11	34,270	$	10,750,000		$	8,754,000			100	%
Woodland Terrace at the Oaks	Allentown, PA	04/14/11	50,400	$	9,000,000		$	6,276,000			93	%
Physicians Centre MOB	Bryan, TX	04/02/12	114,583		(5	)		(5	)		68	%
Amber Glen	Urbana, IL	08/31/12	26,146	$	13,440,000		$	8,650,000			97	%
Mill Creek	Springfield, IL	08/31/12	34,270	$	12,180,000		$	8,349,000			98	%
Sugar Creek	Normal, IL	08/31/12	50,400	$	11,880,000		$	7,836,000			95	%
Hudson Creek	Bryan, TX	08/31/12	114,583	$	11,500,000		$	7,997,000			70	%

⁽¹⁾ The earn-out agreement associated with this acquisition was estimated to have a fair value of $1.0 million as of December 31, 2011 and an earn-out payment of approximately $1.0 million was made in January of 2012. For the three month periods ended September 30, 2011, expense approximately $0.2 million related to the increased earn-out liability associated with the earn-out payment have been included in the condensed consolidated statements of operations under real estate acquisition costs and contingent consideration. For the nine month periods ended September 30, 2011, expense of approximately $0.5 million related to the increased earn-out liability associated with the earn-out payment have been included in the condensed consolidated statements of operations under real estate acquisition costs and contingent consideration.

⁽²⁾  Rome LTACH, a development project, was completed in February 2011 and its first tenant moved in on February 1, 2011. In April 2012, the Company acquired the interests of Cornerstone Private Equity Fund Operating Partnership, LP and the Cirrus Group affiliates in Rome LTH Partners, LP for a total payment of approximately $5.2 million. We previously held an equity method investment in this property. As of April 2012, the Company owned 100% of Rome LTH Partners, LP and consolidated its existing equity method investment and the acquired interest at fair value in the amount of $18.9 million. Refer to Note 5 and 14 for more information on the acquisition and preliminary purchase price allocation.

⁽³⁾  Under the purchase and sale agreement executed in connection with the acquisition, a portion of the purchase price for the property was to be calculated and paid to the seller as earn-out payments based upon the net operating income, as defined, of the property during each of the three years following our acquisition of the property. The earn-out value of $1.0 million was paid during the second quarter of 2011.

⁽⁴⁾  Littleton Specialty Rehabilitation Facility, a development project and unconsolidated entity accounted for on the equity method, was completed in April 2012, and the single tenant began paying rent in July 2012, in accordance with the terms of the lease. Tenant operations commenced upon licensure of the facility in July 2012. As of September 30, 2012, real estate asset costs for the property were approximately $7.1 million and we had invested a total of approximately $1.6 million in this project.

⁽⁵⁾ On April 2, 2012, through a wholly owned subsidiary, the Company invested $2.5 million to acquire an interest in the Physicians Centre MOB along with Caddis Partners and related affiliates and a group of physician investors. This investment is accounted for on the equity method and discussed further in Note 5.

Cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles

As of September 30, 2012, cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements			Furniture, fixtures and equipment			Intangible lease assets
Cost	$	23,193,000	$	166,785,000		$	5,052,000		$	14,757,000
Accumulated depreciation and amortization		—		(7,905,000	)		(1,579,000	)		(8,386,000	)
Net	$	23,193,000	$	158,880,000		$	3,473,000		$	6,371,000

As of December 31, 2011, accumulated depreciation and amortization related to investments in real estate and related lease intangibles were as follows:

	Land		Buildings and improvements			Furniture, fixtures and equipment			Intangible lease assets
Cost	$	20,713,000	$	105,340,000		$	3,578,000		$	10,649,000
Accumulated depreciation and amortization		—		(4,653,000	)		(1,016,000	)		(6,784,000	)
Net	$	20,713,000	$	100,687,000		$	2,562,000		$	3,865,000

Estimated amortization

	Intangible assets
October 2012 — December 2012	$	407,000
2013	$	2,712,000
2014	$	330,000
2015	$	330,000
2016	$	329,000
2017	$	328,000
2018 and thereafter	$	1,935,000

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Organization

9 Months Ended

Sep. 30, 2012

Organization [Abstract]

Organization

1. Organization

Sentio Healthcare Properties, Inc., a Maryland corporation, was formed on October 16, 2006 under the Maryland General Corporation Law for the purpose of engaging in the business of investing in and owning commercial real estate. As used in this report, the “Company”, “we”, “us” and “our” refer to Sentio Healthcare Properties, Inc. and its consolidated subsidiaries, except where context otherwise requires. Effective January 1, 2012, subject to certain restrictions and limitations, our business is managed by Sentio Investments, LLC, a Florida limited liability company that was formed on December 20, 2011 (the “Advisor”). Sentio Investments, LLC is controlled by John Mark Ramsey, our Chief Executive Officer and formerly an owner of our prior sub-advisor, Servant Healthcare Investments, LLC. Prior to January 1, 2012, Cornerstone Leveraged Realty Advisors, LLC, a Delaware limited liability company that was formed on October 16, 2006, was our advisor (the “Prior Advisor”).

Sentio Healthcare Properties OP, LP, a Delaware limited partnership (the “Operating Partnership”), was formed on October 17, 2006. At September 30, 2012, we owned 100% of the interest in the Operating Partnership and HC Operating Partnership, LP, a subsidiary of the Operating Partnership. We anticipate that we will conduct all or a portion of our operations through the Operating Partnership. Our financial statements and the financial statements of the Operating Partnership and its subsidiaries are consolidated in the accompanying condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.

For federal income tax purposes, we have elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), beginning with our taxable year ended December 31, 2008. REIT status imposes limitations related to operating assisted-living properties. Generally, to qualify as a REIT, we cannot directly operate assisted-living facilities. However, such facilities may generally be operated by a taxable REIT subsidiary (“TRS”) pursuant to a lease with the Company. Therefore, we have formed Master HC TRS, LLC (“Master TRS”), a wholly owned subsidiary of HC Operating Partnership, LP, to lease any assisted-living properties we acquire and to operate the assisted-living properties pursuant to contracts with unaffiliated management companies. Master TRS and the Company have made the applicable election for Master TRS to qualify as a TRS. Under the management contracts, the management companies have direct control of the daily operations of these assisted-living properties.

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Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	580,000,000	580,000,000
Common stock, shares issued	12,840,319	12,916,612
Common stock, shares outstanding	12,840,319	12,916,612

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Stockholders' Equity

9 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

11. Stockholders’ Equity

Common Stock

Our charter authorizes the issuance of 580,000,000 shares of common stock with a par value of $0.01 per share and 20,000,000 shares of preferred stock with a par value of $0.01 per share. As of September 30, 2012, including distributions reinvested, we had issued approximately 13.3 million shares of common stock for a total of approximately $132.3 million of gross proceeds in our initial and follow-on public offerings.

Distributions

We have adopted a distribution reinvestment plan that allows our stockholders to have dividends and other distributions otherwise distributable to them invested in additional shares of our common stock at their election. We have registered 10,000,000 shares of our common stock for sale pursuant to the distribution reinvestment plan. The purchase price per share provided in the plan is 95% of the price paid by the purchaser for our common stock, but not less than $9.50 per share. As of September 30, 2012 and December 31, 2011, approximately 551,000 shares had been issued under the distribution reinvestment plan.

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our follow-on public offering, our dividend reinvestment plan and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with our Independent Directors Committee consideration of various strategic alternatives to enhance our stockholders’ value. As a result, we suspended our distribution reinvestment plan effective as of May 10, 2011.

The following are the distributions declared during the nine months ended September 30, 2012 and 2011:

	Distribution Declared (1)
Period	Cash		Reinvested		Total
First quarter 2011	$	1,152,000	$	1,124,000	$	2,276,000
Second quarter 2011	$	2,436,000	$	—	$	2,436,000
Third quarter 2011	$	817,000	$	—	$	817,000
First quarter 2012	$	801,000	$	—	$	801,000
Second quarter 2012	$	799,000	$	—	$	799,000
Third quarter 2012	$	807,000	$	—	$	807,000

(1) Distributions declared represented a return of capital and taxable ordinary income for tax purposes. In order to meet the requirements for being treated as a REIT under the Internal Revenue Code, we must pay distributions to our stockholders each taxable year equal to at least 90% of our net ordinary taxable income. Some of our distributions have been paid from sources other than operating cash flow, such as offering proceeds. Until proceeds from our offering are fully invested and generating operating cash flow sufficient to fully cover distributions to stockholders, we intend to pay all or a portion of our distributions from the proceeds of our offerings or from borrowings in anticipation of future cash flow.

The declaration of distributions is at the discretion of our board of directors and our board will determine the amount of distributions on a regular basis. The amount of distributions will depend on our funds from operations, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors our board of directors deems relevant. On September 30, 2011, our board of directors resolved to lower our distributions to a current annualized rate of $0.25 per share (2.5% based on a share price of $10.00) from the prior annualized rate of $0.75 per share (7.5% based on a share price of $10.00), effective July 1, 2011 and continuing until and including September 30, 2012. Distributions are paid quarterly commencing with the third quarter distribution paid in October 2011. Effective October 1, 2012, our board of directors declared distributions for daily record dates occurring in the fourth quarter of 2012 in amounts per share that, if declared and paid each day for a 365-day period, would equate to an annualized rate of $.475 per share (4.75% based on share price of $10.00). The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

From our inception in October 2006 through September 30, 2012, we declared aggregate distributions of $17.0 million and our cumulative net loss during the same period was $17.3 million.

Stock Repurchase Program

We adopted a stock repurchase program for investors who have held their shares for at least one year, unless the shares are being repurchased in connection with a stockholder’s death. Under our stock repurchase program, the repurchase price varies depending on the purchase price paid by the stockholder and the number of years the shares are held. Our board of directors may amend, suspend or terminate the program at any time on 30 days prior notice to stockholders. Our board of directors may modify our stock repurchase program so that we can repurchase stock using the proceeds from the sale of our real estate investments or other sources, however, we have no obligation to repurchase our stockholders’ shares. Our board of directors waived the one-year holding period in the event of the death of a stockholder and adjusted the repurchase price to 100% of such stockholders purchase price if the stockholder held the shares for less than three years. Our board of directors reserves the right in its sole discretion at any time and from time to time, upon 30 days prior notice to our stockholders, to adjust the repurchase price for our shares of stock, or suspend or terminate our stock repurchase program.

On April 29, 2011, we informed our stockholders that our Independent Directors Committee had directed us to suspend our offering, our dividend reinvestment program and our stock repurchase program (except repurchases due to death) because of the uncertainty associated with our Independent Directors Committee consideration of various strategic alternatives to enhance our stockholder value. As a result, we suspended our stock repurchase program effective as of May 29, 2011. On December 22, 2011, our Board of Directors approved a net asset valuation of $9.02 per share, and revised the share repurchase price upon the death of a shareholder to this amount.

During the three and nine months ended September 30, 2012, we repurchased shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
January		33,008	$	9.98
February		—	$	—
March		—	$	—
First quarter 2012		33,008	$	9.98
April		9,203	$	9.00
May		17,582	$	9.00
June		—	$	—
Second quarter 2012		26,785	$	9.00
July		—	$	—
August		3,000	$	9.00
September		13,500	$	9.00
Third quarter 2012		16,500	$	—
		76,293

During the three and nine months ended September 30, 2011, we repurchased 28,729 and 195,997 shares, respectively, pursuant to our stock repurchase program.

During the nine months ended September 30, 2012, we received requests to have an aggregate of 78,793 shares repurchased pursuant to our stock repurchase program. Of these requests 2,500 shares were not able to be repurchased due to the limitations contained in the terms of our stock repurchase program and the suspension of ordinary repurchases under our stock repurchase program as of May 29, 2011.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 12, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	Sentio Healthcare Properties Inc
Entity Central Index Key	0001378774
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		12,835,755

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Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

12. Related Party Transactions

The Company has no employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the policies established by our board of directors. We have an advisory agreement that entitles the Advisor to specified fees upon the provision of certain services to us, as well as reimbursement for organizational and offering costs incurred by the Advisor on our behalf and reimbursement of certain costs and expenses incurred by the Advisor in providing services to us. Effective January 1, 2012, Sentio Investments, LLC became our Advisor under a new advisory agreement (the “2012 Advisory Agreement”). On July 29, 2011, the Company executed the Omnibus Agreement, which provided for a number of significant changes to the Company’s Advisory Agreement with the Prior Advisor (the “2011 Advisory Agreement”). The 2012 Advisory Agreement and the 2011 Advisory Agreement are collectively referred to as the “Advisory Agreements.”

Advisory Agreements

Under the terms of the 2012 Advisory Agreement, the Advisor is required to use commercially reasonable efforts to present to us investment opportunities to provide a continuing and suitable investment program consistent with the investment policies and objectives adopted by our board of directors. The 2012 Advisory Agreement calls for the Advisor to provide for our day-to-day management and to retain property managers and leasing agents, subject to the authority of our board of directors, and to perform other duties. The 2011 Advisory Agreement had similar provisions.

The fees and expense reimbursements payable to the Advisor and Prior Advisor (collectively, the “Advisors”) under the 2012 Advisory Agreement and the 2011 Advisory Agreement are described below.

Organizational and Offering Costs. Organizational and offering costs of our offerings paid by the Prior Advisor on our behalf were reimbursed to the Prior Advisor from the proceeds of our offerings. Organizational and offering costs consisted of all expenses (other than sales commissions and the dealer manager fee) to be paid by us in connection with our offerings, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and other accountable offering expenses, including, but not limited to, (i) amounts to reimburse the Advisor for all marketing related costs and expenses such as salaries and direct expenses of employees of the Advisor and its affiliates in connection with registering and marketing our shares; (ii) technology costs associated with the offering of our shares; (iii) our costs of conducting our training and education meetings; (iv) our costs of attending retail seminars conducted by participating broker-dealers; and (v) payment or reimbursement of bona fide due diligence expenses. At times during our offering stage, the amount of organization and offering expenses that we incur, or that the Advisor and its affiliates incur on our behalf, may exceed 3.5% of the gross offering proceeds then raised, but our Advisor is required to reimburse us to the extent that our organization and offering expenses exceed 3.5% of aggregate gross offering proceeds at the conclusion of our offering. In addition, the Advisor will also pay any organization and offering expenses to the extent that such expenses, plus sales commissions and the dealer manager fee (but not the acquisition fees or expenses) are in excess of 13.5% of gross offering proceeds. In no event will we have any obligation to reimburse the Advisor for organizational and offering costs totaling in excess of 3.5% of the gross proceeds from our primary offerings. As of September 30, 2012 and December 31, 2011, the Prior Advisor and its affiliates had incurred organizational and offering costs totaling approximately $5.1 million, including $0.1 million of organizational costs that have been expensed and $5.0 million of offering costs that reduce net proceeds of our offerings. Of this amount $4.0 million reduced the net proceeds of our initial public offering and $1.0 million reduced the net proceeds of our follow-on offering. Upon the execution of the Omnibus Agreement, we forgave $0.8 million of organization and offering costs in excess of the 3.5% of gross offering proceeds advanced to Prior Advisor pursuant to the 2011 Advisory Agreement. This amount reduced our offering proceeds and has therefore been treated as a reduction in additional paid-in capital in our condensed consolidated balance sheet.

Acquisition Fees and Expenses. The 2012 Advisory Agreement requires us to pay the Advisor acquisition fees in an amount equal to 1.0% of the investments acquired, including any debt attributable to such investments. In addition, we are required to reimburse the Advisor for direct costs the Advisor incurs and amounts the Advisor pays to third parties in connection with the selection and acquisition of a property, whether or not ultimately acquired. The 2011 Advisory Agreement required us to pay the Prior Advisor acquisition fees in an amount equal to 2.0% of the investments acquired, including any debt attributable to such investments. A portion of the acquisition fees were paid upon receipt of offering proceeds, and the balance were paid at the time we acquired a property. However, if the 2011 Advisory Agreement was terminated or not renewed, the Prior Advisor was obligated to return acquisition fees not yet allocated to one of our investments. In addition, we were required to reimburse the Prior Advisor for direct costs the Prior Advisor incurred and amounts the Prior Advisor paid to third parties in connection with the selection and acquisition of a property, whether or not ultimately acquired. For the three months and nine months ended September 30, 2012 the Advisor earned approximately $0.4 million and $0.5 million of acquisition fees. For the three months and nine months ended September 30, 2011, the Prior Advisor earned approximately $0.0 million and $0.5 million in acquisition fees, respectively. As of September 30, 2011, the amount of acquisition fees that had been paid to the Prior Advisor but not allocated to one of our investments was $0.9 million. That amount was expensed and included in real estate acquisition costs and earn out costs in our condensed consolidated statements of operations. Upon the execution of the Omnibus Agreement, we forgave the advance not earned through services rendered in connection with future acquisitions.

Financing Coordination Fee. The 2012 Advisory Agreement requires us to pay the Advisor a financing coordination fee equal to 0.5% of the gross amount of any refinancing, provided, however, that the Advisor shall not be entitled to a financing coordination fee in connection with the refinancing of any debt obligations secured by any particular asset that was previously subject to a refinancing in which the Advisor received a financing coordination fee within the immediately preceding three year period. For the three months and nine months ended September 30, 2012 the Advisor earned approximately $28,000 and $0.3 million of financing coordination fees. The 2011 Advisory Agreement did not provide for a financing coordination fee.

Management Fees. The 2012 Advisory Agreement requires us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the greater of the (i) the average GAAP basis book carrying value of such asset before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period (or if such specified period is a single month, then the average of such values during such month), or (ii) an amount determined as follows: (A) if such property, loan, or other permitted investment has been appraised by an independent appraiser within the immediately preceding twelve month period, the appraised value of such property, loan, or other permitted investment, or (B) if such property, loan, or other permitted investment has not been appraised by an independent appraiser within the immediately preceding twelve month period, the estimated fair market value of such property, loan, or other permitted investment, as approved by the Independent Directors Committee. The value of each property, loan, or other permitted investment owned by a joint venture shall be the product of the Company’s pro rata ownership interest in such joint venture, multiplied by the greater of (i) the average GAAP basis book carrying value of such asset before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period (or if such specified period is a single month, then the average of such values during such month), or (ii) an amount determined as follows: (A) if such property, loan, or other permitted investment has been appraised by an independent appraiser within the immediately preceding twelve month period, the appraised value of such property, loan, or other permitted Investment, or (B) if such property, loan, or other permitted investment has not been appraised by an independent appraiser within the immediately preceding twelve month period, the estimated fair market value of such property, loan, or other permitted investment, as approved by the Independent Directors Committee. These fees and expenses are in addition to management fees that we expect to pay to third party property managers.

The Prior Advisory Agreement required us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the sum of the aggregate basis in book carrying values of our assets invested, directly or indirectly, in equity interests in and loans secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, calculated in accordance with GAAP. In addition, we reimbursed the Prior Advisor for the direct and indirect costs and expenses incurred by the Prior Advisor in providing asset management services to us, including personnel and related employment costs related to providing asset management services on our behalf and amounts paid by our Advisor to Servant Investments, LLC and Servant Healthcare Investments, LLC for portfolio management services provided on our behalf. These fees and expenses are in addition to management fees paid to third party property managers.

For the three months and nine months ended September 30, 2012, the Advisor earned approximately $0.6 million and $1.5 million of management fees, respectively. For the three months and nine months ended September 30, 2011, the Prior Advisor earned approximately $0.2 million and $0.6 million of management fees, respectively. These fees were expensed. For the three months and nine months ended September 30, 2011, the Prior Advisor also incurred approximately $0.2 million and $0.5 million of direct and indirect costs and expenses, which are included in asset management fees and expensed in the condensed consolidated statement of operations. No comparable charges were made by the Advisor in 2012.

Operating Expenses. The 2012 Advisory Agreement does not provide for the reimbursement of the Advisor’s direct or indirect costs of providing administrative services to us. Accordingly, there were no such charges for the three months and nine months ended September 30, 2012. The 2011 Advisory Agreement provided for reimbursement of the Prior Advisor’s direct and indirect costs of providing administrative and management services to us. For the three months and nine months ended September 30, 2011, approximately $0.2 million and $0.9 million of such costs were reimbursed and included in general and administrative expenses on our condensed consolidated statements of operations.

Consistent with limitations set forth in our charter, the Advisory Agreements further provide that, commencing four fiscal quarters after the acquisition of our first real estate asset, we shall not reimburse the Advisor at the end of any fiscal quarter management fees and expenses and operating expenses that, in the four consecutive fiscal quarters then ended exceed (the “Excess Amount”) the greater of 2% of our average invested assets or 25% of our net income for such year (the “2%/25% Guidelines”) unless the Independent Directors Committee of our board of directors determines that such excess was justified, based on unusual and nonrecurring factors which it deems sufficient. If the Independent Directors Committee does not approve such excess as being so justified, the advisory agreement requires that any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. In addition, our charter provides that, if the Independent Directors Committee does not determine that the Excess Amount is justified, the Advisor shall reimburse us the amount by which the aggregate annual expenses paid to the Advisor during the four consecutive fiscal quarters then ended exceed the 2%/25% Guidelines.

For the three months ended September 30, 2012, our management fees and expenses and operating expenses did not exceed the greater of 2% of our average invested assets and 25% of our net income. For the four quarters ended September 30, 2012, our management fees and expenses and operating expenses totaled $4.4 million. This amount exceeded the greater of 2% of our average invested assets and 25% of our net loss by $0.7 million.

Disposition Fee. The 2012 Advisory Agreement provides that if the Advisor or an Affiliate provides a substantial amount of the services (as determined by a majority of the Directors, including a majority of the Independent Directors Committee) in connection with the sale of one or more properties, other than a sale in connection with a transaction in which the Company sells, grants, transfers, conveys or relinquishes its ownership of all or substantially all of the Company’s assets, the Advisor or such Affiliate shall receive at the closing of such sale a disposition fee equal to the lesser of (i) 1.0% of the sales price of such property or properties, or (ii) one-half of the Competitive Real Estate Commission for such property. Any disposition fee payable may be paid in addition to real estate commissions paid to non-Affiliates, provided that the total real estate commissions (including such disposition fee) paid to all persons by the Company for each property shall not exceed an amount equal to the lesser of (i) 6.0% of the aggregate contract sales price of each property or (ii) the competitive real estate commission for each property.

Subordinated Participation Provisions. The Advisor is entitled to receive a subordinated participation upon the sale of our properties, listing of our common stock or termination of the Advisor, as follows:

• After we pay stockholders cumulative distributions equal to their invested capital plus a 7% cumulative, non-compounded return, the Advisor will be paid a subordinated participation in net sale or refinancing proceeds of 10%. Following a listing, this fee will no longer be payable.

• Upon termination of the advisory agreement, other than for cause, the Advisor will receive the subordinated performance fee due upon termination in the form of a promissory note bearing simple interest at a rate of 5% per annum, in a principal amount equal to 10% the amount, if any, which the sum of the appraised value of our assets minus our liabilities on the date the advisory agreement is terminated plus total distributions (other than stock distributions) paid prior to termination of the advisory agreement exceeds the amount of invested capital plus annualized returns of 7%, less any prior payment to the Advisor of a subordinated share of cash from sales or refinancing’s.

• In the event we list our stock for trading, the Advisor will receive a subordinated incentive listing fee instead of a subordinated participation in net sales proceeds in an amount equal to 10% of the amount by which the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 7% less any prior payment to the Advisor of a subordinated share of cash from sales or refinancing’s.

Dealer Manager Agreements

Pacific Cornerstone Capital, Inc. (“PCC”), an affiliate of the Prior Advisor, was the dealer manager for our initial and follow-on public offerings, prior to the suspension of our follow-on offering on April 29, 2011. As such, PCC was entitled to receive a sales commission of up to 7% of gross proceeds from sales in the primary offerings. PCC is also entitled to receive a dealer manager fee equal to up to 3% of gross proceeds from sales in the primary offerings. PCC was also entitled to receive a reimbursement of bona fide due diligence expenses up to 0.5% of the gross proceeds from sales in the primary offerings. The 2011 Advisory Agreement required the Prior Advisor to reimburse us to the extent that offering expenses including sales commissions, dealer manager fees and organization and offering expenses (but excluding acquisition fees and acquisition expenses discussed above) were in excess of 13.5% of gross proceeds from our primary offerings. For the three months and nine months ended September 30, 2011, PCC earned sales commission and dealer manager fees of approximately $0.0 million and $1.6 million, respectively. Dealer manager fees and sales commissions paid to PCC are a cost of capital raised and, as such, are included as a reduction of additional paid in capital in the accompanying condensed consolidated balance sheets.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenue:
Rental revenue	$ 8,422,000	$ 7,942,000	$ 24,525,000	$ 23,013,000
Resident services and fee income	3,655,000	1,945,000	8,243,000	5,667,000
Tenant reimbursements and other income	312,000	362,000	1,121,000	876,000
Total revenues	12,389,000	10,249,000	33,889,000	29,556,000
Expenses:
Property operating and maintenance	7,473,000	6,750,000	20,921,000	18,751,000
General and administrative expenses	423,000	1,243,000	1,632,000	3,201,000
Asset management fees and expenses	559,000	390,000	1,543,000	1,197,000
Real estate acquisition costs and contingent consideration	1,016,000	22,000	1,229,000	1,453,000
Depreciation and amortization	1,689,000	1,946,000	4,653,000	5,658,000
Total expenses	11,160,000	10,351,000	29,978,000	30,260,000
Income (loss) from operations	1,229,000	(102,000)	3,911,000	(704,000)
Other income (expense):
Interest income	2,000	4,000	10,000	10,000
Interest expense	(1,790,000)	(1,436,000)	(4,818,000)	(4,161,000)
Other			(151,000)
Equity in income (loss) from an unconsolidated entity	14,000	121,000	(363,000)	(105,000)
Fair value adjustment for equity method investment			1,282,000
Net loss	(545,000)	(1,413,000)	(129,000)	(4,750,000)
Net (loss) income attributable to noncontrolling interests	(16,000)	(20,000)	108,000	(66,000)
Net loss attributable to common stockholders	$ (529,000)	$ (1,393,000)	$ (237,000)	$ (4,684,000)
Basic and diluted net (loss) per common share attributable to common stockholders	$ (0.04)	$ (0.11)	$ (0.02)	$ (0.37)
Weighted-average number of common shares	12,853,483	12,985,804	12,877,929	12,629,155
Distribution declared, per common share	$ 0.06	$ 0.06	$ 0.19	$ 0.44

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Allowance for Doubtful Accounts

9 Months Ended

Sep. 30, 2012

Allowance for Doubtful Accounts [Abstract]

Allowance for Doubtful Accounts

6. Allowance for Doubtful Accounts

As of September 30, 2012 and December 31, 2011, we had recorded $71,000 and $76,000, respectively, as allowances for doubtful accounts related to tenants and other receivables.

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Investments in Consolidated Joint Ventures and Unconsolidated Entities

9 Months Ended

Sep. 30, 2012

Investments in Consolidated Joint Ventures and Unconsolidated Entities [Abstract]

Investments in Consolidated Joint Ventures and Unconsolidated Entities

5. Investments in Consolidated Joint Ventures and Unconsolidated Entities

Consolidated Joint Ventures

Oakleaf Joint Venture

On April 30, 2010, we invested approximately $21.6 million to acquire 80% equity interests in Royal Cornerstone South Carolina Portfolio, LLC (“Portfolio LLC”) and Royal Cornerstone South Carolina Tenant Portfolio, LLC (“Tenant LLC”) (collectively, we refer to the Portfolio LLC and the Tenant LLC as the “Oakleaf Joint Venture”). In accordance with the joint venture agreement, the Company is deemed the managing member and consolidates these entities. The Oakleaf Joint Venture owns and operates two assisted-living properties located in Lexington and Greenville, South Carolina. As of September 30, 2012, total assets related to Oakleaf Joint Venture were approximately $25.6 million, which includes approximately $22.6 million of real estate assets, and total liabilities were approximately $17.9 million, which includes approximately $17.5 million of secured mortgage debt. We may be required to fund additional capital contributions, including funding of any capital expenditures deemed necessary to continue to operate the entity and any operating cash shortfalls that the entity may experience.

Rome LTACH Project

On January 12, 2010, we funded an investment in a joint venture with affiliates of The Cirrus Group, an unaffiliated entity, to develop a $16.3 million free-standing medical facility on the campus of the Floyd Medical Center in Rome, Georgia. We contributed approximately $2.7 million of capital to acquire a 75% limited partnership interest in Rome LTH Partners, LP (“Rome LTH”). Cornerstone Private Equity Fund Operating Partnership, LP, an affiliate of our Prior Advisor, contributed approximately $0.5 million of capital to acquire a 15% limited partnership interest in Rome LTH. Three affiliates of The Cirrus Group contributed an aggregate of approximately $0.3 million to acquire an aggregate 9.5% limited partnership interest in Rome LTH. A fourth affiliate of the Cirrus Group acted as the general partner and held the remaining 0.5% interest in Rome LTH. The terms of the Rome LTH operating agreement included provisions obligating the joint venture to monetize a portion of our partners’ interest in the appreciation of value in the joint venture property. The obligation was exercisable by our partners at their sole discretion between years two and four of the joint venture. In February 2011, construction of the Rome LTACH project was completed.

In December 2011, The Cirrus Group notified us of their intended exercise of the promote monetization provisions of the Rome LTH operating agreement. On April 6, 2012, we acquired the interests of Cornerstone Private Equity Fund Operating Partnership, LP in the Rome LTH for $1.1 million. On April 12, 2012, we acquired the interests of The Cirrus Group in Rome LTH for $4.1 million, which included a $3.0 million payment of the promote termination amount. As of April 12, 2012, we owned 100% of Rome LTH. Upon acquiring control of Rome LTH, the Company recorded a gain on the fair value adjustment of this previously recorded equity method investment in the amount of $1.3 million during the period ended June 30, 2012 which is presented as a fair value adjustment for equity method investment in our statement of operations. The acquisition of interests was funded by approximately $2.6 million of equity raised in our offerings and $2.6 million of debt proceeds.

As of September 30, 2012, total assets related to this project were $19.2 million, which includes $18.4 million of net real estate related assets. Total liabilities were $13.5 million at September 30, 2012, which includes $13.5 million of secured mortgage debt. As of December 31, 2011, total assets related to this project were $16.5 million, which included $15.6 million of net real estate related assets. Total liabilities were $14.1 million at December 31, 2011, which includes $10.9 million of secured mortgage debt. For the three and nine months ended September 30, 2011, Rome LTH recorded revenue of $0.6 million and $1.6 million, and net income of $0.1 million and $0.1 million, respectively.

Leah Bay Joint Venture

On August 31, 2012, we invested approximately $49.5 million, to acquire an 80% joint venture interest in Sentio Leah Bay Portfolio, LLC (“Landlord LLC”) and Sentio Leah Bay TRS Portfolio, LLC (“Tenant LLC”) (collectively, we refer to the Landlord LLC and the Tenant LLC as the “Leah Bay Joint Venture”). Through two wholly-owned subsidiaries, the Company controls Landlord LLC and Tenant LLC and consolidates these entities. The Leah Bay Joint Venture owns and operates four memory care facilities located in Urbana, IL (Amber Glen), Springfield, IL (Mill Creek), Normal, IL (Sugar Creek) and Bryan, TX (Hudson Creek). As of September 30, 2012, total assets related to Leah Bay joint venture were approximately $50.5 million, which includes approximately $49.1 million of real estate assets and total liabilities were approximately $33.8 million, which includes approximately $32.8 million of secured mortgage debt.

Unconsolidated Entities

Littleton Specialty Rehabilitation Facility

On December 16, 2010, we funded an investment in a joint venture with affiliates of The Cirrus Group, an unaffiliated entity, to develop a $7.3 million specialty rehabilitation facility in Littleton, CO. We agreed to contribute approximately $1.6 million of capital to acquire a 90.0% limited partnership interest in Littleton Med Partners, LP. Three affiliates of The Cirrus Group contributed an aggregate of approximately $0.2 million to acquire an aggregate 9.5% limited partnership interest in the Littleton Med Partners, LP. A fourth affiliate of the Cirrus Group acts as the general partner and holds the remaining 0.5% interest in the Littleton Med Partners, LP. As of September 30, 2012 and December 31, 2011, we owned a 90.0% limited partnership interest in Littleton Med Partners, LP. Our net investment in this property as of September 30, 2012 and December 31, 2011 was $1.6 million. For the three months ended September 30, 2012 and 2011, we recorded income from this unconsolidated entity of $0.1 million and $0, respectively. For the nine months ended September 30, 2012 and 2011, we recorded a loss from this unconsolidated entity of $0.1 million and $0, respectively. As of September 30, 2012, total assets related to this project were $7.3 million, which includes $7.0 million of net real estate related assets. Total liabilities were $5.6 million at September 30, 2012, which includes $5.5 million of secured mortgage debt. As of December 31, 2011, total assets related to this project were $6.0 million, which included $5.8 million of net real estate related assets. Total liabilities were $4.2 million at December 31, 2011, which includes $3.2 million of secured mortgage debt. The joint venture began operations in July 2012.

Under the terms of the joint venture agreement, the joint venture may be obligated to monetize a portion of our partners’ interest in the appreciation of value in the joint venture property. These obligations may be exercised by our partners at their sole discretion between years two and four of the joint venture. The amount that would be paid upon monetization is subject to change based on a number of factors, including the value of the property, net income earned by the property and payment of preferred returns on equity, and, under certain circumstances, the Company may elect to satisfy the promote monetization obligation connection with a disposition of the property. If the promote monetization liability is satisfied other than in connection with a sale of the property, the Company would be required to fund additional capital into the partnership.

Physicians Centre MOB

On April 2, 2012, through a wholly-owned subsidiary, we entered into a joint venture with affiliates of Caddis Partners, an unaffiliated entity, and a group of unaffiliated physicians to acquire an on-campus medical office building (the “Physicians Centers MOB”) located in Bryan, Texas.

The Company invested approximately $2.5 million of capital to acquire a 71.9% limited partnership interest in Bryan MOB Partners, L.P the (“Bryan LP”). Affiliates of Caddis Partners contributed an aggregate of approximately $0.35 million to acquire an aggregate 10.1% limited partnership interest in the Bryan LP and another affiliate of the Caddis Partners acts as the Bryan LP general partner, but does not own a partnership interest. The physician partners contributed approximately $0.625 million to acquire a 18.0% interest in Bryan LP. The Company’s equity investment in the joint venture was funded from proceeds from its public offering.

For the three and nine months ended September 30, 2012, we recorded a loss from this unconsolidated entity of $0.1 million and $0.4 million, respectively. As of September 30, 2012, total assets related to this joint venture were approximately $10.3 million, which includes approximately $9.4 million of real estate assets and total liabilities were approximately $7.4 million, which includes approximately $7.1 million of secured mortgage debt. Under the terms of the joint venture agreement, the joint venture may be obligated to monetize a portion of our partners’ interest in the appreciation of value in the joint venture property. These obligations may be exercised by our partners at their sole discretion between years two and four of the joint venture. The amount that would be paid upon monetization is subject to change based on a number of factors, including the value of the property, net income earned by the property and payment of preferred returns on equity, and, under certain circumstances, the Company may elect to satisfy the promote monetization obligation connection with a disposition of the property. We may be required to fund additional capital contributions, including funding of any capital expenditures deemed necessary to continue to operate the entity, any operating cash shortfalls that the entity may experience and the promote monetization if not satisfied in connection with a sale of the property.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In accordance with the guidance for the consolidation of variable interest entities (“VIEs”), we analyze our variable interests, including investments in partnerships and joint ventures, to determine if the entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews, based on our review of the design of the entity, its organizational structure including decision-making ability, risk and reward sharing experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions and financial agreements. We also use quantitative and qualitative analyses to determine if we must consolidate a variable interest entity as the primary beneficiary.

Investments in Unconsolidated Entities

Investments in Unconsolidated Entities

We account for our investments in unconsolidated joint ventures under the equity method of accounting. We exercise significant influence, but do not control these entities or direct the activities that most significantly impact the venture’s performance. Investments in unconsolidated entities are recorded initially at cost and subsequently adjusted for cash contributions and distributions. We recognize our allocable share of the equity in earnings of our unconsolidated entities based on the respective venture’s structure and preferences.

Use of Estimates

Use of Estimates

The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted.

Comprehensive Income

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2011-05, Comprehensive Income: Presentation of Comprehensive Income, which eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity and requires the presentation of components of net income and components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB deferred the requirement to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements.

As of September 30, 2012, the Company had no components of other comprehensive income. Accordingly, net loss is equal to comprehensive loss for all periods presented.

Interim Financial Information

Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. Our accompanying interim condensed consolidated financial statements should be read in conjunction with our audited condensed consolidated financial statements and the notes thereto included on our 2011 Annual Report on Form 10-K, as filed with the SEC.

Fair Value of Financial Instruments and Fair Value Measurements

Fair Value of Financial Instruments and Fair Value Measurements

FASB Accounting Standards Codification (“ASC”) 825-10, “Financial Instruments”, requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and International Financial Reporting Standards. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of ASU 2011-04 on January 1, 2012 did not have a material impact on the Company’s consolidated financial position or results of operations. The impact on the Company’s disclosures was not material. Financial assets and liabilities recorded at fair value on the condensed consolidated balance sheets and disclosed in the financial statements are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical instruments.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets when such information is available or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our balance sheets include the following financial instruments: cash and cash equivalents, tenant and other receivables, restricted cash, security deposits, accounts payable and accrued liabilities, distributions payable, and notes payable. With the exception of an equity method investment the Company obtained control of in April 2012 and notes payable discussed below, we consider the carrying values of our financial instruments to approximate fair value because they generally expose the Company to limited credit risk and because of the short period of time between origination of the financial assets and liabilities and their expected settlement.

The fair market value of notes payable is estimated using lending rates available to us for financial instruments with similar terms and maturities and are classified as Level 2. As of September 30, 2012 and December 31, 2011, the fair value of notes payable was $147.1 million and $87.0 million, compared to the carrying values of $145.0 million and $86.0 million, respectively. Upon acquiring control of a previously unconsolidated entity, the Company recorded its equity method investment at fair value of $6.0 million, and recorded a gain of approximately $1.3 million. The fair value of the equity method investment was estimated using appraisals of the respective investment.

There were no transfers between Levels 1 or 2 during the three months and nine months ended September 30, 2012. The Company has no financial instruments classified using level 3 measurements as of September 30, 2012.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

13. Commitments and Contingencies

We monitor our properties for the presence of hazardous or toxic substances. We are not currently aware of any environmental liability with respect to the properties that we believe would have a material effect on our financial condition, results of operations and cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Our commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In the opinion of management, these matters are not expected to have a material impact on our condensed consolidated financial position, cash flows and results of operations. We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against the Company which if determined unfavorably to us would have a material adverse effect on our cash flows, financial condition or results of operations.

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Segment Reporting

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Segment Reporting

9. Segment Reporting

As of September 30, 2012, we operated in three reportable business segments: senior living operations, triple-net leased properties, and medical office building (“MOB”) properties. Our senior living operations segment primarily consists of investments in senior housing communities located in the United States for which we engage independent third-party managers. Our triple-net leased properties segment consists of investments in skilled nursing and hospital facilities in the United States. These facilities are leased to healthcare operating companies under long-term “triple-net” or “absolute-net” leases, which require the tenants to pay all property-related expenses. Our medical office building operations segment primarily consists of investing in medical office buildings and leasing those properties to healthcare providers under long-term leases, which may require tenants to pay property-related expenses.

We evaluate performance of the combined properties in each segment based on net operating income. Net operating income is defined as total revenue less property operating and maintenance expenses. There are no intersegment sales or transfers. We use net operating income to evaluate the operating performance of our real estate investments and to make decisions concerning the operation of the property. We believe that net operating income is useful to investors in understanding the value of income-producing real estate. Net income is the GAAP measure that is most directly comparable to net operating income; however, net operating income should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes certain items such as depreciation and amortization, asset management fees and expenses, real estate acquisition costs, interest expense and corporate general and administrative expenses. Additionally, net operating income as we define it may not be comparable to net operating income as defined by other REITs or companies.

The following tables reconcile the segment activity to consolidated net income for the three months and nine months ended September 30, 2012 and 2011:

	Three Months Ended September 30, 2012									Three Months Ended September 30, 2011
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated			Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenues	$	6,910,000	$	1,298,000	$	214,000	$	8,422,000		$	6,915,000	$	826,000	$	201,000	$	7,942,000
Resident services and fee income		3,655,000		—		—		3,655,000			1,945,000		—		—		1,945,000
Tenant reimbursements and other income		15,000		222,000		75,000		312,000			73,000		234,000		55,000		362,000
	$	10,580,000	$	1,520,000	$	289,000	$	12,389,000		$	8,933,000	$	1,060,000	$	256,000	$	10,249,000
Property operating and maintenance expenses		7,159,000		220,000		94,000		7,473,000			6,365,000		258,000		127,000		6,750,000
Net operating income	$	3,421,000	$	1,300,000	$	195,000	$	4,916,000		$	2,568,000	$	802,000	$	129,000	$	3,499,000
General and administrative expenses								423,000									1,243,000
Asset management fees and expenses								559,000									390,000
Real estate acquisition costs and contingent consideration								1,016,000									22,000
Depreciation and amortization								1,689,000									1,946,000
Interest income								2,000									4,000
Interest expense								(1,790,000	)								(1,436,000	)
Equity in (loss) income from unconsolidated entities								(14,000	)								121,000
Net loss							$	(545,000	)							$	(1,413,000	)
Net loss attributable to non controlling interests								(16,000	)								(20,000	)
Netloss attributable to common stockholders							$	(529,000	)							$	(1,393,000	)

	Nine Months Ended September 30, 2012									Nine Months Ended September 30, 2011
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated			Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenues	$	20,453,000	$	3,436,000	$	636,000	$	24,525,000		$	19,983,000	$	2,427,000	$	603,000	$	23,013,000
Resident services and fee income		8,243,000		—		—		8,243,000			5,667,000		—		—		5,667,0000
Tenant reimbursements and other income		294,000		593,000		234,000		1,121,000			248,000		462,000		166,000		876,000
	$	28,990,000	$	4,029,000	$	870,000	$	33,889,000		$	25,898,000	$	2,889,000	$	769,000	$	29,556,000
Property operating and maintenance expenses		20,084,000		594,000		243,000		20,921,000			18,023,000		468,000		260,000		18,751,000
Net operating income	$	8,906,000	$	3,435,000	$	627,000	$	12,968,000		$	7,875,000	$	2,421,000	$	509,000	$	10,805,000
General and administrative expenses								1,632,000									3,201,000
Asset management fees and expenses								1,543,000									1,197,000
Real estate acquisition costs and contingent consideration								1,229,000									1,453,000
Depreciation and amortization								4,653,000									5,658,000
Interest income								10,000									10,000
Interest expense								(4,818,000	)								(4,161,000	)
Other expense								(151,000	)								—
Equity in (loss) income from unconsolidated entities								(363,000	)								105,000
Fair value adjustment for equity method investment								1,282,000									—
Net loss							$	(129,000	)							$	(4,750,000	)
Net income (loss) attributable to the noncontrolling interests								108,000									(66,000	)
Net loss attributable to common stockholders							$	(237,000	)							$	(4,684,000	)

The following table reconciles the segment activity to consolidated financial position as of September 30, 2012 and December 31, 2011.

	September 30, 2012		December 31, 2011
Assets
Investment in real estate:
Senior living operations	$	139,471,000	$	92,975,000
Triple-net leased properties		44,197,000		26,366,000
Medical office building		8,249,000		8,486,000
Total reportable segments	$	191,917,000	$	127,827,000
Reconciliation to consolidated assets:
Cash and cash equivalents		21,741,000		27,972,000
Deferred financing costs, net		1,715,000		824,000
Investment in unconsolidated entities		3,499,000		3,387,000
Tenant and other receivables, net		1,677,000		1,366,000
Deferred costs and other assets		1,686,000		1,938,000
Restricted cash		3,664,000		3,806,000
Goodwill		5,965,000		5,965,000
Total assets	$	231,864,000	$	173,085,000

As of September 30, 2012 and December 31, 2011, goodwill had a balance of approximately $6.0 million and $6.0 million, respectively, all related to senior the living operations segment. The Company historically has not recorded any impairment charges for goodwill.

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Immaterial Corrections to Prior Period Financial Statements (Details 1) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenue:
Rental revenue	$ 8,422,000	$ 7,942,000	$ 24,525,000	$ 23,013,000
Resident services and fee income	3,655,000	1,945,000	8,243,000	5,667,000
Tenant reimbursements and other income	312,000	362,000	1,121,000	876,000
Total revenues	12,389,000	10,249,000	33,889,000	29,556,000
Expenses:
Property operating and maintenance	7,473,000	6,750,000	20,921,000	18,751,000
General and administrative expenses	423,000	1,243,000	1,632,000	3,201,000
Asset management fees and expenses	559,000	390,000	1,543,000	1,197,000
Real estate acquisition costs and contingent consideration	1,016,000	22,000	1,229,000	1,453,000
Depreciation and amortization	1,689,000	1,946,000	4,653,000	5,658,000
Total expenses	11,160,000	10,351,000	29,978,000	30,260,000
Income (loss) from operations	1,229,000	(102,000)	3,911,000	(704,000)
Other income (expense):
Interest income	2,000	4,000	10,000	10,000
Interest expense	(1,790,000)	(1,436,000)	(4,818,000)	(4,161,000)
Equity in income (loss) from an unconsolidated entity	14,000	121,000	(363,000)	(105,000)
Net loss	(545,000)	(1,413,000)	(129,000)	(4,750,000)
Net (loss) income attributable to noncontrolling interests	(16,000)	(20,000)	108,000	(66,000)
Net loss attributable to common stockholders	(529,000)	(1,393,000)	(237,000)	(4,684,000)
Basic and diluted net (loss) per common share attributable to common stockholders	$ (0.04)	$ (0.11)	$ (0.02)	$ (0.37)
As Previously Reported [Member]
Revenue:
Rental revenue		8,458,000		24,389,000
Resident services and fee income		1,945,000		5,667,000
Tenant reimbursements and other income		433,000		1,064,000
Total revenues		10,836,000		31,120,000
Expenses:
Property operating and maintenance		6,821,000		18,973,000
General and administrative expenses		1,240,000		3,201,000
Asset management fees and expenses		390,000		1,197,000
Real estate acquisition costs and contingent consideration		22,000		1,663,000
Depreciation and amortization		2,100,000		6,090,000
Total expenses		10,573,000		31,124,000
Income (loss) from operations		263,000		(4,000)
Other income (expense):
Interest income		4,000		10,000
Interest expense		(1,640,000)		(4,719,000)
Net loss		(1,373,000)		(4,713,000)
Net (loss) income attributable to noncontrolling interests		20,000		(29,000)
Net loss attributable to common stockholders		(1,393,000)		(4,684,000)
Basic and diluted net (loss) per common share attributable to common stockholders		$ (0.11)		$ (0.37)
As Corrected [Member]
Revenue:
Rental revenue		7,942,000		23,013,000
Resident services and fee income		1,945,000		5,667,000
Tenant reimbursements and other income		362,000		876,000
Total revenues		10,249,000		29,556,000
Expenses:
Property operating and maintenance		6,750,000		18,751,000
General and administrative expenses		1,243,000		3,201,000
Asset management fees and expenses		390,000		1,197,000
Real estate acquisition costs and contingent consideration		22,000		1,453,000
Depreciation and amortization		1,946,000		5,658,000
Total expenses		10,351,000		30,260,000
Income (loss) from operations		(102,000)		(704,000)
Other income (expense):
Interest income		4,000		10,000
Interest expense		(1,436,000)		(4,161,000)
Equity in income (loss) from an unconsolidated entity		121,000		(105,000)
Net loss		(1,413,000)		(4,750,000)
Net (loss) income attributable to noncontrolling interests		(20,000)		(66,000)
Net loss attributable to common stockholders		$ (1,393,000)		$ (4,684,000)
Basic and diluted net (loss) per common share attributable to common stockholders		$ (0.11)		$ (0.37)

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Concentration of Risks

9 Months Ended

Sep. 30, 2012

Concentration of Risks [Abstract]

Concentration of Risks

7. Concentration of Risks

Our senior living operations segment accounted for approximately 85.3% and 82.4% of total revenues for the three months ended September 30, 2012 and 2011, respectively and approximately 85.6% and 83.2% of total revenues for the nine months ended September 30, 2012 and 2011. The following table provides information about our senior living operation segment concentration for the three and nine months ended September 30, 2012:

	Three Months Ended						Nine Months Ended
Operators	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Good Neighbor Care		29.6	%		25.3	%		31.1	%		26.6	%
Royal Senior Care		17.1	%		14.6	%		18.3	%		15.7	%
Woodbine Senior Living		18.2	%		15.5	%		19.7	%		16.9	%
12 Oaks Senior Living		15.7	%		13.4	%		17.2	%		14.7	%
JEA Senior Living		10.3	%		8.7	%		3.7	%		3.2	%
Provision Living		4.8	%		4.1	%		5.3	%		4.5	%
Legend Senior Living		4.3	%		3.7	%		4.7	%		4.0	%
		100	%		85.3	%		100	%		85.6	%

Our triple-net leased segment accounted for approximately 12.2% and 10.2% of total revenues for the three months ended September 30, 2012 and 2011, respectively and approximately 11.9% and 9.8% of total revenues for the nine months ended September 30, 2012 and 2011, respectively. The following table provides information about our triple-net leased segment for the three and nine months ended September 30, 2012:

	Three Months Ended						Nine Months Ended
Tenant	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Babcock PM Management		32.8	%		4.0	%		37.2	%		4.4	%
Global Rehab Hospitals		30.2	%		3.7	%		34.2	%		4.1	%
The Specialty Hospital		29.6	%		3.6	%		22.9	%		2.7	%
Floyd Healthcare Management		7.4	%		0.9	%		5.7	%		0.7	%
		100	%		12.2	%		100	%		11.9	%

Our medical office building segment accounted for approximately 2.5% and 2.4% of total revenues for the three months ended September 30, 2012 and 2011, respectively, and approximately 2.5% of total revenues for the nine months ended September 30, 2012 and 2011.

As of September 30, 2012, we owned or had joint venture interests in 20 properties, geographically located in ten states. The following table provides information about our geographic risks by operating segment for the three and nine months ended September 30, 2012:

	Three Months Ended						Nine Months Ended
State	Percentage of Segment Revenues			Percentage of Total Revenues			Percentage of Segment Revenues			Percentage of Total Revenues
Senior living operations
South Carolina		17.2	%		14.6	%		18.4	%		15.7	%
Texas		17.7	%		15.1	%		17.9	%		15.4	%
Ohio		11.6	%		9.9	%		12.6	%		10.7	%
Pennsylvania		16.7	%		14.3	%		17.2	%		14.7	%
New Hampshire		9.9	%		8.5	%		10.7	%		9.1	%
Tennessee		9.6	%		8.2	%		10.3	%		8.8	%
Illinois		8.2	%		7.0	%		3.0	%		2.5	%
Indiana		4.8	%		4.1	%		5.3	%		4.5	%
Florida		4.3	%		3.6	%		4.6	%		4.2	%
Triple-net leased properties
Texas		63.0	%		7.7	%		71.4	%		8.5	%
Georgia		37.0	%		4.5	%		28.6	%		3.4	%
Medical office building
Texas		100	%		2.5	%		100	%		2.5	%

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

8. Income Taxes

For federal income tax purposes, we have elected to be taxed as a REIT, under Sections 856 through 860 of the Code beginning with our taxable year ended December 31, 2008, which imposes limitations related to operating assisted-living properties. As of September 30, 2012, we had acquired fourteen assisted-living facilities and formed eleven wholly owned taxable REIT subsidiaries, or TRSs, which includes a Master TRS that consolidates our wholly owned TRSs.

Each TRS is a tax paying component for purposes of classifying deferred tax assets and liabilities. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would not be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would establish a valuation allowance which would reduce the provision for income taxes.

The Master TRS recognized a $0.1 million expense and a $0.1 million expense for Federal and State income taxes in the three months ended September 30, 2012 and 2011, respectively, and a $0.1 million expense and benefit of $0.1 million for Federal and State income taxes in the nine months ended September 30, 2012 and 2011, respectively, which have been recorded in general and administrative expenses. Net deferred tax assets related to the TRS entities totaled approximately $1.3 million and $1.1 million at September 30, 2012 and December 31, 2011, respectively, related primarily to book and tax basis differences for straight-line rent and accrued liabilities. Realization of these deferred tax assets is dependent in part upon generating sufficient taxable income in future periods. These deferred tax assets are included in deferred costs and other assets in our condensed consolidated balance sheets. We have not recorded a valuation allowance against our deferred tax assets as of September 30, 2012 as we have determined that the future projected taxable income from the operations of the TRS entities are sufficient to cover the additional future expenses resulting from these book tax differences.

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Notes Payable

9 Months Ended

Sep. 30, 2012

Notes Payable [Abstract]

Notes Payable

10. Notes Payable

Notes payable were $145.5 million ($145.0 million, net of premium) and $86.0 million as of September 30, 2012 and December 31, 2011, respectively. As of September 30, 2012, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 4.45% to 6.50% per annum and a weighted average effective interest rate of 5.70% per annum. As of September 30, 2012, we had $113.8 million of fixed rate debt, or approximately 79% of notes payable, at a weighted average interest rate of 5.66% per annum and $31.1 million of variable rate debt, or approximately 21% of notes payable, at a weighted average interest rate of 5.83% per annum. As of December 31, 2011, we had fixed and variable rate secured mortgage loans with effective interest rates ranging from 3.45% to 6.50% per annum and a weighted-average effective interest rate of 5.91% per annum. As of December 31, 2011, we had $32.7 million of fixed rate debt, or 38% of notes payable, at a weighted average interest rate of 6.01% per annum and $53.3 million of variable rate debt, or 62% of notes payable, at a weighted average interest rate of 5.85% per annum.

On June 11, 2012, we entered into MultiFamily Loan and Securities Agreements (the “Loans”) with KeyCorp Real Estate Capital Markets, Inc., originated under Fannie Mae’s Delegated Underwriting and Servicing Product Line, to refinance our Terrace at Mountain Creek, River’s Edge at Yardley, Forestview Manor, GreenTree at Westwood and Windsor Oaks of Bradenton properties. The Loans are at a fixed rate of 4.45% for a term of seven years. Proceeds from the Loans of $32.0 million exceeded the debt repaid and loan fees and expenses by approximately $11.5 million. The Loans are secured by first priority liens on the refinanced properties. In connection with the documentation and closing of the Loans, we paid fees and expenses totaling approximately $791,000. In addition, the Company recognized a loss on debt extinguishment of approximately $148,000, which is included in other income/expense in the accompanying condensed consolidated statements of operations.

In November 2010, we entered into an agreement with KeyBank National Association, an unaffiliated financial institution (“KeyBank”), to obtain a $25,000,000 revolving credit facility. Effective August 2011, the KeyBank agreement was amended to convert the credit facility to a term loan, revised certain loan covenants and changed the maturity date to July 31, 2012, with an option to extend the maturity to October 30, 2012 subject to satisfaction of certain conditions. This option was exercised and the term was extended on July 31, 2012. On August 14, 2012, the Company repaid the final amount outstanding on the Key Bank credit facility. The amount outstanding under the credit facility was $0 and $16.3 million at September 30, 2012 and December 31, 2011, respectively.

We are required by the terms of the applicable loan documents to meet certain financial covenants, such as debt service coverage ratios, rent coverage ratios and reporting requirements. As of September 30, 2012, we were in compliance with all such covenants and requirements.

The following table details the notes payable by property as of September 30, 2012 and December 31, 2011.

Property Name	Payment Type	Interest Rate	Outstanding Principal Balance as of September 30, 2012(1)		Outstanding Principal Balance as of December 31, 2011(1)			Maturity Date
Amber Glen	Principal and interest at a 30-year amortization rate	6.40%—fixed	$	8,650,000		(5	)	June 1, 2019
Carriage Court of Hilliard	Principal and interest at a 35-year amortization rate	5.40%—fixed	$	13,325,000	$	13,440,000		August 1, 2044
Caruth Haven Court	Principal and interest at a 30-year amortization rate	6.43%—fixed	$	9,707,000	$	9,793,000		December 16, 2019
Greentree (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	3,856,000		2,832,000		July 1, 2019
Forestview Manor (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	8,754,000		5,935,000		July 1, 2019
Global Rehab Inpatient Rehab Facility	Principal and interest at a 30-year amortization rate	6.25%—fixed for 3 years; thereafter the greater of 6.25% and 3yr LIBOR +3.25%	$	7,373,000	$	7,441,000		December 22, 2016
Hedgcoxe Health Plaza (3)	Principal and interest at a 30-year amortization rate	4.9%—fixed	$	5,600,000	$	5,060,000		August 14, 2022
Hudson Creek	Principal and interest at a 30-year amortization rate	6.11%—fixed	$	7,997,000		(5	)	June 1, 2019
Mesa Vista Inn Health Center	Principal and interest at a 20-year amortization rate	6.50%—fixed	$	6,981,000	$	7,136,000		January 5, 2015
Mill Creek	Principal and interest at a 30-year	6.40%—fixed	$	8,349,000		(5	)	June 1, 2019
Oakleaf Village Portfolio	Principal and interest at a 30-year amortization rate	5.45% plus the greater of 1% or the 3 month LIBOR	$	17,485,000	$	17,644,000		April 30, 2015
River’s Edge of Yardley (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	6,484,000	$	2,500,000		July 1, 2019
Rome LTACH Project	Principal and interest at a 25-year amortization rate	4.5%—fixed	$	13,461,000		(4	)	March 31, 2017
Sugar Creek	Principal and interest at a 30-year amortization rate	6.20%—fixed	$	7,836,000		(5	)	June 1, 2019
The Oaks Bradenton (2)	Principal and interest at a 30-year amortization rate.	4.45%—fixed	$	4,085,000	$	2,697,000		July 1, 2019
Terrace at Mountain Creek (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	8,754,000	$	5,700,000		July 1, 2019
Woodland Terrace at the Oaks	Months 1-22 interest only. Month 23 to maturity principal and interests at a 25-year amortization rate	3Mo LIBOR +3.75% with a floor of 5.75%	$	6,276,000	$	5,800,000		May 1, 2014
			$	144,973,000	$	85,978,000
Add: premium				487,000
Notes payable, net			$	145,460,000	$	85,978,000

(1) As of September 30, 2012 and December 31, 2011, all notes payable are secured by the underlying real estate.

(2) These loans were refinanced in June 2012 under the Multifamily Loan and Securities Agreement discussed above.

(3) On August 14, 2012, this loan was refinanced with the KeyBank National Association.

(4) Not applicable because this entity was an unconsolidated joint venture at December 31, 2011.

(5) On August 31, 2012, the Company acquired an interest in the Leah Bay joint venture subject to existing indebtedness of approximately $32.9 million. These notes payable are secured by the underlying real estate.

Principal payments due on our notes payable for October 1, 2012 to December 31, 2012 and each of the subsequent years is as follows:

Year	Principal amount
October 1, 2012 to December 31, 2012	$	546,000
2013		2,318,000
2014		8,578,000
2015		25,439,000
2016		9,024,000
2017 and thereafter		99,068,000
	$	144,973,000

Interest Expense and Deferred Financing Cost

For the three months ended September 30, 2012 and 2011, the Company incurred interest expense, including amortization of deferred financing costs of $1.8 million and $1.4 million, respectively. For the nine months ended September 30, 2012 and 2011, the Company incurred interest expense, including amortization of deferred financing costs of $4.8 million and $4.2 million, respectively. As of September 30, 2012 and December 31, 2011, the Company’s net deferred financing costs were approximately $1.7 million and $0.8 million, respectively. All deferred financing costs are capitalized and amortized over the life of the respective loan agreement.

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Investment in Real Estate and Unconsolidated Entities (Details) (USD $)				9 Months Ended
	Apr. 30, 2012 Rome LTACH Project [Member]	Sep. 30, 2012 Littleton Specialty Rehabilitation Facility [Member]	Apr. 02, 2012 Physicians Centre MOB [Member]	Sep. 30, 2012 Highland Park, TX [Member] Caruth Haven Court [Member] sqft	Sep. 30, 2012 Bradenton, FL [Member] The Oaks Bradenton [Member] sqft	Sep. 30, 2012 Columbus, IN [Member] GreenTree at Westwood [Member] sqft	Sep. 30, 2012 San Antonio, TX [Member] Mesa Vista Inn Health Center [Member] sqft	Sep. 30, 2012 Rome, GA [Member] Rome LTACH Project [Member] sqft	Sep. 30, 2012 Lexington, SC [Member] Oakleaf Village at - Lexington [Member] sqft	Sep. 30, 2012 Greer, SC [Member] Oakleaf Village at - Greenville [Member] sqft	Sep. 30, 2012 Dallas, TX [Member] Global Rehab Inpatient Rehab Facility [Member] sqft	Sep. 30, 2012 Chattanooga, TN [Member] Terrace at Mountain Creek [Member] sqft	Sep. 30, 2012 Littleton, CO [Member] Littleton Specialty Rehabilitation Facility [Member] sqft	Sep. 30, 2012 Hilliard, OH [Member] Carriage Court of Hilliard [Member] sqft	Sep. 30, 2012 Plano, TX [Member] Hedgcoxe Health Plaza [Member] sqft	Sep. 30, 2012 Yardley, PA [Member] River's Edge of Yardley [Member] sqft	Sep. 30, 2012 Meredith, NH [Member] Forestview Manor [Member] sqft	Sep. 30, 2012 Allentown, PA [Member] Woodland Terrace at the Oaks [Member] sqft	Sep. 30, 2012 Bryan, TX [Member] Physicians Centre MOB [Member] sqft	Sep. 30, 2012 Bryan, TX [Member] Hudson Creek [Member] sqft	Sep. 30, 2012 Urbana, IL[Member] Amber Glen [Member] sqft	Sep. 30, 2012 Springfield, IL[Member] Mill Creek [Member] sqft	Sep. 30, 2012 Normal, IL[Member] Sugar Creek [Member] sqft
Summary of current property portfolio
Date Purchased				Jan. 22, 2009	May 01, 2009	Dec. 30, 2009	Dec. 31, 2009	Jan. 12, 2010	Apr. 30, 2010	Apr. 30, 2010	Aug. 19, 2010	Sep. 03, 2010	Dec. 16, 2010	Dec. 22, 2010	Dec. 22, 2010	Dec. 22, 2010	Jan. 14, 2011	Apr. 14, 2011	Apr. 02, 2012	Aug. 31, 2012	Aug. 31, 2012	Aug. 31, 2012	Aug. 31, 2012
Gross Square Feet				74,647	18,172	50,249	55,525	52,944	67,000	65,000	40,828	109,643	26,808	69,184	32,109	26,146	34,270	50,400	114,583	114,583	26,146	34,270	50,400
Purchase Price	$ 5,200,000	$ 7,100,000	$ 2,500,000	$ 20,500,000	$ 4,500,000	$ 5,150,000	$ 13,000,000	$ 18,900,000	$ 14,512,000	$ 12,488,000	$ 14,800,000	$ 8,500,000	$ (4)	$ 17,500,000	$ 9,094,000	$ 4,500,000	$ 10,750,000	$ 9,000,000	$ (5)	$ 11,500,000	$ 13,440,000	$ 12,180,000	$ 11,880,000
Debt				$ 9,707,000	$ 4,085,000	$ 3,865,000	$ 6,981,000	$ 13,461,000	$ 9,391,000	$ 8,094,000	$ 7,373,000	$ 5,453,000	$ (4)	$ 13,325,000	$ 5,600,000	$ 6,484,000	$ 8,754,000	$ 6,276,000	$ (5)	$ 7,997,000	$ 8,650,000	$ 8,349,000	$ 7,836,000
% Occupancy				95.00%	97.00%	98.00%	100.00%	100.00%	89.00%	70.00%	100.00%	95.00%	100.00%	94.00%	100.00%	100.00%	100.00%	93.00%	68.00%	70.00%	97.00%	98.00%	95.00%

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Stockholders' Equity (Details) (USD $)	3 Months Ended						9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Sep. 30, 2012	Sep. 30, 2011
Summary of distributions declared
Cash	$ 807,000	$ 799,000	$ 801,000	$ 817,000	$ 2,436,000	$ 1,152,000	$ 2,709,000	$ 5,529,000
Reinvested						1,124,000
Total	$ 807,000	$ 799,000	$ 801,000	$ 817,000	$ 2,436,000	$ 2,276,000

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Subsequent Events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

15. Subsequent Events

On October 25, 2012, the Company completed a refinancing of the loan on the Carriage court of Hilliard with HUD. This loan has a thirty five year term with the rate of interest fixed at 2.8% and payments of principal on a 35 year amortization rate.

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Reconciliation of segment activity to consolidated net income

	Three Months Ended September 30, 2012									Three Months Ended September 30, 2011
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated			Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenues	$	6,910,000	$	1,298,000	$	214,000	$	8,422,000		$	6,915,000	$	826,000	$	201,000	$	7,942,000
Resident services and fee income		3,655,000		—		—		3,655,000			1,945,000		—		—		1,945,000
Tenant reimbursements and other income		15,000		222,000		75,000		312,000			73,000		234,000		55,000		362,000
	$	10,580,000	$	1,520,000	$	289,000	$	12,389,000		$	8,933,000	$	1,060,000	$	256,000	$	10,249,000
Property operating and maintenance expenses		7,159,000		220,000		94,000		7,473,000			6,365,000		258,000		127,000		6,750,000
Net operating income	$	3,421,000	$	1,300,000	$	195,000	$	4,916,000		$	2,568,000	$	802,000	$	129,000	$	3,499,000
General and administrative expenses								423,000									1,243,000
Asset management fees and expenses								559,000									390,000
Real estate acquisition costs and contingent consideration								1,016,000									22,000
Depreciation and amortization								1,689,000									1,946,000
Interest income								2,000									4,000
Interest expense								(1,790,000	)								(1,436,000	)
Equity in (loss) income from unconsolidated entities								(14,000	)								121,000
Net loss							$	(545,000	)							$	(1,413,000	)
Net loss attributable to non controlling interests								(16,000	)								(20,000	)
Netloss attributable to common stockholders							$	(529,000	)							$	(1,393,000	)

	Nine Months Ended September 30, 2012									Nine Months Ended September 30, 2011
	Senior living operations		Triple-net leased properties		Medical office building		Consolidated			Senior living operations		Triple-net leased properties		Medical office building		Consolidated
Rental revenues	$	20,453,000	$	3,436,000	$	636,000	$	24,525,000		$	19,983,000	$	2,427,000	$	603,000	$	23,013,000
Resident services and fee income		8,243,000		—		—		8,243,000			5,667,000		—		—		5,667,0000
Tenant reimbursements and other income		294,000		593,000		234,000		1,121,000			248,000		462,000		166,000		876,000
	$	28,990,000	$	4,029,000	$	870,000	$	33,889,000		$	25,898,000	$	2,889,000	$	769,000	$	29,556,000
Property operating and maintenance expenses		20,084,000		594,000		243,000		20,921,000			18,023,000		468,000		260,000		18,751,000
Net operating income	$	8,906,000	$	3,435,000	$	627,000	$	12,968,000		$	7,875,000	$	2,421,000	$	509,000	$	10,805,000
General and administrative expenses								1,632,000									3,201,000
Asset management fees and expenses								1,543,000									1,197,000
Real estate acquisition costs and contingent consideration								1,229,000									1,453,000
Depreciation and amortization								4,653,000									5,658,000
Interest income								10,000									10,000
Interest expense								(4,818,000	)								(4,161,000	)
Other expense								(151,000	)								—
Equity in (loss) income from unconsolidated entities								(363,000	)								105,000
Fair value adjustment for equity method investment								1,282,000									—
Net loss							$	(129,000	)							$	(4,750,000	)
Net income (loss) attributable to the noncontrolling interests								108,000									(66,000	)
Net loss attributable to common stockholders							$	(237,000	)							$	(4,684,000	)

Reconciliation of segment activity to consolidated financial position

	September 30, 2012		December 31, 2011
Assets
Investment in real estate:
Senior living operations	$	139,471,000	$	92,975,000
Triple-net leased properties		44,197,000		26,366,000
Medical office building		8,249,000		8,486,000
Total reportable segments	$	191,917,000	$	127,827,000
Reconciliation to consolidated assets:
Cash and cash equivalents		21,741,000		27,972,000
Deferred financing costs, net		1,715,000		824,000
Investment in unconsolidated entities		3,499,000		3,387,000
Tenant and other receivables, net		1,677,000		1,366,000
Deferred costs and other assets		1,686,000		1,938,000
Restricted cash		3,664,000		3,806,000
Goodwill		5,965,000		5,965,000
Total assets	$	231,864,000	$	173,085,000

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Notes Payable (Details 1) (USD $)	9 Months Ended
	Sep. 30, 2012
Principal payments due on notes payable
Total Principle amount	$ 144,973,000
October 1, 2012 to December 31, 2012
Principal payments due on notes payable
Principal amount	546,000
2013 [Member]
Principal payments due on notes payable
Principal amount	2,318,000
2014 [Member]
Principal payments due on notes payable
Principal amount	8,578,000
2015 [Member]
Principal payments due on notes payable
Principal amount	25,439,000
2016 [Member]
Principal payments due on notes payable
Principal amount	9,024,000
2017 and thereafter [Member]
Principal payments due on notes payable
Principal amount	$ 99,068,000

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Concentration of Risks (Details 1) (Triple-net leased properties [Member])	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Summary of segment concentration
Percentage of Segment Revenues	100.00%		100.00%
Percentage of Total Revenues	12.20%	10.20%	11.90%	9.80%
Babcock PM Management [Member]
Summary of segment concentration
Percentage of Segment Revenues	32.80%		37.20%
Percentage of Total Revenues	4.00%		4.40%
Global Rehab Hospitals [Member]
Summary of segment concentration
Percentage of Segment Revenues	30.20%		34.20%
Percentage of Total Revenues	3.70%		4.10%
The Specialty Hospital [Member]
Summary of segment concentration
Percentage of Segment Revenues	29.60%		22.90%
Percentage of Total Revenues	3.60%		2.70%
Floyd Healthcare Management [Member]
Summary of segment concentration
Percentage of Segment Revenues	7.40%		5.70%
Percentage of Total Revenues	0.90%		0.70%

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Condensed Consolidated Statements of Equity (Unaudited) (USD $)	Total	Common Stock	Common Stock, Additional Paid-In Capital	Common Stock, Accumulated Deficit	Common Stock, Total Stockholders' Equity	Noncontrolling Interests
Balance-Value at Dec. 31, 2010	$ 81,691,000	$ 116,000	$ 91,588,000	$ (11,722,000)	$ 79,982,000	$ 1,709,000
Beginning balance-Number of Shares at Dec. 31, 2010		11,592,883
Issuance of common stock, shares		1,575,250
Issuance of common stock	15,644,000	16,000	15,628,000		15,644,000
Redeemed shares, shares		(195,998)
Redeemed shares	(1,891,000)	(2,000)	(1,889,000)		(1,891,000)
Offering costs	(1,890,000)		(1,890,000)		(1,890,000)
Distributions	(5,529,000)		(5,529,000)		(5,529,000)
Net loss	(4,750,000)			(4,684,000)	(4,684,000)	(66,000)
Balance-Value at Sep. 30, 2011	83,275,000	130,000	97,908,000	(16,406,000)	81,632,000	1,643,000
Ending balance- Number of Shares at Sep. 30, 2011		12,972,135
Balance-Value at Dec. 31, 2011	80,859,000	129,000	96,542,000	(17,054,000)	79,617,000	1,242,000
Beginning balance-Number of Shares at Dec. 31, 2011		12,916,612
Noncontrolling interest contribution	3,444,000					3,444,000
Redeemed shares, shares	(76,293)	(76,293)
Redeemed shares	(719,000)		(719,000)		(719,000)
Distributions	(2,709,000)		(2,407,000)		(2,407,000)	(302,000)
Net loss	(129,000)			(237,000)	(237,000)	108,000
Balance-Value at Sep. 30, 2012	$ 80,746,000	$ 129,000	$ 93,416,000	$ (17,291,000)	$ 76,254,000	$ 4,492,000
Ending balance- Number of Shares at Sep. 30, 2012		12,840,319

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Investment in Real Estate and Unconsolidated Entities

9 Months Ended

Sep. 30, 2012

Investment in Real Estate and Unconsolidated Entities [Abstract]

Investment in Real Estate and Unconsolidated Entities

4. Investment in Real Estate and Unconsolidated Entities

The following table provides summary information regarding our current property portfolio.

Property	Location	Date Purchased	Gross Square Feet	Purchase Price			Sept. 30, 2012 Debt			Sept. 30, 2012 % Occupancy
Caruth Haven Court	Highland Park, TX	01/22/09	74,647	$	20,500,000		$	9,707,000			95	%
The Oaks Bradenton	Bradenton, FL	05/01/09	18,172	$	4,500,000		$	4,085,000			97	%
GreenTree at Westwood (1)	Columbus, IN	12/30/09	50,249	$	5,150,000		$	3,865,000			98	%
Mesa Vista Inn Health Center	San Antonio, TX	12/31/09	55,525	$	13,000,000		$	6,981,000			100	%
Rome LTACH Project (2)	Rome, GA	01/12/10	52,944	$	18,900,000		$	13,461,000			100	%
Oakleaf Village Portfolio
Oakleaf Village at — Lexington	Lexington, SC	04/30/10	67,000	$	14,512,000		$	9,391,000			89	%
Oakleaf Village at — Greenville	Greer, SC	04/30/10	65,000	$	12,488,000		$	8,094,000			70	%
Global Rehab Inpatient Rehab Facility	Dallas, TX	08/19/10	40,828	$	14,800,000		$	7,373,000			100	%
Terrace at Mountain Creek (3)	Chattanooga, TN	09/03/10	109,643	$	8,500,000		$	5,453,000			95	%
Littleton Specialty Rehabilitation Facility	Littleton, CO	12/16/10	26,808		(4	)		(4	)		100	%
Carriage Court of Hilliard	Hilliard, OH	12/22/10	69,184	$	17,500,000		$	13,325,000			94	%
Hedgcoxe Health Plaza	Plano, TX	12/22/10	32,109	$	9,094,000		$	5,600,000			100	%
River’s Edge of Yardley	Yardley, PA	12/22/10	26,146	$	4,500,000		$	6,484,000			100	%
Forestview Manor	Meredith, NH	01/14/11	34,270	$	10,750,000		$	8,754,000			100	%
Woodland Terrace at the Oaks	Allentown, PA	04/14/11	50,400	$	9,000,000		$	6,276,000			93	%
Physicians Centre MOB	Bryan, TX	04/02/12	114,583		(5	)		(5	)		68	%
Amber Glen	Urbana, IL	08/31/12	26,146	$	13,440,000		$	8,650,000			97	%
Mill Creek	Springfield, IL	08/31/12	34,270	$	12,180,000		$	8,349,000			98	%
Sugar Creek	Normal, IL	08/31/12	50,400	$	11,880,000		$	7,836,000			95	%
Hudson Creek	Bryan, TX	08/31/12	114,583	$	11,500,000		$	7,997,000			70	%

⁽¹⁾ The earn-out agreement associated with this acquisition was estimated to have a fair value of $1.0 million as of December 31, 2011 and an earn-out payment of approximately $1.0 million was made in January of 2012. For the three month periods ended September 30, 2011, expense approximately $0.2 million related to the increased earn-out liability associated with the earn-out payment have been included in the condensed consolidated statements of operations under real estate acquisition costs and contingent consideration. For the nine month periods ended September 30, 2011, expense of approximately $0.5 million related to the increased earn-out liability associated with the earn-out payment have been included in the condensed consolidated statements of operations under real estate acquisition costs and contingent consideration.

⁽²⁾  Rome LTACH, a development project, was completed in February 2011 and its first tenant moved in on February 1, 2011. In April 2012, the Company acquired the interests of Cornerstone Private Equity Fund Operating Partnership, LP and the Cirrus Group affiliates in Rome LTH Partners, LP for a total payment of approximately $5.2 million. We previously held an equity method investment in this property. As of April 2012, the Company owned 100% of Rome LTH Partners, LP and consolidated its existing equity method investment and the acquired interest at fair value in the amount of $18.9 million. Refer to Note 5 and 14 for more information on the acquisition and preliminary purchase price allocation.

⁽³⁾  Under the purchase and sale agreement executed in connection with the acquisition, a portion of the purchase price for the property was to be calculated and paid to the seller as earn-out payments based upon the net operating income, as defined, of the property during each of the three years following our acquisition of the property. The earn-out value of $1.0 million was paid during the second quarter of 2011.

⁽⁴⁾  Littleton Specialty Rehabilitation Facility, a development project and unconsolidated entity accounted for on the equity method, was completed in April 2012, and the single tenant began paying rent in July 2012, in accordance with the terms of the lease. Tenant operations commenced upon licensure of the facility in July 2012. As of September 30, 2012, real estate asset costs for the property were approximately $7.1 million and we had invested a total of approximately $1.6 million in this project.

⁽⁵⁾ On April 2, 2012, through a wholly owned subsidiary, the Company invested $2.5 million to acquire an interest in the Physicians Centre MOB along with Caddis Partners and related affiliates and a group of physician investors. This investment is accounted for on the equity method and discussed further in Note 5.

As of September 30, 2012, cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:

	Land		Buildings and improvements			Furniture, fixtures and equipment			Intangible lease assets
Cost	$	23,193,000	$	166,785,000		$	5,052,000		$	14,757,000
Accumulated depreciation and amortization		—		(7,905,000	)		(1,579,000	)		(8,386,000	)
Net	$	23,193,000	$	158,880,000		$	3,473,000		$	6,371,000

As of December 31, 2011, accumulated depreciation and amortization related to investments in real estate and related lease intangibles were as follows:

	Land		Buildings and improvements			Furniture, fixtures and equipment			Intangible lease assets
Cost	$	20,713,000	$	105,340,000		$	3,578,000		$	10,649,000
Accumulated depreciation and amortization		—		(4,653,000	)		(1,016,000	)		(6,784,000	)
Net	$	20,713,000	$	100,687,000		$	2,562,000		$	3,865,000

Depreciation expense associated with buildings and improvements, site improvements and furniture and fixtures for the three months ended September 30, 2012 and 2011 was approximately $1.2 million and $1.0 million, respectively. Depreciation expense associated with building and improvements, site improvements and furniture and fixtures for the nine months ended September 30, 2012 and 2011 was $3.2 million and $2.7 million, respectively.

Amortization associated with intangible assets for the three months ended September 30, 2012 and 2011 was $0.5 million and $1.0 million, respectively. Amortization associated with intangible assets for the nine months ended September 30, 2012 and 2011 was $1.5 million and $3.0 million, respectively. Estimated amortization for October 1, 2012 through December 31, 2012 and each of the subsequent years is as follows:

	Intangible assets
October 2012 — December 2012	$	407,000
2013	$	2,712,000
2014	$	330,000
2015	$	330,000
2016	$	329,000
2017	$	328,000
2018 and thereafter	$	1,935,000

The estimated useful lives for intangible assets range from approximately one to seventeen years. As of September 30, 2012, the weighted-average amortization period for intangible assets was seven years.

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Subsequent Events (Details)	1 Months Ended
	Oct. 25, 2012
Subsequents Events (Textual) [Abstract]
Period of term loan	35 years
Interest rate of loan	2.80%
Term loan principal payment period	35 years

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2012

Notes Payable [Abstract]

Summary of covenants and requirements

Property Name	Payment Type	Interest Rate	Outstanding Principal Balance as of September 30, 2012(1)		Outstanding Principal Balance as of December 31, 2011(1)			Maturity Date
Amber Glen	Principal and interest at a 30-year amortization rate	6.40%—fixed	$	8,650,000		(5	)	June 1, 2019
Carriage Court of Hilliard	Principal and interest at a 35-year amortization rate	5.40%—fixed	$	13,325,000	$	13,440,000		August 1, 2044
Caruth Haven Court	Principal and interest at a 30-year amortization rate	6.43%—fixed	$	9,707,000	$	9,793,000		December 16, 2019
Greentree (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	3,856,000		2,832,000		July 1, 2019
Forestview Manor (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	8,754,000		5,935,000		July 1, 2019
Global Rehab Inpatient Rehab Facility	Principal and interest at a 30-year amortization rate	6.25%—fixed for 3 years; thereafter the greater of 6.25% and 3yr LIBOR +3.25%	$	7,373,000	$	7,441,000		December 22, 2016
Hedgcoxe Health Plaza (3)	Principal and interest at a 30-year amortization rate	4.9%—fixed	$	5,600,000	$	5,060,000		August 14, 2022
Hudson Creek	Principal and interest at a 30-year amortization rate	6.11%—fixed	$	7,997,000		(5	)	June 1, 2019
Mesa Vista Inn Health Center	Principal and interest at a 20-year amortization rate	6.50%—fixed	$	6,981,000	$	7,136,000		January 5, 2015
Mill Creek	Principal and interest at a 30-year	6.40%—fixed	$	8,349,000		(5	)	June 1, 2019
Oakleaf Village Portfolio	Principal and interest at a 30-year amortization rate	5.45% plus the greater of 1% or the 3 month LIBOR	$	17,485,000	$	17,644,000		April 30, 2015
River’s Edge of Yardley (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	6,484,000	$	2,500,000		July 1, 2019
Rome LTACH Project	Principal and interest at a 25-year amortization rate	4.5%—fixed	$	13,461,000		(4	)	March 31, 2017
Sugar Creek	Principal and interest at a 30-year amortization rate	6.20%—fixed	$	7,836,000		(5	)	June 1, 2019
The Oaks Bradenton (2)	Principal and interest at a 30-year amortization rate.	4.45%—fixed	$	4,085,000	$	2,697,000		July 1, 2019
Terrace at Mountain Creek (2)	Principal and interest at a 30-year amortization rate	4.45%—fixed	$	8,754,000	$	5,700,000		July 1, 2019
Woodland Terrace at the Oaks	Months 1-22 interest only. Month 23 to maturity principal and interests at a 25-year amortization rate	3Mo LIBOR +3.75% with a floor of 5.75%	$	6,276,000	$	5,800,000		May 1, 2014
			$	144,973,000	$	85,978,000
Add: premium				487,000
Notes payable, net			$	145,460,000	$	85,978,000

(1) As of September 30, 2012 and December 31, 2011, all notes payable are secured by the underlying real estate.

(2) These loans were refinanced in June 2012 under the Multifamily Loan and Securities Agreement discussed above.

(3) On August 14, 2012, this loan was refinanced with the KeyBank National Association.

(4) Not applicable because this entity was an unconsolidated joint venture at December 31, 2011.

(5) On August 31, 2012, the Company acquired an interest in the Leah Bay joint venture subject to existing indebtedness of approximately $32.9 million. These notes payable are secured by the underlying real estate.

Principal payments due on notes payable

Year	Principal amount
October 1, 2012 to December 31, 2012	$	546,000
2013		2,318,000
2014		8,578,000
2015		25,439,000
2016		9,024,000
2017 and thereafter		99,068,000
	$	144,973,000

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Investments in Consolidated Joint Ventures (Details) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended				3 Months Ended	9 Months Ended		12 Months Ended			3 Months Ended		9 Months Ended		12 Months Ended	3 Months Ended	9 Months Ended								9 Months Ended			9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Sep. 30, 2012 Triple-net leased properties [Member]	Sep. 30, 2011 Triple-net leased properties [Member]	Sep. 30, 2012 Triple-net leased properties [Member]	Sep. 30, 2011 Triple-net leased properties [Member]	Sep. 30, 2012 Medical office building [Member]	Sep. 30, 2011 Medical office building [Member]	Sep. 30, 2012 Medical office building [Member]	Sep. 30, 2011 Medical office building [Member]	Sep. 30, 2012 Oakleaf Joint Venture [Member]	Apr. 30, 2010 Oakleaf Joint Venture [Member]	Sep. 30, 2011 Rome LTACH Project [Member]	Sep. 30, 2012 Rome LTACH Project [Member]	Sep. 30, 2011 Rome LTACH Project [Member]	Dec. 31, 2011 Rome LTACH Project [Member]	Apr. 12, 2012 Rome LTACH Project [Member]	Mar. 31, 2011 Rome LTACH Project [Member]	Sep. 30, 2012 Littleton Specialty Rehabilitation Facility [Member]	Sep. 30, 2011 Littleton Specialty Rehabilitation Facility [Member]	Sep. 30, 2012 Littleton Specialty Rehabilitation Facility [Member]	Sep. 30, 2011 Littleton Specialty Rehabilitation Facility [Member]	Dec. 31, 2011 Littleton Specialty Rehabilitation Facility [Member]	Sep. 30, 2012 Physicians Centre MOB [Member]	Sep. 30, 2012 Physicians Centre MOB [Member]	Sep. 30, 2012 Leah Bay Joint Venture [Member]	Aug. 31, 2012 Leah Bay Joint Venture [Member]	Jan. 12, 2010 Free-standing medical facility [Member] Rome LTACH Project [Member]	Dec. 16, 2010 Littleton, CO [Member] Littleton Specialty Rehabilitation Facility [Member]	Sep. 30, 2012 Bryan MOB Partners, L.P [Member] Physicians Centre MOB [Member]	Sep. 30, 2012 Physician partners [Member] Physicians Centre MOB [Member]	Sep. 30, 2012 Caddis Partners [Member] Physicians Centre MOB [Member]	Sep. 30, 2012 Cornerstone Private Equity Fund Operating Partnership, LP [Member] Rome LTACH Project [Member]	Apr. 30, 2012 Cornerstone Private Equity Fund Operating Partnership, LP [Member] Rome LTACH Project [Member]	Apr. 06, 2012 Cornerstone Private Equity Fund Operating Partnership, LP [Member] Rome LTACH Project [Member]	Sep. 30, 2012 Three affiliates of The Cirrus Group [Member] Rome LTACH Project [Member]	Sep. 30, 2012 Three affiliates of The Cirrus Group [Member] Littleton Specialty Rehabilitation Facility [Member]	Sep. 30, 2012 Fourth affiliate of Cirrus Group [Member] Rome LTACH Project [Member]	Sep. 30, 2012 Fourth affiliate of Cirrus Group [Member] Littleton Specialty Rehabilitation Facility [Member]	Apr. 12, 2012 Cirrus Group [Member] Rome LTACH Project [Member]	Sep. 30, 2012 Cirrus Group [Member] Littleton Specialty Rehabilitation Facility [Member]
Investments and Joint Ventures (Textual) [Abstract]
Investments in Joint Ventures															$ 21,600,000		$ 2,700,000					$ 1,600,000		$ 1,600,000						$ 49,500,000	$ 16,300,000	$ 7,300,000				$ 500,000	$ 5,200,000	$ 1,100,000	$ 300,000				$ 4,100,000	$ 200,000
Percentage limited partnership interest																	100.00%		75.00%					90.00%		90.00%			80.00%							15.00%			9.50%	9.50%	0.50%	0.50%
Payments under promote obligation																					3,000,000
Buildings and improvements	158,880,000		158,880,000		100,687,000																200,000
Total net assets														25,600,000			19,200,000		16,500,000			7,300,000		7,300,000		6,000,000	10,300,000	10,300,000	50,500,000
Real estate assets														22,600,000			18,400,000		15,600,000			7,000,000		7,000,000		5,800,000	9,400,000	9,400,000	49,100,000
Total liabilities	33,800,000		33,800,000											17,900,000			13,500,000		14,100,000			5,600,000		5,600,000		4,200,000	7,400,000	7,400,000
Secured mortgage debt														17,500,000			13,500,000		10,900,000			5,500,000		5,500,000		3,200,000	7,100,000	7,100,000	32,800,000
Equity raised for acquisition of interests																	2,600,000
Excess refinancing proceeds																	2,600,000
Contribution by the Company to acquire limited partnership interest																																	2,500,000	625,000	350,000
Percentage of limited partnership interest acquired by the company	100.00%		100.00%		75.00%										80.00%					100.00%													71.90%	18.00%	10.10%
Percentage of total revenues						12.20%	10.20%	11.90%	9.80%	2.50%	2.40%	2.50%	2.50%
Revenues	12,389,000	10,249,000	33,889,000	29,556,000		1,520,000	1,060,000	4,029,000	2,889,000	289,000	256,000	870,000	769,000			600,000		1,600,000
Net Income or Loss	(529,000)	(1,393,000)	(237,000)	(4,684,000)												100,000		100,000				100,000	0	100,000	0		100,000	400,000
Gain on the fair value adjustment																	1,300,000
Net investment																						$ 1,600,000		$ 1,600,000		$ 1,600,000

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Business Combinations

9 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Business Combinations

14. Business Combinations

On January 14, 2011, through a wholly-owned subsidiary, we purchased an assisted-living property, Forestview Manor, from 153 Parade Road, LLC a non-related party, for a purchase price of approximately $10.8 million. The acquisition was funded with our revolving credit facility from KeyBank National Association and with proceeds from our initial public offering.

On April 14, 2011, through a wholly-owned subsidiary, we purchased an assisted-living property, Sunrise of Allentown, from an affiliate of Sunrise Senior Living, Inc., for $9.0 million. The property has been rebranded as Woodland Terrace at the Oaks at the Oaks Senior Living. The acquisition of Woodland Terrace at the Oaks was funded with proceeds from our public offerings and a mortgage loan from an unaffiliated lender, post-closing.

On January 12, 2010, we funded an investment in a joint venture with affiliates of The Cirrus Group, an unaffiliated entity, to develop a $16.3 million free-standing medical facility on the campus of the Floyd Medical Center in Rome, Georgia. We contributed approximately $2.7 million of capital to acquire a 75% limited partnership interest in Rome LTH Partners, LP (“Rome LTH”). Cornerstone Private Equity Fund Operating Partnership, LP, an affiliate of our Prior Advisor, contributed approximately $0.5 million of capital to acquire a 15% limited partnership interest in Rome LTH. Three affiliates of The Cirrus Group contributed an aggregate of approximately $0.3 million to acquire an aggregate 9.5% limited partnership interest in Rome LTH. A fourth affiliate of the Cirrus Group acted as the general partner and held the remaining 0.5% in Rome LTH. In April 2012, we acquired the interest of Cornerstone Private Equity Fund Operating Partnership, LP and the Cirrus Group affiliates in Rome LTH for a total payment of approximately $5.2 million. As of September 30, 2012 and December 31, 2011, we owned a 100% and 75% limited partnership interest in Rome LTH. We began consolidating Rome LTH when we obtained control of this venture in April 2012.

On August 31, 2012, through wholly-owned subsidiaries, we invested approximately $49.5 million, to acquire an 80% interest in the Leah Bay joint venture from non-related parties. The joint venture owns four memory care facilities in Illinois and Texas (the “Leah Bay Portfolio”). The acquisition was funded with proceeds from our public offerings and mortgage loans from unaffiliated lenders.

As of September 30, 2012, the Leah Bay purchase price allocation to the fair value of assets acquired and liabilities assumed is not yet complete. Accounting and valuation activity that could impact the opening balance estimates shown below is expected to be complete by the end of 2012.

The following summary provides the allocation of the acquired assets and liabilities as of the acquisition date. We have accounted for the acquisitions as business combinations under U.S. GAAP. Under business combination accounting, the assets and liabilities of the acquired properties were recorded as of the acquisition date, at their respective fair values, and consolidated in our financial statements. The detail of the purchase price of the acquired property is set forth below:

	Forestview Manor		Sunrise of Allentown		Rome LTACH Project		Leah Bay Portfolio
Land	$	1,320,000	$	1,000,000	$	—	$	2,481,000
Buildings & improvements		6,803,000		6,395,000		17,800,000		41,364,000
Site improvements		1,040,000		350,000		—		1,539,000
Furniture & fixtures		350,000		220,000		—		1,199,000
Intangible assets		960,000		590,000		1,100,000		2,904,000
Goodwill		277,000		445,000		—		—
Real estate acquisition	$	10,750,000		9,000,000		18,900,000		49,487,000
Acquisition expenses	$	160,000	$	142,000	$	182,000	$	908,000

The following unaudited pro forma information for the three and nine months ended September 30, 2012 and 2011 have been prepared to reflect the incremental effect of the Forestview Manor, Sunrise of Allentown, Rome LTACH Project and the Leah Bay Portfolio acquisitions as if such acquisitions had occurred on January 1, 2011. We have not adjusted the proforma information for any items that may be directly attributable to the business combination or non-recurring in nature.

	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011
Revenues	$	14,532,000		$	13,040,000
Net (loss) income	$	(81,000	)	$	114,000
Basic and diluted net (loss) income per common share attributable to common stockholders	$	(0.01	)	$	0.01

	Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Revenues	$	42,920,000	$	38,496,000
Net income (loss)	$	1,341,000	$	(3,752,000	)
Basic and diluted net income (loss) per common share attributable to common stockholders	$	0.10	$	(0.30	)

The Company recorded revenues of $1.0 million and $2.8 million for the three and nine months ended September 30, 2011, respectively, and net loss of $0.3 million and $0.5 million for the three and nine months ended September 30, 2011 and revenues of $1.1 million and $3.1 million for the three and nine months ended September 30, 2012, respectively, and net income of $0.2 million and $0.1 million for the three and nine months ended September 30, 2012, respectively, for Forestview Manor.

The Company recorded revenues of $0.7 million and $1.3 million for the three and nine months ended September 30, 2011, respectively, and net loss of $0.1 million and $0.5 million for the three and nine months ended September 30, 2011 and revenues of $0.9 million and $2.4 million for the three and nine months ended September 30, 2012, respectively, and net loss of $0.1 million and $0.3 million for the three and nine months ended September 30, 2012, respectively, for Sunrise of Allentown.

The Company recorded revenues of $0.6 million and $1.2 million for the three and nine months ended September 30, 2012 and net income of $0.2 million and $1.5 million for the three and nine months ended September 30, 2012, respectively, for the Rome LTACH Project. Prior to April of 2012, the Rome LTACH Project was being accounted for under the equity method.

The Company recorded revenues of $1.1 million and a net loss of $0.9 million for the three and nine months ended September 30, 2012, for the Leah Bay Portfolio.