EXHIBIT 99.11

COMPLETE APPRAISAL OF REAL PROPERTY

Inn at Willow Glen
1185 Pedro Street
San Jose, Santa Clara County, California
95126

IN A SELF-CONTAINED APPRAISAL REPORT

As of 10/15/03

Prepared For:
ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, CA 92626

Prepared By:
Cushman & Wakefield of Oregon, Inc.
Senior Housing/Healthcare Industry Group
Valuation Services, Advisory Group
200 S.W. Market Street, Suite 200
Portland, OR 97201

C&W File ID: 03-34001-9383

VALUATION SERVICES ADVISORY GROUP

Cushman & Wakefield of Oregon, Inc.

200 S.W. Market Street, Suite 200

Portland, OR 97201

503-279-1734 Tel

503-279-1791 Fax

WWW.CWVAS.COM

October 27, 2003

Douglas Armstrong
Senior Vice President and General Counsel
ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, CA 92626

Re:	Complete Appraisal of Real Property
	In a Self-Contained Report
	Inn at Willow Glen
	1185 Pedro Street
	San Jose, Santa Clara County, California 95126
	C&W File ID: 03-34001-9383

Dear Mr. Armstrong:

In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our complete appraisal report (the “Appraisal”) on the property referenced above.

The value opinion reported below is qualified by certain assumptions, limiting conditions, certifications, and definitions, which are set forth in the Appraisal. We particularly call your attention to the following extraordinary assumptions and hypothetical conditions:

Extraordinary Assumptions:	This Appraisal assumes that the property continues to meet the licensing requirements of the State of California as a residential care facility for the elderly and continues to remain in compliance with applicable life safety codes.
	This Appraisal employs no other Extraordinary Assumptions.
Hypothetical Conditions:	This Appraisal employs no Hypothetical Conditions.

This Appraisal was prepared for ARV Assisted Living, Inc. and is intended for use in connection with the proxy solicitation/tender offer filed with the SEC and distributed to the holders of limited partnership interests in American Retirement Villas Properties II (a California limited partnership) (the “Partnership”). Unless we otherwise consent in writing, the Appraisal cannot be used other than in the material related to proxy solicitation/tender offer referred to above for any purpose. If the Appraisal is submitted to a lender or investor with the prior approval of C&W, Inc., such party should consider this Appraisal as only one factor together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in the Appraisal.

Douglas Armstrong
ARV Assisted Living, Inc.
October 27, 2003
Page 2

This Appraisal has been prepared in accordance with our interpretation of FIRREA, the regulations of OCC, and the Uniform Standards of Professional Appraisal Practice (USPAP) including the competency provision, as promulgated by the Appraisal Institute.

The property consists of an existing 83 unit, 83 bed assisted living facility known as Inn at Willow Glen. The facility contains 47,691 ± square feet of gross floor area and is situated on a 1.59 acre site. The facility occupancy was 95 percent at the time of inspection.

The property is owned by T.M. Chang, Yoshie F. Chang and Tobias H.T. Chang (lessor), as successor in interest to San Jose Investors Company, a California limited partnership (by assignment). The lessee is American Retirement Villas Properties II (a California limited partnership), as successor in interest to Retirement Inn of San Jose, a California limited partnership (by assignment). We note that there was an Assignment and Assumption of Lease Agreement between Retirement Inn of San Jose, as Assignor and American Retirement Villas Properties II (a California limited partnership), as Assignee, dated as of April 11, 1989.

The improvement lease originally commenced November 23, 1977 and was for a base term of 20 years, expiring November 22, 1997. The lease has provisions for two, ten-year option periods. The lease is currently in the first option period. The lease is structured on a pure triple net lease where the lessee pays all expenses of operation. The lease on the improvements is paid quarterly (per year) at a rate of $10,000 per quarter plus “bonus” rent that is calculated by multiplying $40,000 times the percentage which annual rents exceed 1981 (base year) rents. We are assuming that the lease expense shown in the financial statements represents the actual improvements lease payments. This is a net lease with all operating expenses including property taxes and utilities to be paid by the lessee. A copy of the lease is included in the Addenda. Therefore, the scope of this assignment involves estimating the leasehold estate in the subject property.

The property has been appraised as a going concern which assumes a fair sale, which includes the transfer of a valid operating license, adequate working capital, an assembled workforce, and the transfer of all business assets necessary for the operation of a licensed assisted living facility.

The property was inspected by and the report was prepared by Mark E. Bryant under the supervision of John M. Vissotzky, MAI. This Appraisal employs only the Income Capitalization Approach as we are valuing the leasehold position in the property. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Therefore, we have not employed the Cost Approach or the Sales Comparison Approach to develop an opinion of market value.

VALUATION SERVICES ADVISORY GROUP

Douglas Armstrong
ARV Assisted Living, Inc.
October 27, 2003
Page 3

Based on our Complete Appraisal as defined by the Uniform Standards of Professional Appraisal Practice, we have developed an opinion that the going concern market value of the leasehold estate of the referenced property, subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, “as-is” on October 15, 2003 was:

ONE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS

$1,950,000

The above value estimate is inclusive of $100,000 in personal property and $1,950,000 in business value as an integral part of the going concern.

Based on recent market transactions, as well as discussions with market participants, a sale of the subject property at the above-stated opinion of market value would have required an exposure time of approximately twelve (12) months. Furthermore, a marketing period of approximately twelve (12) months is currently warranted for the subject property.

This letter is invalid as an opinion of value if detached from the Appraisal, which contains the text, exhibits, and Addenda.

Respectfully submitted,

CUSHMAN & WAKEFIELD OF OREGON, INC.

Mark E. Bryant	John M. Vissotzky, MAI
Managing Director	Managing Director
Senior Housing/Healthcare Industry Group
California Certified General Appraiser
License No. AG02572
mark_bryant@cushwake.com
503-279-1734 Office Direct
503-279-1791 Fax

VALUATION SERVICES ADVISORY GROUP

SUMMARY OF SALIENT FACTS

Common Property Name:	Inn at Willow Glen
Location:	1185 Pedro Street San Jose, Santa Clara County, California 95126
	The site is situated at the northeast corner of Pedro Street and Northrup Street.
Property Description:	The property consists of a one-building, two-story assisted living facility containing 83 units and 83 beds on a 1.59-acre parcel of land.
Assessor’s Parcel Number:	264-05-066
Interest Appraised:	Leasehold Estate
Date of Value:	October 15, 2003
Date of Inspection:	October 15, 2003
Ownership:	The property is currently owned by T.M. Chang, Yoshie F. Chang and Tobias H.T. Chang, as successor in interest to San Jose Investors Company, a California limited partnership (by assignment) who lease the improvements to American Retirement Villas Properties II (a California limited partnership), as successor in interest to Retirement Inn of San Jose, a California limited partnership (by assignment).
Occupancy:	Current physical occupancy is 95 percent
Current Property Taxes
Total Assessment:	$5,062,530
2002-2003 Property Taxes:	$67,895
Highest and Best Use
If Vacant:	Multi-family residential property developed to the highest density possible
As Improved:	As it is currently utilized as an assisted living facility.

VALUATION SERVICES ADVISORY GROUP

SUMMARY OF SALIENT FACTS

Site & Improvements
Zoning:	R-4
Land Area:	1.59 acres or 69,260± square feet
Number of Units:	83
Number of Beds:	83
Number of Stories:	Two
Number of Buildings:	One
Year Built:	1977
Type of Construction:	Wood frame
Gross Building Area:	47,691 square feet
Parking:	36 spaces (0.43 Unit).
VALUE INDICATORS
Cost Approach:	N/A
Sales Comparison Approach:	N/A
Income Capitalization Approach
Discounted Cash Flow
Projection Period:	Five years
Holding Period:	14 years
Terminal Capitalization Rate:	13.50%
Indicated Value:	$1,950,000
FINAL VALUE CONCLUSION
Going Concern Market Value As-Is Leasehold:	$1,950,000
Exposure Time:	Under 12 months
Marketing Time:	Under 12 months

VALUATION SERVICES ADVISORY GROUP

SUMMARY OF SALIENT FACTS

Extraordinary Assumptions and Hypothetical Conditions

Extraordinary Assumptions

An extraordinary assumption is defined by the Uniform Standards of Professional Appraisal Practice (2001 Edition, The Appraisal Foundation, page 2) as “an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.”

This Appraisal assumes that the property continues to meet the licensing requirements of the State of California as a residential care facility for the elderly and continues to remain in compliance with applicable life safety codes.

This Appraisal employs no other Extraordinary Assumptions.

Hypothetical Conditions

A hypothetical condition is defined by the Uniform Standards of Professional Appraisal Practice (2001 Edition, The Appraisal Foundation, page 3) as “that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.”

This Appraisal employs no Hypothetical Conditions.

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SUBJECT PHOTOGRAPHS

Front view of property

East elevation of property

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SUBJECT PHOTOGRAPHS

West elevation of property

Common area

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SUBJECT PHOTOGRAPHS

Common area

Typical hallway

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SUBJECT PHOTOGRAPHS

Typical resident unit

Outdoor courtyard

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SUBJECT PHOTOGRAPHS

Parking lot

View east on Pedro Street

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SUBJECT PHOTOGRAPHS

View west on Pedro Street

View north on Northrup Street

VALUATION SERVICES ADVISORY GROUP

TABLE OF CONTENTS

INTRODUCTION	1
SILICON VALLEY REGIONAL ANALYSIS	7
LOCAL AREA ANALYSIS	24
SENIOR LIVING INDUSTRY OVERVIEW	26
MANAGEMENT AND OPERATIONS OVERVIEW	34
COMPETITIVE MARKET ANALYSIS	36
SITE DESCRIPTION	55
IMPROVEMENTS DESCRIPTION	57
REAL PROPERTY TAXES AND ASSESSMENTS	62
ZONING	63
HIGHEST AND BEST USE	64
VALUATION PROCESS	66
INCOME CAPITALIZATION APPROACH	68
RECONCILIATION AND FINAL VALUE OPINION	90
ASSUMPTIONS AND LIMITING CONDITIONS	92
CERTIFICATION OF APPRAISAL	95
ADDENDA	96

VALUATION SERVICES	ADVISORY GROUP

INTRODUCTION

Identification of Property

Common Property Name:	Inn at Willow Glen
Location:	1185 Pedro Street San Jose, Santa Clara County, California 95126
	The site is situated at the northeast corner of Pedro Street and Northrup Street.
Property Description:	The property consists of a one-building, two-story assisted living facility containing 83 units and 83 beds situated on a 1.59 acre site.
Assessor’s Parcel Number:	264-05-066

Property Ownership and Recent History

Current Ownership:	The property is owned by T.M. Chang, Yoshie F. Chang and Tobias H.T. Chang (lessor), as successor in interest to San Jose Investors Company, a California limited partnership (by assignment).
	The lessee is American Retirement Villas Properties II (a California limited partnership), as successor in interest to Retirement Inn of San Jose, a California limited partnership (by assignment). We note that there was an Assignment and Assumption of Lease Agreement between Retirement Inn of San Jose, as Assignor and American Retirement Villas Properties II (a California limited partnership), as Assignee, dated as of April 11, 1989.
	The improvement lease originally commenced November 23, 1977 and was for a base term of 20 years, expiring November 22, 1997. The lease has provisions for two, ten-year option periods. The lease is currently in the first option period. The lease is structured on a pure triple net lease where the lessee pays all expenses of operation. The lease on the improvements is paid quarterly (per year) at a rate of $10,000 per quarter plus “bonus” rent that is calculated by multiplying $40,000 times the percentage which annual rents exceed 1981 (base year) rents. We are assuming that the lease expense shown in the financial statements represents the actual improvements lease payments.
Sale History:	The property has not transferred within the past three years to the best of our knowledge.
Current Disposition:	American Retirement Villas Properties II (a California limited partnership) is involved in a proxy/solicitation offer filed with the SEC that involves this property.

VALUATION SERVICES 1 ADVISORY GROUP

INTRODUCTION

Intended Use and Users of the Appraisal

This Appraisal is intended to provide an opinion of the going concern market value of the leasehold interest in the property for the use of ARV Assisted Living, Inc. in connection with the proxy solicitation/tender offer filed with the SEC and distributed to the holders of the limited partnership interests in the Partnership. All other uses and users are unintended.

Dates of Inspection and Valuation

The value conclusion reported herein is as of October 15, 2003. The property was inspected on October 15, 2003 by Mark E. Bryant. John M. Vissotzky, MAI has reviewed the report and did not inspect the property.

Property Rights Appraised

Leasehold interest

Scope of the Appraisal

This is a Complete Appraisal presented in a self-contained report, intended to comply with the reporting requirements set forth under the Uniform Standards of Professional Appraisal Practice (USPAP) for a Self-Contained Appraisal Report. In addition, the report was also prepared to conform to the requirements of the Code of Professional Ethics of the Appraisal Institute and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Title XI Regulations.

In preparation of this Appraisal, we investigated a wide array of vacant land sales in the subject’s submarket, improved sales from a local, regional or national basis, analyzed rental data, and considered the input of buyers, sellers, brokers, property developers and public officials. Additionally, we investigated the general regional economy as well as the specifics of the local area of the subject.

The scope of this Appraisal required collecting primary and secondary data relative to the subject property. The depth of the analysis is intended to be appropriate in relation to the significance of the appraisal issues as presented herein. The data has been analyzed and confirmed with sources believed to be reliable, whenever possible, leading to the value conclusions set forth in this report. In the context of completing this report, we have made a physical inspection of the subject property and the comparables. The valuation process involved utilizing market-derived and supported techniques and procedures considered appropriate to the assignment.

The scope of this analysis, and the analysis contained herein, is reflective of “the amount and type of information researched and the analysis applied in an assignment” (2001 USPAP, page 4). This Appraisal employs only the Income Capitalization Approach as we are valuing the leasehold position in the property. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Therefore, we have not employed the Cost Approach or the Sales Comparison Approach to develop an opinion of market value.

Definitions of Value, Interest Appraised and Other Terms

The following definitions of pertinent terms are taken from the Dictionary of Real Estate Appraisal, Third Edition (1993), published by the Appraisal Institute, as well as other sources.

VALUATION SERVICES 2 ADVISORY GROUP

INTRODUCTION

Market Value

Market value is one of the central concepts of the appraisal practice. Market value is differentiated from other types of value in that it is created by the collective patterns of the market. A current economic definition agreed upon by agencies that regulate federal financial institutions in the United States of America follows, taken from the glossary of the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation:

The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1.	Buyer and seller are typically motivated;
2.	Both parties are well informed or well advised, and acting in what they consider their own best interests;
3.	A reasonable time is allowed for exposure in the open market;
4.	Payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and
5.	The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Fee Simple Estate

Absolute ownership unencumbered by any other interest or estate, subject to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

Going Concern Value

The value created by a proven property operation; considered as a separate entity to be valued with a specific business establishment. Common going-concern appraisals are conducted for assisted living facilities, nursing homes, hotels and motels, restaurants, bowling alleys, industrial enterprises, retail stores, and similar property uses. For these property types, the physical real estate assets are integral parts of an ongoing business such that the market values from the land and building are difficult, if not impossible, to segregate from the total value of the ongoing business.

Leased Fee Estate

An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the leased fee are specified by contract terms contained within the lease.

Leasehold Estate

The interest held by the lessee (the tenant or renter) through a lease conveying the rights of use and occupancy for a stated term under certain conditions.

VALUATION SERVICES 3 ADVISORY GROUP

INTRODUCTION

Market Rent

The rental income that a property would most probably command on the open market, indicated by the current rents paid and asked for comparable space as of the date of appraisal.

Cash Equivalent

A price expressed in terms of cash, as distinguished from a price expressed totally or partly in terms of the face amounts of notes or other securities that cannot be sold at their face amounts.

Exposure Time and Marketing Time

Exposure Time

Under Paragraph 3 of the Definition of Market Value, the value opinion presumes that “A reasonable time is allowed for exposure in the open market”. Exposure time is defined as the length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at the market value on the effective date of the appraisal. Exposure time is presumed to precede the effective date of the appraisal.

The reasonable exposure period is a function of price, time and use. It is not an isolated opinion of time alone. Exposure time is different for various types of real estate and under various market conditions. As noted above, exposure time is always presumed to precede the effective date of appraisal. It is the length of time the property would have been offered prior to a hypothetical market value sale on the effective date of appraisal. It is a retrospective opinion based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient and reasonable time but adequate, sufficient and a reasonable marketing effort. Exposure time and conclusion of value are therefore interrelated.

Based on discussions with market participants and information gathered during the sales verification process, a reasonable exposure time for the subject property at the value concluded within this report would have been approximately twelve (12) months. This assumes an active and professional marketing plan would have been employed by the current operator.

VALUATION SERVICES 4 ADVISORY GROUP

INTRODUCTION

Marketing Time

Marketing time is an opinion of the time that might be required to sell a real property interest at the appraised value. Marketing time is presumed to start on the effective date of the appraisal. (Marketing time is subsequent to the effective date of the appraisal and exposure time is presumed to precede the effective date of the appraisal). The opinion of marketing time uses some of the same data analyzed in the process of estimating reasonable exposure time and it is not intended to be a prediction of a date of sale.

We believe, based on the assumptions employed in our analysis, as well as our selection of investment parameters for the subject, that our value conclusion represents a price achievable within twelve (12) months.

Legal Description

The subject site is identified by the Santa Clara County assessor as Assessor’s Parcel Number 264-05-066. The legal description for the subject is located in the Addenda.

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REGIONAL MAP

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SILICON VALLEY REGIONAL ANALYSIS

Introduction

The short- and long-term value of real estate is influenced by a variety of factors and forces that interact within a given region. Regional analysis serves to identify those forces that affect property value, and the role they play within the region. The four primary forces that influence real property value include environmental characteristics, governmental forces, social factors, and economic trends. These forces determine the supply and demand for real property, which, in turn, affect market value.

The subject property is located in San Jose, California within Santa Clara County, which is part of the greater San Francisco-Oakland-San Jose Consolidated Metropolitan Statistical Area (CMSA).

Regional Economic and Demographic Analysis

Regional Area Overview

Silicon Valley encompasses 1,740 square miles of land and is comprised of San Mateo County and Santa Clara County. San Mateo County is essentially the peninsula formed by San Francisco Bay and the Pacific Ocean (save for the City and County of San Francisco at its northern tip). Santa Clara County lies at the south of San Francisco Bay and is much larger geographically than San Mateo County. Silicon Valley is part of the greater San Francisco-Oakland-San Jose Consolidated Metropolitan Statistical Area (CMSA) which includes the Primary Metropolitan Statistical Areas (PMSAs) of San Francisco (Marin, San Francisco and San Mateo Counties), San Jose (Santa Clara County), Santa Cruz (Santa Cruz County), Oakland (Alameda and Contra Costa Counties), Vallejo-Fairfield-Napa (Napa and Solano Counties) and Santa Rosa (Sonoma County).

Silicon Valley’s Northern California location on the San Francisco Bay provides for a fairly mild climate year round. The topography of the area varies from beaches to mountains, providing for myriad microclimates and recreational venues.

VALUATION SERVICES 7 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

SAN FRANCISCO CMSA COMPONENT COUNTIES

Source: Cushman & Wakefield Analytics

Silicon Valley has long been the high-tech center of the nation and despite the technology fallout that has beset the region, remains so. Increased business investment in computers and related equipment was the driving force of the Silicon Valley economy throughout the late 1990s into the 2000s. Rising stock valuations, an influx of venture capital, investment in hardware and software in anticipation of Y2K, and the continuous need by businesses to enhance productivity, fueled the growth of Silicon Valley’s industries. As business investment has waned, however, so has the Silicon Valley’s prosperity.

The Silicon Valley’s technology sector accounts for nearly a quarter of its employment base. As a growing economy that lacks significant diversity across industrial sectors, Silicon Valley tends to exhibit more volatile growth than do more economically diversified markets.

Demographic Profile

Both Santa Clara and San Mateo counties are considered highly desirable but expensive places to live. The median age of Silicon Valley’s population is 35.1 years, the same as the median age of the nation’s top 100 largest metropolitan areas (Top 100) and just slightly below the U.S. median age of 35.6 years. Its population’s share of the age cohort under 24 years is also slightly below that of the Top 100 at 33 percent versus 35 percent, but its prime wage-earning age cohort of 35-59 years is somewhat greater at 36 versus 35 percent.

Silicon Valley’s labor pool is highly skilled and highly compensated, resulting in a very high per capita income. Its average household income is 62 percent above the Top 100 average, and its median household income is an even more impressive 68 percent above the Top 100 median.

Silicon Valley has a vastly higher percentage of households in the $100,000 plus annual income cohort – 45 percent versus 20 percent across the Top 100. At the lower end of the income

VALUATION SERVICES 8 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

strata with annual incomes under $50,000, Silicon Valley’s share of households is half that of the Top 100 – 23 percent versus 46 percent.

DEMOGRAPHIC CHARACTERISTICS
Silicon Valley vs. Top 100 MSAs and U.S.
2002 Estimates

		Silicon			Top 100
Characteristic		Valley			Metro Areas*			U.S.
Median Age (years)			35.1			35.1			35.6
Average Annual Household Income		$	117,800		$	72,700		$	64,300
Median Annual Household Income		$	92,100		$	54,700		$	47,500
Households by Annual Income Level:
	<$25,000		9.1	%		21.0	%		25.3	%
	$25,000 to $49,999		13.5	%		25.1	%		27.3	%
	$50,000 to $74,999		16.7	%		20.8	%		20.2	%
	$75,000 to $99,999		15.6	%		13.4	%		11.8	%
	$100,000 plus		45.1	%		19.7	%		15.5	%
Education Breakdown:
	< High School		18.0	%		21.8	%		24.1	%
	High School Graduate		19.6	%		27.8	%		29.8	%
	College < Bachelor Degree		30.9	%		26.5	%		25.4	%
	Bachelor Degree		20.1	%		15.5	%		13.5	%
	Advanced Degree		11.3	%		8.4	%		7.3	%

Source: Claritas, Inc., Cushman & Wakefield Analytics

* The Top 100 Metro Areas are comprised of the 100 largest metropolitan statistical areas within the U.S. in terms of total employment as of 2002.

Silicon Valley’s population breakdown by educational achievement follows a similar pattern to incomes, reflective of the strong correlation between the two demographic factors. The San Francisco Bay Area is home to some of the nation’s most prestigious universities, including Stanford University, University of California (UC) Berkeley and UC San Francisco. Over 31 percent of Silicon Valley’s population has a bachelor or graduate degree, compared to just 24 percent for the Top 100. And, while 50 percent of the Top 100 population has just a high school diploma or less, that figure is a substantially lower 38 percent in Silicon Valley.

Population

Silicon Valley, with a current population of 2.4 million, has significantly lagged the Top 100 in terms of its population growth between 1992 and 2002. Silicon Valley, with an average annual growth rate of 0.8 percent, also grew more slowly than the San Francisco CMSA as a whole. While Silicon Valley briefly exceeded the Top 100’s population growth rate during 1996 and 1997, it has since significantly lagged the Top 100 and indeed saw a decline in population in 2002.

VALUATION SERVICES	9	ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

POPULATION GROWTH BY YEAR
Silicon Valley vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

NOTE: In this Exhibit and all subsequent time-series graphs, the shaded bars indicate the periods of a U.S. economic recession.

Population growth is forecast to be negative once again in 2003, and thereafter to under-perform substantially the Top 100 over the forecast period. Between 2002 to 2007, Silicon Valley’s average population growth rate, at 0.2 percent annually, is expected to be dwarfed by that of both the Top 100 and the CMSA (both 1.1 percent).

ANNUALIZED POPULATION GROWTH BY COUNTY
Silicon Valley vs. San Francisco CMSA Counties
1990 – 2007

								Forecast		Annual Growth
Population (000s)				1992		2002		2007		92-02			02-07
Top 100 Metro Areas					160,017.2		181,966.9		191,733.8		1.3	%		1.1	%
	San Francisco CMSA				6,449.8		7,126.5		7,398.0		1.0	%		0.8	%
			Marin County		235.8		247.6		263.1		0.5	%		1.2	%
			San Francisco County		734.9		764.0		789.2		0.4	%		0.6	%
		Silicon Valley Region			2,194.8		2,386.7		2,414.5		0.8	%		0.2	%
			San Mateo County		662.9		703.2		691.7		0.6	%		-0.3	%
			Santa Clara County		1,531.9		1,683.5		1,722.8		0.9	%		0.5	%
			Alameda County		1,332.2		1,472.3		1,490.2		1.0	%		0.2	%
			Contra Costa County		839.8		992.4		1,070.3		1.7	%		1.5	%
			Santa Cruz County		232.9		253.8		266.1		0.9	%		0.9	%
			Napa County		114.3		130.3		143.1		1.3	%		1.9	%
			Solano County		359.9		411.1		452.1		1.3	%		1.9	%
			Sonoma County		405.2		468.4		509.4		1.5	%		1.7	%

Source: Economy.com, Cushman & Wakefield Analytics

VALUATION SERVICES	10	ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

Silicon Valley’s largest population clusters are along the west shore of San Francisco Bay and east of Interstate 280 within San Mateo County, in the communities of Daly City, Foster City and San Mateo. Within Santa Clara County, Mountain, Sunnyvale, Cupertino, San Jose and Milpitas have the greatest population density. The lowest population concentrations are along the coastal ranges of San Mateo County and the hills to the east of Santa Clara County.

POPULATION PER SQUARE MILE BY ZIP CODE
Silicon Valley
2002

Source: Claritas, Inc., Cushman & Wakefield Analytics

Households

As Silicon Valley’s population growth has trailed the Top 100, likewise its household formation rate has significantly lagged the Top 100 over the past 10 years. Between 1992 and 2002, growth in Silicon Valley’s number of households averaged 0.6 percent annually, somewhat below the CMSA’s 0.9 percent annual growth rate and well below the Top 100 growth rate of 1.3 percent annually. Household growth was negative in 2002 as out-migration from Silicon Valley increased.

Worsening net out-migration is an indicator of an economy not yet in recovery. Migration originally turned negative in 1999 when the economy was still strong, but a lack of housing

VALUATION SERVICES 11 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

affordability drove many out of Silicon Valley. Then, as job losses mounted, out-migration accelerated. The magnitude of net out-migration is indicative of the depth of Silicon Valley’s recession. Until the jobless rate begins to subside and narrow the gap with other western metro areas, out-migration will continue at a rapid clip.

Growth in household formations for Silicon Valley between 2002 and 2007 is forecast at a meager 0.5 percent – above its population growth rate, but significantly less than the projected rate of 1.1 percent for the CMSA and 1.3 percent for the Top 100.

HOUSEHOLD GROWTH BY YEAR
Silicon Valley vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

Income

In 2002, the median household income in Silicon Valley was $92,100. This figure is a staggering 68 and 94 percent higher than the respective median incomes for the Top 100 and the U.S., respectively. Between 1992 and 2002, Silicon Valley’s 4.5 percent average annual growth in median household income far exceeded the Top 100 average annual growth of 3.7 percent. Broken down by county, Santa Clara County’s average annual growth rate was 4.2 percent, and the average annual growth in median household income for San Mateo County was an even stronger strong 5.3 percent.

Through 2007, median household income growth in Silicon Valley is expected to slow considerably to 2.7 percent, with San Mateo County forecast for 3.4 percent and Santa Clara County expected to average annual increases of just 2.3 percent. By comparison, the median household income for the Top 100 is forecast to average roughly 2.7 percent annual growth.

Silicon Valley remains the most affluent region in the Bay Area. The highest income households are generally located to the south and west of Interstate 280 and south and east of Interstate 680. No ZIP code areas in Silicon Valley have a median household income of less than $50,000, and there are but a few in the $50,000 to $75,000 income cohort, with those predominantly located in north, central and east San Jose.

VALUATION SERVICES 12 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

MEDIAN HOUSEHOLD INCOME DISTRIBUTION BY ZIP CODE
Silicon Valley
2002

Source: Claritas, Inc., Cushman & Wakefield Analytics

Regional Economic Overview

Silicon Valley remains in recession. Employment continues to fall and the jobless rate hit a record high in January 2003. Employment in the critical electronics manufacturing and information services industries continues to fall, with continued negative spillover effects on professional and business services. Construction activity is also beginning to falter. Average real wages among Silicon Valley’s manufacturers have fallen for over one year, as has the average workweek. House prices are falling once again and housing inventories on the market are rising.

Silicon Valley’s workforce continues to shrink. It has fallen by over 11 percent from its peak in late 2000, an extraordinary loss of 152,000 jobs. The downturn has been so severe that it generated the first annual decline in population since World War II. The economy’s rise was so fast and the downturn so sharp that given a projected steady growth rate beginning in 2004, it will be more than a decade before the previous peak is reached again.

VALUATION SERVICES 13 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

Improving indicators remain elusive, but retailers are no longer paring staff, indicating some stability in personal income and consumer spending. Similarly, employment in financial services is no longer declining. Also, leisure and hospitality industry payrolls have remained level for the past year, a good indicator of stable business travel to the area. Indeed, the local hotel industry is considering ways to help fund an expansion of San Jose’s downtown convention center. Thus, the worst of the multiplier effects of the tech downturn may be diminishing. Yet hiring in healthcare has gone flat, which was one of the few industries that had expanded over the past two years.

While Silicon Valley’s economic turnaround is clearly not evident yet, some sources of growth are emerging. Biotechnology, for example, has one of the more positive outlooks for the San Mateo County economy. Indicative of the outlook is a doubling of Genentech’s stock price, with most of the gain following FDA approvals of several of their experimental drugs. More importantly, however, are a number of IPOs announced or venture capital placements made with several Bay Area biotech firms. They include a stock offering by Exelixis in South San Francisco worth an estimated $95 million, and a $100 million private placement with CV Therapeutics in the San Jose metro area. The industry is historically volatile, going through periods of funding drought and excess, and through periods of successful drug approvals. Indicative of this volatility is the closing of Millennium Pharmaceuticals’s South San Francisco operation, where 210 were employed, to concentrate its operations in Massachusetts.

Venture funding is not limited solely to biotech, however, as Visto Corporation, a maker of mobile email software located in Redwood City, garnered over $50 million in venture funding in first quarter 2003. But this has not stanched the employment cutbacks in computer and electronic manufacturing in the valley. Information services employment, however, has nearly leveled off.

The need to replace an aging stock of computers and electronic equipment generates some optimism that Silicon Valley’s tech industries will see moderate growth next year. Already, consumer spending on electronic equipment fueled a rise in new orders for semiconductors late last year. The trend is far from solid, however, as global chip sales fell in three of the four months ending in March 2003, resulting in lackluster orders for the fabrication equipment made or designed in Silicon Valley. Furthermore, private research and development spending among local tech firms has been cut this year, as cost savings become critical to the bottom line.

Software and tech services will likely lead Silicon Valley’s rebound. Current examples include the remake of Hewlett-Packard into a service-based firm, the non-stop expansion of Internet- retailer eBay, and the potential move into online entertainment by Apple Computer. But Silicon Valley’s true growth driver, technology innovation, will be slow to turn around until venture capital placement halts the slide that continued through first quarter 2003. One possible new generator of local innovation, however, may be research dollars from the defense and homeland security departments.

Silicon Valley’s near-term outlook remains weak with no substantial turnaround in employment until well into 2004. Office and industrial property markets, thus, will also remain weak for another year at least. Further risk to residential property markets is also possible as sales prices are faltering again, and supply currently exceeds demand. Rising interest rates can be expected to add further downside pressure.

Longer term, the economy is not expected to expand at a rate above the Top 100 average until 2005. This makes Silicon Valley an underperforming region until it is able to pull out of its current slump towards the latter part of the decade.

VALUATION SERVICES 14 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

Silicon Valley will continue to be a volatile economy, driven by cycles of innovation and investment. Longer-term, Silicon Valley will benefit from its extremely well educated workforce, the basic research undertaken at its universities and corporate labs, and its still deep sources of investment capital.

Gross Product

Silicon Valley enjoyed a 10-year period of astounding 8.7 percent average annual growth in its gross product, compared to 3.8 percent for the Top 100, with phenomenal peaks in 1999 and 2000 of 18.6 and 25.9 percent, respectively. During 2002, Silicon Valley’s real gross product experienced negative 2.3 percent growth, and the region’s growth in gross product is anticipated to be zero during 2003. Over the five-year forecast period of 2002 to 2007, gross product is expected to grow at a 3.4 percent annual rate, exceeding somewhat the forecasted Top 100 rate of 3.0 percent.

REAL GROSS PRODUCT GROWTH BY YEAR
Silicon Valley vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

Employment Trends

Silicon Valley’s employment base is far less diversified than the U.S. overall. High-tech employment accounts for nearly one-fourth of all employment within Silicon Valley, compared to about four percent across the Top 100. The Valley is significantly more concentrated in Manufacturing (18 versus 10 percent) and Professional and Business Services (19 versus 14 percent) than the Top 100. Both of those sectors locally have substantial high-tech components.

VALUATION SERVICES 15 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

EMPLOYMENT BY SECTOR
Silicon Valley vs. Top 100
2002

Source: Economy.com, Cushman & Wakefield Analytics

Compared to the Top 100, Silicon Valley is relatively less weighted in the sectors of Government (10 versus 15 percent), Finance, Insurance and Real Estate (five versus seven percent) and Trade, Transportation and Utilities (17 versus 20 percent). Over the past year, the only sectors to see employment growth has been Education and Health Services, and Government, which increased by 3.8 percent and 3.0 percent, respectively. Information, Professional and Business Services, and Manufacturing all saw double-digit declines in employment over the course of 2002.

Among the San Francisco CMSA’s counties, Silicon Valley has by far the largest share of total employment (37 percent) and realized the greatest increase in total employment between 1992 and 2002 of over 173,000 jobs (edging out the Oakland PMSA’s 172,000 jobs). Silicon Valley is also expected to capture the largest share of new job creations between 2002 and 2007 of 54,000 jobs, followed the Oakland PMSA with 53,000 jobs.

TOTAL EMPLOYMENT BY COUNTY
San Francisco CMSA
2002

Source: Economy.com, Cushman & Wakefield Analytics

VALUATION SERVICES 16 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

Between 1992 and 2002, Silicon Valley’s total employment increased at a 1.5 percent average annual rate, significantly below the Top 100 rate of 1.9 percent. More recently, total employment has turned negative. Total employment is not forecast to recover to its pre-recession level until the next decade. Beginning in 2005, Silicon Valley employment growth is forecast to grow at 2.0 percent annually through 2007, on par with the Top 100.

TOTAL EMPLOYMENT GROWTH AND UNEMPLOYMENT RATE BY YEAR
Silicon Valley vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

Over most of the past decade, Silicon Valley’s unemployment rate had been substantially lower than that across the Top 100. However, with the 2001 economic recession and the corresponding loss of many of the region’s jobs, Silicon Valley’s unemployment rate has lost its advantage over the Top 100. The jobless rate jumped from its low point of 1.9 percent in 2000 to 7.5 percent in 2002. The unemployment rate is projected to peak at 7.8 percent during 2003 and then recede to 5.7 percent by 2007 – by which time the Top 100 unemployment rate is expected to decline to 5.0 percent.

Silicon Valley is home to 12 of the 2002 Fortune 500 corporations: Hewlett-Packard Company (ranked 14), Intel (58), Cisco Systems (95), Solectron Corporation (158), Sun Microsystems Inc. (155), Oracle Corporation (190), Agilent Technologies Inc. (292), Calpine Corporation (246), Applied Materials Inc. (327), Apple Computer Inc. (300), CNF Inc. (347), and Maxtor Corporation (421). Following is a table of Silicon Valley’s largest non-government employers.

VALUATION SERVICES 17 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

TOP NON-GOVERNMENT EMPLOYERS
Silicon Valley
2002

	Number of MSA
Employer	Employees
United Airlines		17,700
Cisco Systems		13,000
Hewlett-Packard Company/Agilent		10,000
Stanford University		10,000
Kaiser Permanente		9,100
Oracle Corporation		7,400
Intel Corporation		7,000
Lockheed Martin Missiles & Space		6,700
Applied Materials, Inc.		6,200
Solectron Corporation		6,000
Sanmina		6,000
A T & T		5,200
UCSF Stanford Health Care		4,200
Genentech		3,700
Apple Computer, Inc.		3,000
3 Com Corporation		3,000
Advanced Micro Devices		2,900
Raychem Corporation		2,900
Visa USA/International		2,700
Mills Peninsula Health Services		2,500

Source: Economy.com, Cushman & Wakefield Analytics

In the early 1990s, Silicon Valley and San Francisco had roughly the same number of office workers – roughly 200,000 each. As of year-end 2002, while San Francisco still had 195,000, Silicon Valley had nearly 330,000. Between 1992 and 2002, Silicon Valley’s office-using employment grew at an average annual rate of 4.0 percent, while San Francisco averaged only 0.2 percent. By comparison, office-using employment for the Top 100 grew at a 2.7 percent rate. Silicon Valley’s surge in office-using employment that took place during the 1990s has ended, however, Recently, Silicon Valley has seen two consecutive years of declining office-using employment, including a staggering 11.6 percent decrease during 2002.

Office-using employment is expected to drop another 2.7 percent during 2003, before reversing the negative trend between 2004 and 2007. Over the forecast period, office-using employment is forecast to rise at an annual 2.3 percent rate through 2007 – outperforming the CMSA’s 1.9 percent growth rate and slightly outpacing the 2.1 percent rate of the Top 100.

VALUATION SERVICES 18 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

TOTAL OFFICE-USING EMPLOYMENT GROWTH BY YEAR
Silicon Valley vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

The South Bay’s largest concentrations of office-using employment are located in the cities of San Jose, Milpitas, Santa Clara, Sunnyvale, Cupertino, Mountain View and Palo Alto. Moving up the Peninsula, the largest concentrations office-using employees in San Mateo County are found in Redwood Shores, Menlo Park, Redwood City, Foster City and San Mateo.

VALUATION SERVICES 19 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

OFFICE-USING EMPLOYMENT PER SQUARE MILE BY ZIP CODE
Silicon Valley
2002

Source: Claritas, Inc., Cushman & Wakefield Analytics

Transportation Network

As in much of the rest of the Bay Area, Silicon Valley freeways are a challenge during commute hours. Interstates 280, 680, 880, U.S. 101, Highways 85, 87 and 92 are the primary freeways serving Silicon Valley. Also, a number of expressways criss-cross Santa Clara County. From the East Bay, the San Mateo Bridge (Highway 92) feeds commuters into San Mateo County and the Dumbarton Bridge feeds commuters into northern Santa Clara County.

Silicon Valley’s public transportation system consists of commuter trains, buses and light rail. The rails for the CalTrain commuter train extend 77 miles from Gilroy in southern Santa Clara County to the South of Market district in San Francisco. CalTrain has an average daily ridership of over 31,000.

The Santa Clara Valley Transportation Authority’s (VTA) light rail system has two lines – an east-west line extending from Downtown Mountain View to Milpitas at Interstate 880, and a north-south line from Baypoint near Highway 237 to south San Jose’s Santa Teresa District. Weekday ridership averages 30,000. San Mateo County has no light rail system.

VALUATION SERVICES 20 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

Separate bus systems run in each county – Santa Clara County’s run by VTA and San Mateo County’s run by SamTrans. VTA average weekday bus boardings are approximately 145,000. SamTrans, serving a significantly smaller population, averages 58,000 weekday boardings.

The Bay Area Rapid Transit System (BART), a high-speed rail system serving predominantly Alameda and Contra Costa County commuters heading into San Francisco, has recently extended into northern San Mateo County and to San Francisco International Airport. BART is also planning expansion into Santa Clara County from Fremont in Alameda County.

Located within the geography of San Mateo County, San Francisco International Airport (SFO), which opened its new International Terminal in 2000, was the 19^th busiest airport in the world for the year 2002 with 31.4 million arrivals and departures. SFO is negotiating to add runways to fuel future growth, but the plan is stalled due to environmental concerns of adding more landfill to San Francisco Bay.

San Jose International Airport (SJC) handled 11.7 million passengers during fiscal 2002 through its existing 31 gates. SJC has won approval for a 40-gate expansion that is expected to greatly improve air transport in and out of Silicon Valley.

Quality of Life/Amenities

Major Attractions and Amenities

Silicon Valley is an area with many unique characteristics. Its topographic features include valleys, mountains, ocean, bay, and lakes. It also has a wide variety of development ranging from urban high-rise, suburban mid-rise, industrial, residential, and agricultural land to natural and undeveloped open space.

A variety of venues include San Jose’s Tech Museum, the Winchester Mystery House, and the Rosicrucian Egyptian Museum. Paramount’s Great America is a prominent theme park in Santa Clara. Santa Cruz Beach & Boardwalk is about an hour away. The valley’s warm summers make San Jose’s Raging Waters, the Bay Area’s largest water theme park, a very popular destination.

Perhaps one of the valley’s best amenities is its proximity to San Francisco. The Wine Country in Napa and Sonoma Counties are also only about a two-hour drive from the south bay. Monterey, Carmel and Big Sur are about an hour drive, and Lake Tahoe and Yosemite National Park are roughly four hours from Silicon Valley.

Silicon Valley is home to the San Jose Sharks professional hockey team. In addition, Santa Clara County is often mentioned when the Oakland A’s start talking about moving the baseball team. The headquarters and practice facilities for the San Francisco 49ers are located in the city of Santa Clara.

Education

The San Francisco Bay Area is home to numerous institutions of higher learning. The large number of world-class educational and research facilities – more than 35 colleges and universities – positively impacts the entire Bay Area economy. Silicon Valley’s most prestigious university is Stanford University in Palo Alto, but the region is also well served by San Jose State, College of San Mateo, Santa Clara University, University of California Santa Cruz and University of California Berkeley.

VALUATION SERVICES 21 ADVISORY GROUP

SILICON VALLEY REGIONAL ANALYSIS

MAJOR COLLEGES/UNIVERSITIES
Silicon Valley
2001

	Full/Part Time
College/University	Enrollment
San Jose State University		50,400
Mission College		17,300
DeAnza College		15,100
Stanford University		14,200
Evergreen Valley College		12,200
College of San Mateo		11,900

Source: San Francisco Business Times Book of Lists, Cushman & Wakefield Analytics

Medical Facilities

Silicon Valley has a comprehensive healthcare network. The area’s major healthcare facilities include the Stanford Medical Center, Santa Clara Valley Medical Center, Kaiser Permanente (3 hospitals), Regional Medical Center of San Jose, El Camino Hospital, Sequoia Hospital and VA Palo Alto.

Regional Summary

Silicon Valley’s near-term economic outlook remains dim. It is expected to limp along for another year before measurable improvement is seen. The local economy’s lack of diversity maintains its volatility and dependence upon capital investment. As long as corporate profits remain weak, business investment is expected to remain lackluster. Furthermore, technology exports, which are crucial to the region’s economic health, will be sluggish until the global economies show marked improvement.

Silicon Valley’s moderate climate and attractive quality-of-life factors, however, are expected to continue attracting top talent to the region – at least those who can afford its high cost of living and housing costs. Its first-class educational institutions will continue to seed the region with tech-savvy graduates. Silicon Valley still maintains the highest share of nationwide venture capital investments. Silicon Valley’s substantial biotechnology industry remains strong and has attracted venture capital in the wake of the dotcom bust. Research related to anti-bioterrorism may provide an additional boost to these firms.

Longer term, innovation and R&D are expected to revive the local economy and to bring its performance on par with that of the nation’s top 100 metropolitan areas. When the national and global economies eventually rebound, capital investment would likely surge, stimulating Silicon Valley’s tech manufacturing base. As computer software becomes more sophisticated, more powerful computers will be required to run the software, boosting investment in computers. Finally, defense and homeland security spending are expected to bolster R&D in the valley.

Silicon Valley is expected to underperform the Top 100. Given the region’s high cost of living and housing costs, its population growth and household formation rates are both expected to lag the Top 100. Furthermore, with the overall weakness in the local, national and global economies, employment growth is also expected to trail the Top 100. Indicative of Silicon Valley’s high productivity, however, the region’s growth in gross product is forecast to slightly exceed that of the Top 100 through 2007.

VALUATION SERVICES 22 ADVISORY GROUP

LOCAL AREA MAP

VALUATION SERVICES 23 ADVISORY GROUP

LOCAL AREA ANALYSIS

Location

The subject is located in the south central area of San Jose, approximately two miles south of the downtown core. The boundaries of the local area are considered to be Willow Street to the south, Meridian Avenue to the west, San Carlos Street to the north and the Guadalupe Expressway to the east.

Access

The primary access routes serving the local area include Meridian Avenue and Lincoln Avenue which both course north and south through the district. Interstate 280 travels east-west through the local area and located two blocks north of the subject. A full interchange is located three blocks west of the subject at the Meridian Avenue interchange. Interstate 280 provides access to all of the metropolitan freeways and cities located along the San Francisco Peninsula. Overall, access to the local area is considered very good, including that to medical facilities for the elderly residents in the local area.

Character

The local area is characterized by a mixture of single- and multi-family, retail commercial, professional office, and public. The majority of existing development located in the area is moderate to higher density residential in nature with retail and commercial uses found along the major streets in the area.

The local area is considered to be in a mature stage of its life with the availability of a few remaining vacant sites providing for limited new development opportunities. The local area is considered to be approximately 95 percent developed at this time.

Nearby and Adjacent Land Uses

West:	Apartments
North:	Apartments
East:	Single-family residences
South:	Swim and Racquet Club

Proximity to Health Care

The primary medical facility serving the local area is the Santa Clara Medical Center which is approximately two miles west of the subject property. The travel time to this facility is less than 10 minutes from the subject.

Special Hazards or Adverse Influences

There are no hazards or adverse influences present in the local area which have a detrimental influence on properties.

Land Use Changes

We are not aware of, at this time, of any planned improvements or demolitions in the neighborhood that would impact the subject.

VALUATION SERVICES 24 ADVISORY GROUP

LOCAL AREA ANALYSIS

Conclusion

The subject is located in an established area of San Jose. The primary influence of the local area is residential oriented. The immediate area is in a mature stage of its life and there is limited land available for future development. Future development will likely consist of redevelopment of existing sites with commercial uses located along Lincoln Avenue and Reece Street, and residential on others. Services requisite to support a senior living complex such as the subject are within close proximity. After reviewing the local area data, a positive effect on real estate values in the neighborhood is anticipated for the foreseeable future. This positive effect also extends to the subject property.

VALUATION SERVICES 25 ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

Independent Living

Congregate care or independent living units are designed for seniors who pay for some congregate services (i.e. housekeeping, transportation, meals, etc.) as part of the monthly fee or rental rate, and who require little, if any, assistance with activities of daily living. Residents of congregate/independent living units may have some health care-type services provided to them by in-house staff or an outside agency. Congregate units may be part of a congregate residence, a property that provides congregate and assisted living services, or a continuing care retirement community.

The retirement housing industry overall has matured considerably over the past two decades as the elderly population has increased and seniors have come to accept and seek alternatives to remaining in their homes. Retirement housing has expanded beyond the early dominance of life care and continuing care retirement communities (CCRCs). These communities, which typically included independent living and nursing care on a single campus, typically charged residents an entrance fee and a monthly fee. Rental retirement communities represented a major area of growth in the 1980s, fueled in part by the Department of Housing and Urban Development’s 221(d)(4) Retirement Service Center mortgage insurance program. Although the program no longer exists, the rental model is still a popular option for newly developed retirement communities. In addition, a small but definite increase in the number of cooperatives and condominiums has taken place, particularly among communities targeting a more affluent segment of the elderly population.

The retirement community of today is a smaller complex consisting of 100 to 200 independent living units versus the 200 to 300 independent living units that characterized the early CCRCs. In some cases, the communities are being developed in stages to avoid some of the up front risk associated with initial lease-up and to allow the facility to be more responsive to the market needs and preferences.

The rental retirement communities of the early 1980s typically offered no nursing care or assistance with daily living. These facilities were designed to provide hospitality services such as meals, housekeeping, transportation, and activities. These facilities met with slow lease-up rates and exceedingly high turnover due to their inability to meet changing resident needs.

Independent living communities, particularly rental communities, are least heavily monitored and governed by state regulations. In some states, this has resulted in a fair degree of flexibility in providing additional services.

It has become quite clear over the past ten years that the retirement communities are attracting an older and somewhat frailer population than originally anticipated. The average age of entrance into independent living units is between the late 70’s and early 80’s, rather than the late 60’s and early 70’s originally anticipated. As a result of the change in resident profile as well as the experience gained in the 1980s, it is clear that some form of health care or supportive services for the frail elderly is a necessary component of a retirement community.

Assisted Living

The emergence of assisted living as an option in the long-term care continuum for elders in the 1990’s represented the convergence of social, political, economic and treatment trends. Prior to this, most dependent seniors had only two long-term care options: be cared for by a family member or enter a nursing home. Today, as the number of elders and their frailty increases, these options have proven inadequate for seniors, their families and society. For many elderly, nursing homes are overly intensive and expensive. Therefore, for the segment of seniors with moderate to intermediate care needs, assisted living has become a favored form of long-term care.

VALUATION SERVICES 26 ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

The Assisted Living Facilities Association of America (ALFAA) defines assisted living as a special combination of housing, personalized supportive services and health care designed to respond to the individual needs of those who require help in activities of daily living, but do not need the skilled medical care provided in a nursing home. Assisted living care promotes the maximum independence of dignity for each resident and encourages the involvement of a resident’s family, neighbors and friends.

Although industry proponents are clear as to the general characteristics and philosophy of an assisted living community, there is no national agreement on the details and legal definition of assisted living. As the assisted living industry becomes increasingly standardized, and as the industry expands, it can expect to acquire a defined legal status with respect to licensure, reimbursement and financing.

Some states have enacted laws using the term assisted living, however, in most jurisdictions licensure statutes combine a variety of terms and programs. In referring to residential housing and services, most state licensing laws use terms such as: rest homes, homes for the aged, supportive living facilities, residential care facilities, board and care homes, elderly group homes, congregate care housing and senior housing.

Assisted living programs are located in a variety of environments. They may be housed in newly constructed freestanding facilities, retrofitted buildings such as former hotels, units attached to nursing homes, senior apartments with services, units within CCRC developments and congregate care units. Whatever the environment, there must be private, or at a minimum companion suite residential living space.

Typically, a resident will have a compact studio or efficiency apartment. Living space will almost always include a private bathroom. The living space may or may not include a kitchen or kitchenette, washer and dryer, a living room or storage space. Economics generally dictate the size of the private living space, which can range from a small one-room efficiency of less than 300 square feet to a large one-bedroom apartment of 750 square feet.

Assisted living residences also provide for a considerable amount of common space for the residents to share. Newer assisted living facilities generally allocate from 30 percent to 40 percent of all gross square footage of the building to common area. Such space includes dining rooms, libraries, lounges, activity centers, kitchens and laundry rooms. The size of an assisted living facility depends on many variables including market forces and site constraints. Most newer freestanding facilities typically fall into the range of 40 to 80 units.

The level of service in assisted living facilities varies. However, within a broad range, there are certain basic services offered:

• 24-hour a day on-site supervision or access to an emergency call system;

• Two or three meals and regular snacks are available;

• Light housekeeping and laundry services are available;

• Residents are entitled to some level of personal care each day from the facility staff;

• A personalized health care plan delineates how health care needs may be addressed; and;

• Activity, social service and transportation resources are made available.

Because it is a goal of assisted living to enable residents to age- in- place, the level of personal care, food services or health care may be adjusted upwards as needed. However, arranging services to allow aging- in- place can be difficult if residents need increasing amounts of nursing care and the states limit or prohibit skilled nursing care in assisted living facilities. With this in

VALUATION SERVICES 27

SENIOR LIVING INDUSTRY OVERVIEW

mind, it should be noted that there is a growing trend by states to extend the scope of assisted living services far into the long-term care continuum.

The typical resident of assisted living is 83 years old, is a woman and is single or widowed. Today’s assisted living residents have care needs and characteristics that were associated with patients in intermediate care facility nursing homes in the 1970’s and 1980’s. Senior care needs are gauged by the extent to which an individual requires regular assistance with ongoing activities of daily living (ADLs) such as bathing, eating, walking, toileting and dressing. In order to determine that there is an ADL dependency, a clinician must determine that an individual cannot safely or routinely perform a specific activity unless he or she has help. Unless such help is provided, the individual is at risk of not meeting an essential daily need.

While the number of ADLs with which a person needs help is used clinically as a measure of dependency, having such dependency does not mean that medical care is required. In assisted living facilities, residents generally have at least one ADL dependency, and it is not uncommon that they have as many as three or four.

Assisted living fees are typically structured around a fixed monthly amount that covers both housing and services. The monthly amount generally includes a base level of personal care with additional personal care charged separately. There also may be entrance fees, typically equivalent to the first and last month’s rent. Assisted living facilities do not require the large endowment type entrance fees required in some CCRCs.

Occupancy Patterns

Occupancy data compiled by the American Seniors Housing Association for the various senior housing community types (congregate, assisted and CCRCs) has been summarized in the following table.

Median Occupancy Rates
For Profit Senior Housing Facilities

Property Type	1995			1996			1997			1998			1999			2000			2001			2002
Independent		95.0	%		98.0	%		96.0	%		98.0	%		95.0	%		95.0	%		94.5	%		93.1	%
Assisted Living		97.0	%		95.0	%		95.0	%		92.0	%		94.0	%		90.0	%		93.8	%		94.2	%
CCRCs		95.0	%		95.0	%		94.0	%		95.0	%		93.2	%		93.2	%		93.1	%		92.4	%
All Communities		95.0	%		96.0	%		95.0	%		95.0	%		93.7	%		93.7	%		94.0	%		93.5	%

Source: American Seniors Housing Association

As seen, assisted living facilities in 2002 exhibited the highest occupancy rate of any of the property types. This was in contrast to the other property types that saw median occupancy rates decline slightly over 2001.

The average length of stay in a senior facility also varies as to the property type. In the following table is average length of stay data compiled by the American Seniors Housing Association.

VALUATION SERVICES 28 ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

Average Resident Length of Stay
(Stated In Months)

Property Type		1998		1999		2000		2001		2002
Independent			45.5		43.4		38.1		43.1		33.4
Assisted Living			24.8		18.5		20.5		28.0		17.7
All CCRCs
	Independent		61.0		45.4		59.8		37.3		37.0
	Assisted Living		16.0		18.2		16.8		12.8		12.0
	Nursing		20.0		23.2		18.6		9.0		9.0

Source: American Seniors Housing Association

As shown, the average length of stay in an assisted living facility in 2002 was 17.7 months and which reflected a notable decline over the length of stay average for 2001. Both assisted and independent living facilities showed declines, while CCRCs maintained generally similar occupancies over 2001. Much of the reasoning for the decline is from increased lateral movement of residents between existing facilities caused by such factors as facility operations (management, staffing, etc.), as well as foreclosures and closings of poorly operated facilities.

Absorption Trends

Net absorption data compiled by the American Seniors Housing Association (ASHA) for senior housing facilities is summarized in the following table.

2001 National Average Net Absorption Rates
Senior Housing Facilities

	1st		Months		Months		2nd		3rd
Property Type	Month		2 - 6		7 - 12		Year		Year
Independent		25.5		6.7		3.7		2.8		2.9
Assisted Living		11.7		5.2		2.9		2.2		5.3
CCRCs		37.4		18.9		9.0		5.5		4.1
All Communities		28.4		10.3		5.2		3.5		4.1

Figures based on number of residents
Source: American Seniors Housing Association

VALUATION SERVICES 29 ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

As seen, initial absorption of new residents for all facility types is strong in the first month, then it tapers off during the following months.

California Assisted Living Environment

The California Department of Social Services, Community Care Licensing Division, is the State Agency responsible for approving, monitoring and regulating residential care facilities for the elderly, which provide temporary or long-term, 24-hour non-medical residential care services to the elderly, who are substantially unable to live independently. Resident dependence may be the result of physical or other limitations associated with age, physical or mental disabilities or other factors.

Residential facilities are group living facilities with shared bedrooms for the residents. Services provided typically include three meals daily, recreation, housekeeping, security and personal services. Personal services in general include assistance with bathing and dressing and dispensing of medications.

Regulation of residential care facilities in California is documented by the State Department of Social Services (“Department”), contained in Residential Care Facilities for the Elderly, Title 22, Division 6, Chapter 8. Included in these regulations are application procedures, license requirements, enforcement provisions, continuing requirements, physical environment and health related services. Unless a facility is exempt from licensure as specified in regulatory Section 80007, no adult, firm, partnership, association, corporation, county, city, public agency or other government entity shall operate, establish, manage, conduct or maintain a community care facility without first obtaining a valid license.

General Requirements

The following is an outline of the basic requirements for residential care facilities in the State of California:

Admission

Prior to accepting a resident for care, the facility shall conduct an interview with the applicant and responsible person, perform a pre-admission appraisal, and evaluate a recent medical assessment. The licensee is to complete and maintain individual written admission agreements with all persons admitted to the facility or their designated representatives. The agreement shall specify basic services to be made available, payment provisions, modification conditions, refund conditions, general facility policies, and that the Department or licensing agency has the authority to examine residents’ records. The agreement must also specify conditions under which the agreement may be terminated.

Medical Assessment

Prior to a person’s acceptance as a resident, the licensee shall obtain and keep on file, documentation of a medical assessment, signed by a physician, made within the last year. The medical assessment shall include a physical examination of the resident, documentation of prior medical services and history, and a current medical status. There should be a record of current prescribed medications, identification of physical limitations of the person, and a determination of the person’s ambulatory status. The licensee shall obtain an updated medical assessment when required by the Department.

VALUATION SERVICES	30	ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

Resident Records

A separate record shall be maintained for each resident. The record shall be current and complete and be generally accessible. A current register of all residents in the facility shall be maintained and also kept in a central location.

Personal Rights

Each person shall have personal rights, which include but are not limited to:

• To be accorded dignity in his/her personal relationships with staff, residents, and other persons.

• To be accorded safe, healthful and comfortable accommodations, furnishings and equipment.

• To be free from corporal or unusual punishment, humiliation, intimidation, mental abuse or other actions of a punitive nature which interfere with daily living functions.

• To leave or depart the facility at any time and to not be locked in any room, building, or on the premises by day or night.

• All persons accepted to facilities or their responsible persons, shall be personally advised and given a copy of these rights at admissions.

Incidental Medical and Dental Care

Each facility shall have a plan for incidental medical and dental care. The plan shall encourage routine medical and dental care and provide for assistance in obtaining such care by compliance with the following:

• The licensee shall arrange, or assist in arranging, for medical and dental care appropriate to the condition and needs of the residents.

• The licensee shall provide assistance in meeting necessary medical and dental needs. This includes transportation to the nearest available medical or dental facility.

• There shall be arrangements for separation and care of residents whose illness requires separation from others.

• When residents require prosthetic devices, vision and hearing aids, the staff shall be familiar with the use of these devices, and shall assist the resident with the utilization of them.

• The licensee shall provide for assisting residents with self-administered medications as needed.

• There shall be adequate privacy for first aid treatment of minor injuries and for examination by a physician if necessary.

• If the facility has no medical unit, a complete first aid kit shall be maintained and readily available.

Food Service

Meals on the premises shall be served in one or more dining rooms or similar areas in which the furniture, fixtures and equipment necessary for meal service are provided. Such dining areas shall be located near the kitchen so that food may be served quickly and easily. The dining rooms are to be attractive to promote socialization among the diners. Tray service shall be provided in case of temporary need.

VALUATION SERVICES	31	ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

In facilities with 50 or more residents, providing three meals a day, a full-time employee qualified by formal training or experience shall be responsible for the operation of the food service. If this person is not a dietician, then a provision should be made for regular consultation. The food should be of a good quality.

Personal Accommodations and Services

The facility shall be safe, clean, sanitary and in good repair at all times for the safety and well being of clients, employees and visitors. The facility should be large enough to provide comfortable living accommodations and privacy for the residents, staff and others. There should be common rooms such as living rooms, dining rooms, dens or other activity rooms. Bedrooms shall sleep no more than two clients and be large enough to allow for easy passage and comfortable use of any required client assistance devices. Bedrooms are not to be used as passageways and no room for any other use can double as a bedroom.

Equipment and supplies necessary for personal care and maintenance of adequate hygiene practice shall be readily available to each resident.

Each client is to be provided with a bed in good repair, a chair, a nightstand, a lamp for reading, and adequate closets and drawer space. Clean linen and towels in good repair are to be provided weekly at a minimum, and more often if necessary. Toilets and bathrooms are to be located near the client’s bedrooms. There is to be at least one toilet and sink for each six persons, and at least one tub or shower for each ten persons, with adequate privacy.

A comfortable temperature must be maintained at all times. All windows are to be in good repair and free of insects, dirt and other debris. There should be adequate lighting throughout the facility for the safety and comfort of all persons in the facility.

Personal Services

Licensees shall provide necessary personal assistance and care with activities of daily living including, but not limited to dressing, eating, and bathing.

Activities

The licensee shall ensure that planned recreational activities are provided for the client. These activities include physical activities such as games, sports and exercise, as well as group interaction.

Evaluation Visits

Every licensed community care facility is periodically inspected and evaluated for quality of care. Evaluations are to be conducted at least once a year to ensure the quality of care. The Department shall notify the facility in writing of all deficiencies and shall set a reasonable timeframe for compliance by the facility. Upon a finding of noncompliance, the Department may levy a civil penalty not to exceed $50 per day for each day until the Department finds the facility in compliance. If the facility fails to comply in the allotted time, then the amount collected shall be forfeited to the Department. Reports shall be kept on file in the Department and open to public inspection. A follow up visit is required to determine if the deficiency has been corrected.

Corrective action is taken by the Department when a licensee fails to protect the health, safety and personal rights of individuals in its care, or is unwilling or unable to maintain substantial compliance with licensing regulations.

Enforcement is maintained through:

1.     Fines and civil penalties (vary according to the violation)

2.     Non-compliance office conferences

VALUATION SERVICES	32	ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

3.     Administrative legal actions as follows:

• Denial of applications

• Compliance plans

• Probationary license

• Temporary suspension of license

• Revocation of license

• License and employee exclusions

The Department may suspend or revoke any license on any of the following grounds stipulated in Health and Safety Code Sections 1569.1515(c) and 1569.50:

• The Department may revoke the license of any corporate licensee that has a member of the board of directors, the executive director or an officer who is not eligible for licensure pursuant to regulations.

• Violations of the specifics rules and regulations.

• Aiding, abetting or permitting the violation of the rules and regulations.

• Conduct which is inimical to the health, morals or safety of either an individual in or receiving services from the facility or the people of the State of California.

• The conviction of a licensee, or individuals in contact with residents at any time before or during licensure, of a crime as defined in the regulations.

• Engaging in acts of financial malfeasance concerning the operation of a facility, including, but not limited to, improper use or embezzlement of resident monies and property or fraudulent appropriation for personal gain of facility moneys and property, or willful or negligent failure to provide services for the care of the residents.

When the Department intends to seek revocation of a license, the Department shall notify the licensee of the proposed action and at the same time shall serve such licensee with an accusation. The licensee has a right to a hearing prior to the revocation or suspension of a license, except when an “Immediate Temporary Suspension Order” is written.

The Immediate Temporary Suspension Order temporarily suspends any license prior to any hearing when in the Department’s opinion such action is necessary to protect the residents in the facility from any physical or mental abuse or any other substantial threat to health and safety. When the Department intends to temporarily suspend a license prior to a hearing, the Department shall notify the licensee of the temporary suspension and the effective date thereof and at the same time serve the licensee with an accusation.

For either a revocation or a revocation and temporary suspension action, the Department shall within 15 days of receipt of notice of defense ask the Office of Administrative Hearings to set the matter for hearing.

For a revocation and temporary suspension action, the Department shall ask the Office of Administrative Hearings to hold the hearings as soon as possible but not later than 30 days after receipt of the Notice of Defense.

VALUATION SERVICES	33	ADVISORY GROUP

MANAGEMENT AND OPERATIONS OVERVIEW

Management Overview

The subject is managed by ARV Assisted Living, Inc., (ARV). Inn at Willow Glen was constructed in 1977. There have not been any major renovations to the facility over the past three years. Between 2001 and 2002, however, the roof was replaced and firewalls were installed in order to place non-ambulatory residents in the second floor. Revenues have been stable over the last three years, while expenses have been increasing. The facility’s occupancy has also been stable over this same period. Overall, based on the historical performance of the facility, it appears that ARV is competent to manage the subject property.

Operations Overview

Services

Inn at Willow Glen is designed for assisted living and offers all the services typical of these types of facilities. This facility has been designed as a rental community and provides most services under a fixed monthly rate. All resident contracts are for the term of stay. According to the terms of the agreement, a thirty (30) day written notice is required prior to any increase in fees for additional charges or for increases due to increased cost of operations. Included in the monthly rates are:

• Three meals daily and snacks;

• All utilities except for personal telephone

• Scheduled Transportation;

• Twenty-four (24) hour security and numerous safety features throughout the apartments;

• Weekly housekeeping services;

• Linen services;

• Organized individual and group activities;

In addition to the monthly fee there are optional services available at an additional charge. These services include additional personal care, respite care, guest meals, beauty shop fees and additional transportation fees. There are regularly scheduled health assessments that help determine which level of services each individual patient receives.

Regulations and Health Matters

The facility has a license for a capacity of 120 residential care/assisted living beds and is regulated by the State of California’s Department of Social Services. A copy of the Regulations is posted in a conspicuous place in the facility and the residents acknowledge at the time of entry that the operation of this facility is governed by these regulations. Furthermore, if the licensing entity amends these regulations, the resident and the provider must obey by the amended regulations.

State Monitoring

The State of California conducts annual surveys of licensed residential care/assisted living facilities. The most recent survey for the subject was conducted in May 2003. The survey reported that the facility met all requirements with no serious deficiencies. A new license for the following 12 months was issued for the facility.

Admission Policies

Inn at Willow Glen requires all potential assisted living residents to undergo a health evaluation by a physician before entrance into the facility. The operator has the right to terminate the

VALUATION SERVICES	34	ADVISORY GROUP

MANAGEMENT AND OPERATIONS OVERVIEW

agreement at any time when they feel that the resident’s personal care needs cannot be adequately served by the facility.

There is to be a chart for each resident in assisted living. At the time of admission, a dated and signed medical evaluation, which conforms to the licensing regulations, must be on file. Thereafter, a medical evaluation, which also conforms to licensing regulations, must be made at least every twelve (12) months.

The operator may seek appropriate evaluation and assistance and may arrange for the transfer of a resident to an appropriate and safe location, prior to termination of an admission agreement and without ninety (90) days notice or court review for the following reasons:

• When a resident fails to pay the monthly rent prior to written notice of such absence;

• When the operator feels that the residents mental or physical needs cannot be adequately met by the facility;

• In the event a resident’s behavior poses an imminent risk of death or serious physical injury to himself/herself or to others;

• Breach of contract for any reason by the resident or operator;

• Any prolonged health-related or other absence.

Inn at Willow Glen caters to the full range of needs of seniors requiring assisted living services. The administrator develops and maintains a personalized service plan, which is amended if necessary. Furthermore, the aging-in-place and out-placement policies appear to be reasonable and well implemented. Services at the facility are standard for this type of complex and are in keeping with the residential make-up at the subject.

Marketing

Inn at Willow Glen has a full time marketing director. Marketing personnel are actively involved in the community, as well as with discharge planners for area hospitals. They do not do any telemarketing. Direct mailings, scheduled community events, and networking, on the other hand are a routine part of marketing efforts.

Overall, given the history of the subject, it appears that the marketing efforts are adequate. The subject’s reputation and marketing campaign are considered to be part of the reason behind the current performance at the subject facility.

Conclusion

Overall, based on our inspection of the facility, discussions with some of the personnel and our review of the Policies and Procedures, it is our opinion that the facility is being operated in a competent manner. The facility has been adequately maintained and the residents appear to be content.

VALUATION SERVICES	35	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Primary Market Area

The first step in analyzing the competitive market for the subject is delineating its primary market area (PMA). The primary market area is typically described as either a defined radius around the subject, zip codes, or the subject’s county. In order to delineate the subject’s primary market area, we have interviewed the subject’s Executive Director as well as the competitive properties we have used in our analysis.

Our discussions indicated that approximately 75 percent of the subject’s residents come from the Sunnyvale area. This encompasses an area of approximately three miles. The remaining 25 percent emanate from the greater eastside area. The following chart details the competitors primary market areas (PMA), as well as the estimated percentage that comes from their PMA.

		% of Residents
Name	PMA	from PMA
Lincoln Glen Manor	3.0-5.0 Miles		70	%
Carlton Plaza	3.0-5.0 Miles		75	%
Retirement Inn of Campbell	3.0-5.0 Miles		75	%
Westgate Villa	3.0-5.0 Miles		70	%
Retirement Inn of Sunnyvale	3.0-5.0 Miles		70	%
SUBJECT	3.0-5.0 Miles		75	%

In the case of the subject, we have determined the primary market area to encompass an area of approximately three miles with 75 percent of the residents emanating from this PMA. Although a project like the subject may also attract residents from outside of the area, the geographic market area within a radius of three miles of the subject is considered to represent the primary draw for the subject. As indicated on the chart, the subject’s primary market area of three miles is similar to the comparables.

Most of the marketing directors we interviewed also indicated that adult children in this market are the driving forces in the decision making process for their parents.

Supply/New Construction

Existing Facilities

Because of the subject’s levels of personal care services, and type of amenities, the personal care homes in the market with less than 25 beds do not generally compete directly with the subject. However, the following charts detail the number of assisted living units in the subject’s market area that pose direct and indirect competition to the subject. We note that the table includes facilities located in both the subject’s primary and secondary market area in the San Jose/San Jose area.

VALUATION SERVICES	36	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

MARKET AREA SUPPLY

	Total AL
Name	Units		PMA/SMA*
Lincoln Glen Manor		31	PMA
Carlton Plaza		122	PMA
Retirement Inn of Campbell		72	SMA
Westgate Villa		32	PMA
Retirement Inn of Sunnyvale		123	SMA
SUBJECT		83
Totals		463

* PMA - Primary Market Area; SMA - Secondary Market Area

Proposed Units

Discussions with local providers and planning departments indicated that there are senior facilities planned at this time in the primary market area.

Occupancy Patterns

Industry Statistics

Assisted living facilities generally exhibit the lowest overall occupancy patterns of any of the senior housing community types (congregate, assisted and CCRCs). As was noted in the Senior Housing Industry Overview presented earlier, assisted living facilities indicated an average occupancy rate of 94.2 percent in 2002, which represented an increase from 93.8 percent in 2001. Assisted living facilities in 2002, according to the survey, indicated the highest occupancies of the senior housing property types (independent, assisted and CCRCs).

Competitive Market Area

The senior living facilities we surveyed for our analysis totaled approximately 652 units and/or beds (excluding the subject) and the current available occupancy of those properties was from 70 to 98 percent. We note that due to the limited amount of similar facilities in the immediate area, several of the facilities we investigated are located outside of the defined primary market area of the subject. Only one of the competitive properties surveyed was exhibiting a non-stabilized occupancy, that being Sunnyside Gardens that was at 76 percent occupancy. The lower occupancy rate of this property is not considered reflective of market conditions, but rather property related.

Inn at Willow Glen is noted as having been at 95 percent occupancy at the time of inspection. The subject appears to have a good reputation in the market and this should continue based on its location and living options. A summary showing the competitive properties and their overall average occupancy levels is shown below. Please note that not all of these properties may fall within the defined market area of the subject, however, in the Elderly Demographics section we have defined the total supply in the competitive market area.

VALUATION SERVICES	37	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

		Total AL
Name		Units		Occupancy Level
Lincoln Glen Manor	*		31		100	%
Carlton Plaza	*		122		98	%
Retirement Inn of Campbell	*		72		90	%
Westgate Villa	*		32		92	%
Retirement Inn of Sunnyvale			123		90	%
SUBJECT			83		95	%

* Denotes facilities located in subject’s primary market area.

Again, we note that due to the limited amount of similar facilities in the immediate area, several of the facilities we investigated are located outside of the defined primary market area of the subject. The properties located in the PMA are identified in the above chart.

Rental Rates

Current rental rates for assisted living units in the San Jose area begin at around $2,200 per month for a studio unit and go up to around $4,100 for a two-bedroom unit. For the most part, assisted living facilities provide three meals per day, weekly to bi-weekly housekeeping, weekly laundry, all utilities except telephone and cable TV, activities and transportation. Most assisted living facilities generally include a minimal or base level of personal care services in the base monthly rents. In the subject’s market, charges for additional personal care services vary from a property like the subject that includes no personal care in the base rental rate up to facilities such as Lincoln Glen Manor that includes all personal care services in the monthly rent.

Rent Increases

Most assisted living facilities in the San Jose market area have been instigating annual rent increases over the last several years. Although no specific data was available, discussions with several providers indicated that they have been routinely increasing rents between three and five percent per year. Discussions with the subject’s Executive Director indicated that the facility has also been increasing rents annually over the last several years. The most recent rent increase at the subject was October 1, 2003 and was for a 5.0 percent across the board increase.

Concessions

Rent concessions, or incentives, provide a good indication of the condition, or strength of current market conditions. Rent concessions are generally found in markets exhibiting high vacancy and diminished absorption levels, as well as being used by new projects as a part of their overall marketing programs. At the time of our investigation of the San Jose market area, no specific concessions were noted. Similar to the market, Inn at Willow Glen reported that they are not offering concessions for leasing vacant units. The subject, however, had been offering concessions in 2002 and in the first part of 2003 to alleviate an atypical loss of residents. The new Executive Director has been very instrumental in increasing occupancy to a relatively high level and has not had to utilize concessions for several months. Concession will not likely be part of the market and used only to stimulate any unforeseen vacancies. They should, however, not be of any major significance to a property like the subject.

VALUATION SERVICES	38	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Absorption Trends

An assisted living facility generally exhibits lower initial absorption patterns during the first year of any of the senior housing community types (independent, assisted and CCRCs). Occupancy data compiled by the American Seniors Housing Association (ASHA) was previously summarized in the Assisted Living Industry Overview. The industry data indicated that initial absorption of new residents for all facility types is strong in the first month, then it tapers off dramatically during the following months. Specifically, net absorption averaged 11.7 residents for the Month 1, 5.2 residents for Months 2 – 6, 2.9 residents for Months 7 – 12, and 2.2 residents during Year 2.

Inn at Willow Glen opened in 1977 and has been successful from an occupancy basis. Occupancy at the facility was 89 percent in 2000, 95 percent in 2001, 63 percent in 2002 and year-to-date 2003 annualizes out to 71 percent. We note that the facility was at an occupancy of 95 percent at the time of our inspection.

Senior Demographics

We have evaluated the current and future market potential by analyzing demographic trends and the supply of elderly housing in the facility’s market area. Most market areas for assisted living are considered to comprise up to five miles for the primary area and up to 10 to 20 miles for the secondary area. As was discussed earlier, the primary market area for the subject is considered to effectively encompass an area of approximately three miles and a secondary area of approximately five miles. This assumption was based on our review of the demographics of the area, trends on where most of the competition is being constructed, as well as from discussions with facility’s Executive Director regarding its primary market area.

The demographic data used in our analysis was compiled by Claritas, Inc. The data includes figures for the most recent census year in 2000, 2002 estimates and projections for the year 2007. For purposes of this analysis, we have relied upon the 2002 estimates for current demographic information. Additional state and national information has also been obtained from A Profile of Older Americans: 2001, prepared by the American Association of Retired Persons and the Administration on Aging and based on data from the U.S. Bureau of the Census.

Senior Population/Growth Rates

Population and growth statistics for the subject’s primary and secondary market area is shown in the following chart.

VALUATION SERVICES	39	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Population Statistics

	PMA					SMA
	3 Miles					5 Miles
	Population		%			Population		%
2000
Total *		210,566					614,756
65+		22,095		10.5	%		57,000		9.3	%
75+		11,919		5.7	%		27,269		4.4	%
85+		3,373		1.6	%		7,128		1.2	%
2002	Estimate
Total *		217,534					634,694
65+		22,740		10.5	%		58,839		9.3	%
75+		12,483		5.7	%		28,813		4.5	%
85+		3,719		1.7	%		7,989		1.3	%
2007	Projection
Total *		233,700					680,955
65+		24,611		10.5	%		63,786		9.4	%
75+		13,513		5.8	%		31,087		4.6	%
85+		4,321		1.8	%		9,289		1.4	%

* Total population unadjusted for age

Source: Claritas, Inc.

Growth Rates

	PMA						SMA
	3 Miles						5 Miles
	Total			Annual			Total			Annual
2000-2007
Total *		11.0	%		1.5	%		10.8	%		1.5	%
65+		11.4	%		1.6	%		11.9	%		1.6	%
75+		13.4	%		1.8	%		14.0	%		1.9	%
85+		28.1	%		3.6	%		30.3	%		3.9	%
2000-2002
Total *		3.3	%		1.6	%		3.2	%		1.6	%
65+		2.9	%		1.4	%		3.2	%		1.6	%
75+		4.7	%		2.3	%		5.7	%		2.8	%
85+		10.3	%		5.0	%		12.1	%		5.9	%
2002-2007
Total *		7.4	%		1.4	%		7.3	%		1.4	%
65+		8.2	%		1.6	%		8.4	%		1.6	%
75+		8.3	%		1.6	%		7.9	%		1.5	%
85+		16.2	%		3.0	%		16.3	%		3.1	%

* Total population unadjusted for age

Source: Claritas, Inc.

The population in the subject’s market area indicates a moderate level of demand for senior housing. As seen from the data, the elderly population is growing slowly in terms of absolute numbers and as a percentage of total population. Comparatively, the national average of residents age 65+ constituted 13.0 percent of the total population in 2000 according to Claritas, Inc. The subject’s primary market area indicates a similar aged older population to the national average. Furthermore, the average number of older Americans increased 12.6 percent from 1990 to 2000. These rates are similar than the senior growth seen in the subject’s primary and secondary market areas.

Adult Children Population/Growth Rates

We have also analyzed population trends for what the industry refers to as “adult children”. This segment of the population generally plays a significant role in the placement of a senior in a senior housing facility. This is especially true as many seniors or elderly will relocate to be near their adult children or relatives. This fact is widely recognized by senior housing operators who indicate that market areas exhibiting a higher concentration of adults between the age of 45 and 65 can generally support a much larger supply of senior housing than would be shown through analyzing only the percentage of seniors currently residing in the market area. This situation is more prevalent with regard to higher levels of care such as assisted living and nursing. Population and growth statistics for the subject’s primary market (PMA), as well as the secondary market (SMA) areas for these age groups are shown below

VALUATION SERVICES	40	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Population Statistics - Adult Children

	PMA					SMA
	Population		%			Population		%
2000
Total *		210,566					614,756
45 - 54		24,306		11.5	%		71,385		11.6	%
55 - 59		7,990		3.8	%		23,906		3.9	%
60 - 64		5,938		2.8	%		18,735		3.0	%
2002		2002
Total *		217,534					634,694
45 - 54		25,995		11.9	%		76,569		12.1	%
55 - 59		9,034		4.2	%		26,999		4.3	%
60 - 64		6,434		3.0	%		20,230		3.2	%
2007		2007
Total *		233,700					680,955
45 - 54		29,596		12.7	%		86,895		12.8	%
55 - 59		11,196		4.8	%		33,449		4.9	%
60 - 64		8,360		3.6	%		26,315		3.9	%

* Total population unadjusted for age

Source: Claritas, Inc.

Growth Rates - Adult Children

	PMA						SMA
	Total			Annual			Total			Annual
2000-2007
Total *		11.0	%		1.5	%		10.8	%		1.5	%
45 - 54		21.8	%		2.9	%		21.7	%		2.8	%
55 - 59		40.1	%		4.9	%		39.9	%		4.9	%
60 - 64		40.8	%		5.0	%		40.5	%		5.0	%
2000-2002
Total *		3.3	%		1.6	%		3.2	%		1.6	%
45 - 54		6.9	%		3.4	%		7.3	%		3.6	%
55 - 59		13.1	%		6.3	%		12.9	%		6.3	%
60 - 64		8.4	%		4.1	%		8.0	%		3.9	%
2002-2007
Total *		7.4	%		1.4	%		7.3	%		1.4	%
45 - 54		13.9	%		2.6	%		13.5	%		2.6	%
55 - 59		23.9	%		4.4	%		23.9	%		4.4	%
60 - 64		29.9	%		5.4	%		30.1	%		5.4	%

* Total population unadjusted for age

Source: Claritas, Inc.

As shown, the 45 to 64 age group showed strong growth between 2000 and 2002 in both the primary and secondary market area. Going forward, this age group is forecast to grow at slightly higher rates. Overall, adult children are expected to contribute positively towards living options for the subject and its market area.

Income and Households

In addition to the absolute number and growth of the elderly population, the number of households with appropriate income levels will dictate the actual population available to support the subject. Statistics on income levels are typically presented by the household. We note that in the case of the elderly, most households include at least a single adult. For comparison purposes it is therefore reasonable to utilize the household statistics. Furthermore, the housing cost and income requirements for a second person are significantly less than the primary occupant.

Compared with the local competition, the subject has monthly rates in the middle portion of the range. To afford the various accommodations at the subject, it is estimated that an average annual income of $30,600 would be necessary. We have utilized the average projected revenue per resident of approximately $26,030 as calculated in the Income Capitalization Approach to value. We have assumed that a resident would spend approximately 85 percent of their income on housing, meals and utilities. The balance of the income is required for taxes, insurance, and personal needs. By dividing the $26,030 by 85 percent we arrive at an average income of $30,600, rounded.

Assuming no child subsidy, it is estimated that most residents would require an annual income of $30,600 or more to afford the majority of the accommodations at the subject. We note that this is a conservative assumption given that there are a significant number of elderly who are receiving some form of child subsidy. Furthermore, these indicators are somewhat skewed given that there are recent findings suggesting that the elderly are indeed spending down their assets other than income from their house while residing in senior living facilities. Given the relatively short term of stay anticipated in these facilities, it is reasonable to assume that there would be a greater spend-down of assets. Reference is made to the findings in the State of

VALUATION SERVICES	41	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Seniors Housing Report, 2002 published by the Americans Senior Housing Association, which cites the average length of stay in an assisted living facility to be 18 months.

We also note that the indicated income level does not account for child subsidies or a sale of a home. According to the Claritas report, 75.5 percent of the 65+-householder population owns their own residences in the primary market area and the median housing value was reported to be $473,672 in 2002 . Given that the elderly population typically own their residence free and clear, it is reasonable to assume that there would be additional income available from the sale of a residence which could be amortized over the length of stay. Given the average price of a house and that the majority of the elderly own their houses free and clear, we have assumed that this cash would provide for additional income of say $28,420 annually or a safe rate of return of 6.0 percent of the investment (6.0 percent x $473,672).

After accounting for this ($30,600 - $28,420 = $2,200), we have considered a higher income qualifier of $25,000 to be a reasonable threshold for entrance to the subject facility due to the rent structure at the property. Reference is made to the table below for a summary of household income for the income qualifiers in the $25,000+ range.

Income Statistics

Households With Incomes Greater Than $25,000

	PMA					SMA
	3 Miles					5 Miles
	Total		%			Total		%
2002
* Total 65+		13,860		—			33,343		—
65+		9,445		68.1	%		23,415		70.2	%
75+		4,932		35.6	%		10,447		31.3	%
85+		1,359		9.8	%		2,589		7.8	%
2007
* Total 65+		14,723		—			35,394		—
65+		11,462		77.9	%		27,967		79.0	%
75+		6,161		41.8	%		13,048		36.9	%
85+		1,845		12.5	%		3,575		10.1	%

* Unadjusted for Income

Source: Claritas, Inc.

Income Statistics - Growth Rates

Households With Incomes Greater Than $25,000

	PMA						SMA
	3 Miles						5 Miles
2002-2007	Total			Annual			Total			Annual
* Total 65+		6.2	%		1.2	%		6.2	%		1.2	%
65+		21.4	%		3.9	%		19.4	%		3.6	%
75+		24.9	%		4.6	%		24.9	%		4.5	%
85+		35.8	%		6.3	%		38.1	%		6.7	%

* Unadjusted for Income

Source: Claritas, Inc.

We have found that for households over $25,000 within our primary market area in 2002 (5-mile radius), there were 9,445 for the 65+ age group, 4,932 for the 75+ age group and 1,359 for the 85+ age group. The number of households earning $25,000 or more in the primary market area is anticipated to increase over the next five years at an annual average rate of 3.95 percent for age 65+ households, 4.55 percent per year for age 75+ and 6.31 percent for the age 85+ households. Overall, these figures appear to be consistent with the population trends.

Penetration Rates

A market penetration analysis provides insight into project feasibility. It indicates the ability of a project to lease-up or maintain stabilized operation based on a ratio analysis of other geographic areas (units to population) applied to the subject’s market area. The applicability of the penetration analysis is dependent on the similarities of the area analysis to the subject area. Other factors may cause variations in the penetration rates in an individual market such as competition from similar property types (assisted versus independent living) and unique market demand characteristics (urban versus rural). Given the relatively small number of units and population in an individual area, some divergence from the macro ratio is not unlikely.

VALUATION SERVICES	42	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

In this analysis we have defined the penetration rate to be the percentage of primary market assisted living units to age and income-qualified residents. The 2002 penetration rate is compared to that projected for 2007 based on a supply increase of 25 percent. While there are no firm industry standards for penetration rates, studies across the country suggest that assisted living penetration rates up to 7.0 percent reflect good markets or markets in equilibrium. These percentages have been provided by the MDS Research Company, Inc., who specializes in the market and feasibility analysis of senior housing facilities. Furthermore, a Cushman & Wakefield survey of over 120 senior housing markets across the nation supports acceptable penetration rates of 7.0 percent or below.

Through a review of senior demographics, industry surveys noted above and local market characteristics; we have utilized the following criteria to determine the subject’s market area characteristics.

MARKET CLASSIFICATIONS

	Market Wide			Market Penetration			Rent
Type of Market	Occupancy			Rate			Concessions
Good		90%+		Up to 3.9%			None
Equilibrium		80 – 89	%		4.0% - 6.9	%	Nominal
Saturation		70 – 79	%		7.0% - 9.9	%	Moderate
Saturated (Over Built)	69% and Below			10% and Above			Substantial

Nationally, it is generally anticipated that 60 to 70 percent of residents will come from the primary market area and an additional 15 to 20 percent will be from the secondary market area. The remainder of the residents will generally be from other areas and have relocated to be closer to family members. Primary market residents lost to other market areas generally offset residents coming from the secondary market.

The demand for elderly housing is determined by analyzing the relationship between the supply of senior housing units and the number of qualified residents with adequate income to afford the units. In general, a higher ratio of qualified residents, coupled with a high overall occupancy in the area indicates a strong demand for senior housing. At the same time, a low ratio of units to available households coupled with a high occupancy also indicates a high demand. A low occupancy for the area always indicates a low demand. In other words, the ratio of qualified residents is only one component.

We have calculated the market wide occupancy as of the date of inspection for the subject’s primary market area. The primary competing facilities in the PMA, including the subject, are shown in the following table. We acknowledge that the following summary of properties may not represent all of the facilities in the market area, but are what we believe to be the most competitive to the subject.

VALUATION SERVICES	43	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

MARKET OCCUPANCY CHARACTERISTICS
Primary Market Area

Name	No. Units		Occupancy			Occupied Units
Lincoln Glen Manor		31		100	%		31
Carlton Plaza		122		98	%		120
Retirement Inn of Campbell		72		90	%		65
Westgate Villa		32		92	%		29
Retirement Inn of Sunnyvale		123		90	%		111
SUBJECT		83		95	%		79
Totals		463		94	%		434

These, along with the previous factors shown will be used in our age and income qualified penetration analysis that follows.

Age and Income Qualified Penetration Analysis

In our analysis we have assumed that 75 percent of the residents will come from the primary market area. We note that the population in the area is moderate and that the general population is increasing and the elderly population is on the rise. This suggests that the subject facility will have to place greater weight on attracting residents to move to be close to family members. We note that areas where the younger population is expanding would be more apt to attract residents from outside the community to move to be closer to their children.

Based on the population and income data presented earlier, the following chart shows our market penetration analysis for the subject.

Market Penetration Analysis
Primary Market Area
3 Miles

	2002			2007
65+ Income Qualified Households		9,445			11,462
Average Household Size*		1.64			1.67
Available Persons		15,496			19,160
Total Supply**		463			579
Required Resident % From PMA		75	%		75	%
Required Residents		347			434
Available Persons		15,496			19,160
Indicated Penetration Rate***		2.24	%		2.27	%

* Total 65+ Population Divided by Total 65+ Households

** No. of assisted living units (includes dementia) in primary market area.

   2007 figure accounts for 25 percent new or forecast competition

*** Required Residents divided by Available Persons

Source: Claritas, Inc.

Based on the data, the indicated penetration rate for the subject in 2002 is 2.24 percent. The projected growth of 25 percent in the unit supply in the next five years indicates a penetration rate of 2.27 percent in 2007 .

VALUATION SERVICES	44	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Based on the market classification chart presented earlier, penetration rates of up to 3.9 percent were classified for good markets, 4.0 to 6.9 percent signifies the market is at equilibrium, 7.0 to 9.9 percent indicates a market is nearing saturation and rates above 10 percent signify the market is saturated.

The subject’s indicated penetration rate for 2002 signifies that there is good demand in the primary market area. Even assuming a 25 percent increase in supply over the next five years indicates good demand in the primary market area.

Conclusion

Overall, these findings suggest that there appears to be good demand for the subject facility in the primary market area from both the general population base and the project specific targeting. Based on the current inventory, the subject’s primary market area is not close to reaching a saturation point. Also, the lack of rent concessions is positive. Further, current statistics appear to be leaning towards a greater spend down of assets by the elderly and that traditional income levels may be conservative. With this in mind, and based on the indicated penetration rate of 2.24 percent for the general population, there appears to be an adequate marketplace for the subject facility.

Market Rate Comparisons

On the following pages are data sheets of the facilities we have compared with the subject. A map showing their location follows these pages. All of the facilities are noted as being located in the subject’s primary market area (PMA).

VALUATION SERVICES	45	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No. 1

Lincoln Glen Manor
2671 Plummer Avenue
San Jose, CA

Property Type:	AL
Verification:	Administrator 408-265-3222 21-Oct-03

No. Units		Unit Types	Occupancy
	31	Assisted Living Units		100	%
	0	Alzheimer Units/Beds		0	%
	31	Total Units/Beds		100	%

Rent Schedule

	Assisted Living	Unit Size	Dementia	Unit Size
Unit Description	Monthly Rent Range	Range	Monthly Rent Range	Range
Semi-Private	-- to --	-- to --	-- to --	-- to --
Studio	$3,500 to $3,500	221 to 221	-- to --	-- to --
Studio Alcove	-- to --	-- to --	-- to --	-- to --
One-Bedroom	$4,100 to $4,100	442 to 442	-- to --	-- to --
Two-Bedroom	-- to --	-- to --	-- to --	-- to --
Cottage/Villa	-- to --	-- to --	-- to --	-- to --
2nd Occcupant Rent	$500 to $500		-- to --
Additional Personal Care	$200 to $650		-- to --
Community Fee	$500 to $500

Basic Service Care Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:	0.0
Utilities:	Water/Sewer	x	Additional Personal Care Charges	Ala carte - levels
	Electricity	x
	Cable TV	x
	Telephone	x	Incontinence Care:	No
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Bus		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	N/A
Nursing Staff:	RN

Improvement Description

Year Opened	2001	Common Area	Lobby	X	Dining Room	X
Construction Type	Wood frame		Activity	X	Salon	X
Floors	2		Library	X	Laundry	X
Site Suitability	Good
Construction Quality	Average	Unit Amenities	Call System	X	Fire Detectors	X
Exterior Siding	Stucco		Pvt Bath	X	Shared Bath	X
Roofing	Tile		Kitchenettes	Yes
Building Area (Sq.Ft.)	N/A
Condition	Good	HVAC System	Central/Wall Units
Effective Age (Yrs):	N/A	Covered Parki	No

Remarks: Privately owned and operated congregate facility. Offers independent and assisted living. Independent living portion was completed in 1980 with 31 assisted living units added in 2000. Assisted rates include a base level of personal care. Additional personal care based on three levels.

VALUATION SERVICES	46	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No. 2

Carlton Plaza
380 Branham Lane
San Jose, CA

Property Type:	ALF
Verification:	Executive Director 408-792-1400 21-Oct-03

No. Units		Unit Types	Occupancy
	122	Assisted Living Units		98	%
	0	Alzheimer Units/Beds		0	%
	122	Total Units/Beds		98	%

Rent Schedule

	Assisted Living	Unit Size	Dementia	Unit Size
Unit Description	Monthly Rent Range	Range	Monthly Rent Range	Range
Semi-Private	-- to --	-- to --	-- to --	-- to --
Studio	$3,150 to $3,150	350 to 350	-- to --	-- to --
Studio Alcove	-- to --	-- to --	-- to --	-- to --
One-Bedroom	$3,720 to $3,720	600 to 600	-- to --	-- to --
Two-Bedroom	$5,400 to $5,400	800 to 800	-- to --	-- to --
Cottage/Villa	-- to --	-- to --	-- to --	-- to --
2nd Occcupant Rent	$595 to $595		-- to --
Additional Personal Care	$350 to $1,700		-- to --
Community Fee	$2,500 to $2,500

Basic Service Care Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:	0.0
Utilities:	Water/Sewer	x	Additional Personal Care Charges	Levels
	Electricity	x
	Cable TV	x
	Telephone	x	Incontinence Care:	No
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Bus		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	N/A
Nursing Staff:	RN

Improvement Description

Year Opened	1999	Common Area	Lobby	X	Dining  Room	X
Construction Type	Wood frame		Activity	X	Salon	X
Floors	2		Library	X	Laundry	X
Site Suitability	Good
Construction Quality	Good	Unit Amenities	Call System	X	Fire  Detectors	X
Exterior Siding	Stucco		Pvt Bath	X	Shared  Bath	X
Roofing	Tile		Kitchenettes	Yes
Building Area (Sq.Ft.)	N/A
Condition	Good	HVAC System	Central/Wall Units
Effective Age (Yrs):	N/A	Covered Parki	No
Remarks:	Newer assisted living facility located in San Jose. Offers assisted living services.

VALUATION SERVICES	47	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No. 3

Retirement Inn of Campbell
290 N. San Tomas Aquino Road
Campbell, CA

Property Type:	ALF/ALZ
Verification:	Administrator 480-657-9000 01-May-03

No. Units		Unit Types	Occupancy
	72	Assisted Living Units		90	%
	0	Alzheimer Units/Beds		0	%
	72	Total Units/Beds		90	%

Rent Schedule

		Assisted Living	Unit Size	Dementia	Unit Size
Unit Description		Monthly Rent Range	Range	Monthly Rent Range	Range
Semi-Private		-- to --	-- to --	-- to --	-- to --
Studio	$	2,375 to $2,375	204 to 204	-- to --	-- to --
Studio Alcove	$	2,475 to $2,475	240 to 240	-- to --	-- to --
One-Bedroom	$	3,000 to $3,000	408 to 408	-- to --	-- to --
Two-Bedroom		-- to --	-- to --	-- to --	-- to --
Cottage/Villa		-- to --	-- to --	-- to --	-- to --
2nd Occupant Rent	$	750 to $750		-- to --
Community Fee	$	2,000 to $2,000
Additional Personal Care	$	225 to $1,425		-- to --

Basic Service Care Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:	0.0
Utilities:	Water/Sewer	x	Additional Personal Care Charges	Points
	Electricity	x
	Cable TV	x
	Telephone	x	Incontinence Care:	No
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Bus		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	N/A
Nursing Staff:	RN

Improvement Description

Year Opened	1974	Common Area	Lobby	X		Dining Room	X
Construction Type	Wood Frame		Activity	X		Salon	X
Floors	3		Library	X		Laundry	X
Site Suitability	Good
Construction Quality	Good	Unit Amenities	Call System	X		Fire Detectors	X
Exterior Siding	Wood		Pvt Bath	X		Shared Bath	X
Roofing	Shingles		Kitchenettes	Yes	No
Building Area (Sq.Ft.)	37,113
Condition	Good	HVAC System	Through-Wall Units
Effective Age (Yrs):	0	Covered Parki	No
Site Area (AC)	1.12

Remarks: Older assisted living facility located in Campbell. Facility is managed by ARV. Offers only assisted living. Units are small and facility is dated. Rates include no personal care. Additional personal care base on seven levels beginning at $225 per month.

VALUATION SERVICES	48	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No. 4

Westgate Villa
5425 Mayme Avenue
San Jose, CA

Property Type:	AL
Verification:	Administrator 408-366-6510 14-Oct-03

No. Units		Unit Types	Occupancy
	32	Assisted Living Units		92	%
	0	Alzheimer Units/Beds		0	%
	32	Total Units/Beds		92	%

Rent Schedule

	Assisted Living	Unit Size	Dementia	Unit Size
Unit Description	Monthly Rent Range	Range	Monthly Rent Range	Range
Semi-Private	$2,250 to $2,250	375 to 375	-- to --	-- to --
Studio	$2,975 to $2,975	350 to 350	-- to --	-- to --
Studio Alcove	-- to --	-- to --	-- to --	-- to --
One-Bedroom	-- to --	-- to --	-- to --	-- to --
Two-Bedroom	-- to --	-- to --	-- to --	-- to --
Cottage/Villa	-- to --	-- to --	-- to --	-- to --
2nd Occcupant Rent	-- to --		-- to --
Additional Personal Care	-- to --		-- to --
Community Fee	-- to --

Basic Service Care Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:	0.0
Utilities:	Water/Sewer	x	Additional Personal Care Charges	Points
	Electricity	x
	Cable TV	x
	Telephone	x	Incontinence Care:	No
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Bus		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	N/A
Nursing Staff:	RN

Improvement Description

Year Opened	1976	Common Area	Lobby	X	Dining Room	X
Construction Type	Wood frame		Activity	X	Salon	X
Floors	2		Library	X	Laundry	X
Site Suitability	Average
Construction Quality	Average	Unit Amenities	Call System	X	Fire Detectors	X
Exterior Siding	Wood		Pvt Bath	X	Shared Bath	X
Roofing	Shingles		Kitchenettes	Yes
Building Area (Sq.Ft.)	N/A
Condition	Average	HVAC System	Central
Effective Age (Yrs):	N/A	Covered Parki	No
Remarks:	Smaller assisted living facility that is located in San Jose.Offers only assisted living services.

VALUATION SERVICES	49	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No. 5

Retirement Inn of Sunnyvale
425 E. Remington Drive
Sunnyvale, CA

Property Type:	ALF
Verification:	Administrator 480-657-9000 01-May-03

No. Units		Unit Types	Occupancy
	123	Assisted Living Units		90	%
	0	Alzheimer Units/Beds		0	%
	123	Total Units/Beds		90	%

Rent Schedule

	Assisted Living	Unit Size	Dementia	Unit Size
Unit Description	Monthly Rent Range	Range	Monthly Rent Range	Range
Semi-Private	-- to --	-- to --	-- to --	-- to --
Studio	$2,375 to $2,375	187 to 187	-- to --	-- to --
Studio Alcove	$2,475 to $2,475	220 to 220	-- to --	-- to --
One-Bedroom	$3,000 to $3,000	525 to 525	-- to --	-- to --
Two-Bedroom	-- to --	-- to --	-- to --	-- to --
Cottage/Villa	-- to --	-- to --	-- to --	-- to --
2nd Occcupant Rent	$   750 to $   750		-- to --
Community Fee	$2,000 to $2,000
Additional Personal Care	$   225 to $1,425		-- to --

Basic Service Care Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:	0.0
Utilities:	Water/Sewer	x	Additional Personal Care Charges	Points
	Electricity	x
	Cable TV	x
	Telephone	x	Incontinence Care:	No
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Bus		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	N/A
Nursing Staff:	RN

Improvement Description

Year Opened	1974	Common Area	Lobby	X	Dining Room	X
Construction Type	Wood Frame		Activity	X	Salon	X
Floors	2		Library	X	Laundry	X
Site Suitability	Good
Construction Quality	Average	Unit Amenities	Call System	X	Fire Detectors	X
Exterior Siding	Wood		Pvt Bath	X	Shared Bath	X
Roofing	Shingles		Kitchenettes	Yes No
Building Area (Sq.Ft.)	62,968
Condition	Average	HVAC System	Through-Wall Units
Effective Age (Yrs):	0	Covered Parki	No
Site Area (AC)	2.04

Remarks: Older assisted living facility located in Sunnyvale. Facility is managed by ARV. Offers only assisted living. Units are small and facility is dated. Rates include no personal care. Additional personal care base on seven levels beginning at $225 per month.

VALUATION SERVICES	50	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

RENT COMPARABLE MAP

VALUATION SERVICES	51	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Direct Comparisons

As a basis for comparing the subject’s asking rental rates to the comparables shown in the previous summary, we have classified each comparable in relation to the subject as either similar, inferior, or superior. The overall classification was based on the five primary factors (aside from pricing) used by potential residents in choosing an assisted living facility. These factors are based on our discussions with hundreds of marketing directors and administrators across the nation. The five main factors in order of importance are as follows: reputation for quality care or social status of the facility; age and condition of the building; unit sizes; amenities and planned activities; and location.

Based on our physical inspection of the comparables and the subject and discussions with local market participants, we have classified the comparables as follows:

Rental No.	Comparison To Subject
1	Superior
2	Superior
3	Similar
4	Superior
5	Similar

Rental Rate Analysis

The assisted living rates at Inn at Willow Glen include three meals per day, weekly housekeeping/laundry, utilities (except for telephone and cable TV), activities and scheduled transportation. All personal care at the subject is charged in addition to the base monthly rental rate. Specifically, there are eight base levels or tiers of care services available (based on a point system) that are determined from a monthly need assessment basis. The levels of personal care range from $225 per month (Level A) up to an additional $1,425 per month for Level 7 services. If a resident requires services above Level 7, there is an additional charge of $5.00 per point.

A summary of the asking or street rents for the subject, as well as the rates for the competitive properties are shown below.

Studio Units - Assisted Living

The following chart indicates the asking rates for assisted living studio units at the subject, as well as the comparables:

Studio Units - AL

Facility Name	Unit Size (SF)		Rental Range
Lincoln Glen Manor		221 - 221	$	3,500 - $3,500
Carlton Plaza		350 - 350	$	3,150 - $3,150
Retirement Inn of Campbell		204 - 204	$	2,375 - $2,375
Westgate Villa		350 - 350	$	2,975 - $2,975
Retirement Inn of Sunnyvale		187 - 187	$	2,375 - $2,375
SUBJECT		187 - 187	$	2,375 - $2,375
Range (Excluding Subject)		187 - 350	$	2,375 - $3,500

VALUATION SERVICES	52	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

The comparables indicate a range of asking rates from $2,375 to $3,500 per month based on unit sizes from 187 to 350 square feet. The subject’s asking rate of $2,375 per month is seen as falling within the lower portion of the range from an absolute rent basis, while towards the lower portion on a unit size basis. Lincoln Glen Manor’s asking rate of $3,500 per month is inclusive of all personal care services, while the subject’s asking rate includes no personal care. Carlton Plaza’s rates include a base level of personal care. We note that the average in-place rent for the subject is $1,807 per month. Based on the data, we believe that a rent of $2,000 per month is warranted for the subject’s studio units.

Studio Alcove Units - Assisted Living

The following chart indicates the asking rates for assisted living studio alcove units at the subject, as well as the comparables:

Alcove Units - AL

Facility Name	Unit Size (SF)		Rental Range
Lincoln Glen Manor		221 - 221	$	3,500 - $3,500
Carlton Plaza		350 - 350	$	3,150 - $3,150
Retirement Inn of Campbell		240 - 240	$	2,475 - $2,475
Westgate Villa		350 - 350	$	2,975 - $2,975
Retirement Inn of Sunnyvale		220 - 220	$	2,475 - $2,475
SUBJECT		187 - 220	$	2,375 - $2,475
Range (Excluding Subject)		220 - 350	$	2,475 - $3,500

The comparables indicate a range of asking rates from $2,475 to $3,500 per month based on unit sizes from 220 to 350 square feet. The subject’s asking rate of $2,475 per month is seen as falling within the lower portion of the range from an absolute rent basis, while towards the lower portion on a unit size basis. Lincoln Glen Manor’s asking rate of $3,500 per month is inclusive of all personal care services, while the subject’s rate includes no personal care. Carlton Plaza’s rates include a base level of personal care. We note that the average in-place rent for the subject is $2,340 per month. Based on the data, we believe that a rent of $2,300 per month is warranted for the subject’s studio units.

One-Bedroom Units – Assisted Living

The following chart indicates the asking rates for assisted living one-bedroom units at the subject, as well as the comparables:

One-Bedroom Units - AL

Facility Name	Unit Size (SF)		Rental Range
Lincoln Glen Manor		442 - 442	$	4,100 - $4,100
Carlton Plaza		600 - 600	$	3,720 - $3,720
Retirement Inn of Campbell		408 - 408	$	3,000 - $3,000
Westgate Villa		—  -  —		—    -     —
Retirement Inn of Sunnyvale		525 - 525	$	3,000 - $3,000
SUBJECT		440 - 440	$	3,000 - $3,000
Range (Excluding Subject)		408 - 600	$	3,000 - $4,100

VALUATION SERVICES	53	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

The comparables indicate a range of asking rates from $3,000 to $4,100 per month based on unit sizes from 408 to 600 square feet. The subject’ asking rates of $3,000 per month is seen as falling within the lower portion of the range from an absolute rent basis, while with in the lower portion on a unit size basis. Lincoln Glen Manor’s asking rate of $4,100 per month is inclusive of all personal care services, while the subject’s rate includes no personal care. Carlton Plaza’s rates include a base level of personal care. Again, the subject’s rate includes no personal care as does the Retirement Inn of Sunnyvale. We note that the average in-place rent for the subject is $3,001 per month. Based on the data, we believe that a rent of $3,000 per month is warranted for the subject’s one-bedroom units.

Summary/Conclusion

The subject is one of several competing facilities in the marketplace and offers assisted living units. The subject has maintained generally positive occupancy levels over the last several years. The property did witness some higher than normal attrition in 2002 and early 2003, however, occupancy is again at very positive levels. The subject rates are generally at the lower end of the competition and based on the older age of the facility, they appear to be reflective of market rates. Concessions are not prevalent in the marketplace. The subject’s ability to continue to attract, as well as retain residents suggests that there is a good marketplace for this type of facility and which should continue into the foreseeable future.

VALUATION SERVICES	54	ADVISORY GROUP

SITE DESCRIPTION

Location:	1185 Pedro Street San Jose, Santa Clara County, California 95126 The site is situated at the northeast corner of Pedro Street and Northrup Street.
Shape:	Rectangular
Topography:	Level at street grade
Land Area:	1.5900 gross acres (1.5900 net acres) 69,260 gross square feet (69,260 net square feet)
Frontage, Access, Visibility:	The site has approximately 350 feet of frontage along Remington Drive and approximately 200 feet along Northrup Street.
Soil Conditions:	We did not receive nor review a soil report. However, we assume that the soil’s load-bearing capacity is sufficient to support the existing structures. We did not observe any evidence to the contrary during our physical inspection of the property. Drainage appears to be adequate.
Utilities
Water:	City of San Jose
Sewer:	City of San Jose
Electricity:	Pacific Gas & Electric
Gas:	Pacific Gas & Electric
Telephone:	Pacific Bell
Site Improvements:	The site improvements include asphalt paved parking areas, curbing, signage, landscaping, yard lighting and drainage.
Land Use Restrictions:	We were not given a title report to review. We are not aware of any other easements that would adversely affect the property; however, the determination of adverse easements or encroachments is a legal matter, which is beyond the scope of this appraisal. We recommend that the appropriate experts be consulted, as part of a business decision regarding the subject.
Flood Map:	National Flood Insurance Rate Map Community Panel Number 060352 0001D (12/19/97).
Flood Zone:	FEMA Zone X: Areas determined to be outside the 500 year flood plain.
Wetlands:	We were not given a Wetlands survey. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We did not note any presence of wetlands during our inspection We recommend a wetlands survey by a competent engineering firm.
Seismic Hazard:	The site is not located in a Special Study Zone as established by California’s Alquist-Priolo Geological Hazards Act. The entire Central California region, however, is prone to earthquakes.

VALUATION SERVICES	55	ADVISORY GROUP

SITE DESCRIPTION

Hazardous Substances:	We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the services of a professional engineer for this purpose.
Overall Functionality:	The subject site is functional for the current intended use.

VALUATION SERVICES	56	ADVISORY GROUP

IMPROVEMENTS DESCRIPTION

The following description of improvements is based upon our physical inspection of the improvements along with our discussions with the Executive Director. Please refer to the development plan and floor plans in the Addenda.

The facility was constructed in 1977 and contains 47,691 square feet of gross building area within one, two-story building. The facility has 83 units and a capacity of 83 beds. The unit mix for the development is as follows.

Inn at Willow Glen

	No.		No.		Unit		Total
Description	Units		Beds		Sq.Ft.		Sq.Ft.
Assisted Living
Studio		35		35		187		6,545
Studio Large		41		41		220		9,020
One-Bedroom		7		7		440		3,080
Totals		83		83				18,645

General Description
Year Built:	1977
Number of Buildings:	One
Number of Stories:	Two
Gross Building Area:	47,691 ± square feet
Number of Units:	83
Number of Beds:	83
Design and Functionality:	The building is an assisted living property of wood frame construction. The improvements have above average appeal to prospective assisted living residents.
Amenities:	Indoor and outdoor common areas
Construction Detail
Basic Construction:	Wood frame
Foundation:	Poured reinforced concrete
Framing:	Wood frame (Class D) construction. Interior partitions are wood studs.
Floors:	Concrete slab on main floor, wood truss joists on the second floor.
Exterior Walls:	The exterior facade of the building consists of stucco with wood trim.

VALUATION SERVICES	57	ADVISORY GROUP

IMPROVEMENTS DESCRIPTION

Roof Cover:	Wood truss roofing system covered with a clay tile cover.
Windows:	All windows are single-glazed sliders situated in aluminum frames.
Mechanical Detail
Heating:	Heating and cooling to the building is supplied by roof mounted gas HVAC systems.
Plumbing:	The plumbing system is assumed to be adequate for existing use and in compliance with local law and building codes. The plumbing system is typical of other assisted living properties in the area with a combination of copper supply lines and plastic or cast iron waste and vent lines throughout the improvements. There is one set of common restrooms on each floor. All of the living units have private bathrooms with sink, toilet and step-in (handicap) showers. The remaining plumbing items consist of water service to the kitchen, facility laundry, resident laundry rooms and mechanical rooms. Hot water is provided by natural gas water heaters.
Electrical Service:	Electricity for the building is obtained through low voltage underground power lines. Electrical service appears adequate and is assumed to be in conformance with city codes
Emergency Power:	The building’s electrical system is backed by an emergency generator serving all building safety and support systems.
Elevator Service:	The building contains two, 2,500 pound capacity hydraulic elevators. In addition, there is a separate service elevator providing freight service between both floors.
Fire Protection:	The building is fully protected by an overhead fire sprinklered system. Each unit and the common areas have electric smoke and heat detectors in compliance with local code. The building also has interior stairwells built to fire code. There are an adequate number of fire hydrants in the vicinity of improvements.
Security:	Resident call systems in all of the resident living areas and bathrooms, as well as emergency battery back-up lighting system and corridor handrails on both sides.

VALUATION SERVICES	58	ADVISORY GROUP

IMPROVEMENTS DESCRIPTION

Interior Detail
Layout:	The facility is designed in a rectangular shape with the central courtyard. The main floor common areas include a lobby/lounge, administrative offices, main dining room, kitchen, guest dining room, library, country store, four lounge areas, and a second private courtyard area. There is also a resident laundry room on the main floor. Common areas on the second floor include four lounge areas, activity room, billiards room and the beauty/barber shop. The units on the main floor have patios, while those on the second floor have balconies.
	There are two different sizes for the studio units (standard and alcove). The standard units contain 187 square feet, the alcove units 220 square feet and the one-bedroom units 440 square feet. All of the resident living units are rectangular in shape and have bathrooms with a toilet, sink and roll-in shower stalls, as well as several storage/closet areas. None of the units have kitchenettes. Some of the units have either a patio or balcony. All the units have emergency call systems in the bedroom and bathrooms.
	Overall, the unit sizes and layouts are small for assisted living. Reference is made to the unit and floor plans in the Addenda.
Floor Covering:	The common areas have carpet and vinyl floor coverings. The living units have carpeting and vinyl (bathrooms). All high activity areas have vinyl and/or tile floors (kitchen, shower rooms, etc.).
Walls:	Painted and textured or wallpapered gypsum board. There are various accents through the buildings, including wainscoting, handrails and vinyl accent coverings.
Ceilings:	Painted and textured gypsum board.
Bathrooms:	Each resident unit is equipped with a private bathroom. All bathrooms consist of a walk-in shower with wall-mounted showerhead, toilet and sink and sheet vinyl floor covering, and a combination wall papered gypsum board walls.
Kitchen Facilities:	All meals for the residents are prepared in a central kitchen. Equipment includes a gas range, steel hood with fire suppression system, dishwashers, stainless steel preparation tables, walk-in coolers and walk-in freezers.
Site Improvements
Parking:	There are 36 open surface parking spaces located along the front and northwest portion of the facility, which equates to a ratio of 0.43 per unit. Overall, the parking appears to be adequate for the facility given that most residents do not have a vehicle.

VALUATION SERVICES	59	ADVISORY GROUP

IMPROVEMENTS DESCRIPTION

Onsite Landscaping:	Landscaping consists of grass areas and planted areas with a variety of deciduous trees, flowering plants and shrubbery. There are two common courtyard areas with sitting areas. All landscaped areas are fully irrigated with an automatic irrigation system.
Other:	Other site improvements include signage, trash enclosures, paved asphalt drives, concrete sidewalks and walking paths, as well as fencing.
Summary
Condition:	The subject improvements are in average condition given its competitive position in the marketplace. The improvements appear to have been adequately maintained and provide a relatively good appearance relative to competing buildings within its market.
	Between 2001 and 2002, the roof was replaced and firewalls were installed in order to place non-ambulatory residents in the second floor. The improvements, because of their age, are considered to be somewhat dated with regard to much of the newer assisted living product in the marketplace.
	We did not inspect the roof of the building or make a detailed inspection of the mechanical systems. The appraisers, however, are not qualified to render an opinion as to the adequacy or condition of these components. The client is urged to retain an expert in this field if detailed information is needed about the adequacy and condition of mechanical systems.
Quality:	The overall quality of the improvements is rated as average and is similar to inferior to the competition in the market area.
Layout & Functional Plan:	Average. The facility is considered to be functional for its intended use. There are adequate common areas and units are considered to be comparable too most competing projects within the area. The furnishings and fixtures appear to be of average quality. The living area of the facility equates to around 61 percent of the total area. This equates to around 39 percent of the facility being designated common area, similar to today’s design of around 40 percent to 60 percent common area.
Year Built:	1977
Effective Age:	26 years
Expected Economic Life:	50 years
Remaining Economic Life:	24 years

VALUATION SERVICES	60	ADVISORY GROUP

IMPROVEMENTS DESCRIPTION

Americans With Disabilities Act

The Americans With Disabilities Act (ADA) became effective January 26, 1992. We have not made, nor are we qualified by training to make, a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey and a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have not been provided with the results of a survey, we did not analyze the results of possible non-compliance.

Hazardous Substances

We are not aware of any potentially hazardous materials (such as formaldehyde foam insulation, asbestos insulation, radon gas emitting materials, or other potentially hazardous materials), which may have been used in the construction of the improvements. However, we are not qualified to detect such materials and urge the client to employ an expert in the field to determine if such hazardous materials are thought to exist.

VALUATION SERVICES	61	ADVISORY GROUP

REAL PROPERTY TAXES AND ASSESSMENTS

Taxes are levied against all real property in this locale for the purpose of providing funding for the various municipalities. The amount of ad valorem taxes is determined by the current assessed value for the property in conjunction with the total combined tax rate for the municipalities. The property is subject to the taxing jurisdiction of Santa Clara County. The assessors’ parcel identification number is 264-05-066.

Under the provisions of Article XIIIA of the California Tax and Revenue Code, properties are assessed their market value as of March 1, 1975, the base year lien date. This value may be increased only 2.0 percent per year, with few exceptions. Events such as a transfer of ownership, or significant new construction will trigger a reassessment of the property. The county assessor usually accepts the sale price, or the cost of improvements, in calculating assessed value. Assessed values are usually poor indicators of actual market value and are useful only to estimate effective tax rates.

The 2002-2003 fiscal tax year is the most recent year for both assessed value and tax information for the subject. This data is shown below.

PROPERTY ASSESSMENT/TAX DATA

	2002-2003
Assessor’s Market Value:
Land	$	1,241,595
Improvements		3,820,935
Personal Property		0
Assessor’s Market Value:	$	5,062,530
Equalization/Assessment Ratio		100.00	%
Assessed Value	$	5,062,530
Tax Rate ($/$1,000 AV)		13.4112
Total Property Taxes	$	67,894.50
Building Area		47,691
Property Taxes per Square Foot	$	1.42
No. of Units		83
Property Taxes per Unit	$	818.01

We did not do any direct comparison with other senior housing facilities in the market area. As noted previously, assessed values are usually poor indicators of market value and in the case of the subject and its higher level of quality, any direct comparison to the existing product in the San Jose market area would not provide any substantial of support towards an assessment estimate.

The definition of market value used in this report assumes a sale of the property. If the property were sold, it would be reassessed according to the county assessor’s opinion of its market value, which is typically the sale price. The current assessment of the property of $5,062,530 is considered reasonable based on our market value estimates excluding the leasehold basis of the property

For the purposes of our Year 1 proforma, we have increased the current taxes for the property by 3.0 percent . Based on the current tax liability of, this equates to a forecast tax liability of $69,931 or $70,000. The increased taxes will be reflected in our proforma model in the Income Capitalization Approach.

VALUATION SERVICES	62	ADVISORY GROUP

ZONING

The property is zoned R-4, High-Density Multiple Family Residential, with a conditional use zoning for an assisted living facility. According to the City of San Jose zoning regulations, the residential zoning allows for single- and multi-family uses. Senior housing, such as the subject use, requires a Conditional Use permit.

We are not experts in the interpretation of complex zoning ordinances but the property appears to be a conforming use based on our review of public information. The determination of compliance is beyond the scope of a real estate appraisal.

We know of no other deed restrictions, private or public, that further limit the subject property’s use. The research required to determine whether or not such restrictions exist, however, is beyond the scope of this appraisal assignment. Deed restrictions are a legal matter and only a title examination by an attorney or title company can usually uncover such restrictive covenants. Thus, we recommend a title search to determine if any such restrictions

VALUATION SERVICES	63	ADVISORY GROUP

HIGHEST AND BEST USE

Definition Of Highest And Best Use

According to The Dictionary of Real Estate Appraisal, Third Edition (1993), a publication of the Appraisal Institute, the highest and best use is defined as:

The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.

Highest And Best Use Criteria

We evaluated the site’s highest and best use both as currently improved and as if vacant. In both cases, the property’s highest and best use must meet four criteria described above.

Legally Permissible

The first test concerns permitted uses. According to our understanding of the zoning ordinance, noted earlier in this report, the site may legally be improved with structures that accommodate medium to high density residential uses. Aside from the site’s zoning and regulations, we are not aware of any legal restrictions that limit the potential uses of the subject.

Physically Possible

The second test is what is physically possible. As discussed in the “Property Description,” the site’s size, soil, topography, etc. do not physically limit its use. The subject site is of adequate shape and size to accommodate almost all suburban land uses.

Financial Feasibility and Maximal Productivity

The third and fourth tests are, respectively, what is feasible and what will produce the highest net return. After analyzing the physically possible and legally permissible uses of the property, the highest and best use must be considered in light of financial feasibility and maximum productivity. For a potential use to be seriously considered, it must have the potential to provide a sufficient return to attract investment capital over alternative forms of investment. A positive net income or acceptable rate of return would indicate that a use is financially feasible.

As stated in the Competitive Market Analysis section, population, income and age statistics would indicate that demand for senior living options in the subject area is considered good. This relates to the economic feasibility of developing a property similar to the subject. The stabilized facilities in the subject’s market area are exhibiting occupancies at or above 90 percent. As such, market conditions for senior living in the subject’s primary market area is considered good .

Highest and Best Use of Site As Though Vacant

Considering the subject site’s size, configuration and topography, location among other assisted living properties and state of the local assisted living market, it is our opinion that the Highest and Best Use of the subject site as though vacant is multi-family residential property developed to the highest density possible.

VALUATION SERVICES	64	ADVISORY GROUP

HIGHEST AND BEST USE

Highest and Best Use of Property As Improved

According to the Dictionary of Real Estate Appraisal, highest and best use of the property as improved is defined as:

The use that should be made of a property as it exists. An existing property should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.

As discussed, an assisted living facility exists on the site. The design, layout, as well as average unit size of the facility is good and there is no functional obsolescence in the improvements. As will be demonstrated in the Sales Comparison Approach and the Income Capitalization Approach, the operating characteristics of an assisted living facility represent a viable facility from a revenue-producing standpoint.

Alternative uses for the existing improvements, however, would be limited due to the overall design (smaller rooms and limited individual cooking facilities). As a result, any conversion to an alternative use would be costly.

It is our opinion that the existing complex adds value to the site as if vacant, and rent levels of existing leases encumbering the subject property would dictate a continuation of the current use. However, the property is subject to an operating lease and may likely not be able to be utilized for any other type of use during the term of the lease. Therefore, it is our opinion that the Highest and Best Use of the subject property as improved is as it is currently utilized as an assisted living facility.

VALUATION SERVICES	65	ADVISORY GROUP

VALUATION PROCESS

Methodology

There are three generally accepted approaches available in developing an opinion of value: the Cost, Sales Comparison and Income Capitalization approaches. We have considered and analyzed each in this appraisal to develop an opinion of the market value of the subject property, because this is a complete appraisal. In appraisal practice, an approach to value is included or eliminated based on its applicability to the property type being valued and the quality of information available. Each approach is discussed below, and applicability to the subject property is briefly addressed in the following summary.

Land Value

Developing an opinion of land value is typically accomplished via the Sales Comparison Approach by analyzing sites of comparable utility adjusted for differences, to indicate a value for the subject parcel. Valuation is typically accomplished using a unit of comparison such as price per square foot or acre. Adjustments are applied to the units of comparison from an analysis of comparable sales, and the adjusted unit of comparison is then used to derive a total value.

The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of non-typical conditions affecting the sales price.

Cost Approach

The Cost Approach is based upon the proposition that an informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements, which represent the highest and best use of the land; or when relatively unique or specialized improvements are located on the site, for which there exist few sales or leases of comparable properties.

In the Cost Approach, the appraiser forms an opinion of the cost of all improvements, depreciating them to reflect value loss from physical, functional and external causes. Land value, entrepreneurial profit and depreciated improvement costs are then added for a total value.

Sales Comparison Approach

The Sales Comparison Approach utilizes sales of comparable properties, adjusted for differences, to indicate a value for the subject property. Valuation is typically accomplished using a unit of comparison such as price per square foot, effective gross income multiplier or net income multiplier. Adjustments are applied to the units of comparison from an analysis of comparable sales, and the adjusted unit of comparison is then used to derive a total value.

The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of non- typical conditions affecting the sales price.

Income Capitalization Approach

This approach first determines the income-producing capacity of a property by utilizing contract rents on leases in place and by estimating market rent from rental activity at competing properties. Deductions then are made for vacancy and collection loss and operating expenses. The resulting net operating income is capitalized at an overall capitalization rate to derive an

VALUATION SERVICES	66	ADVISORY GROUP

VALUATION PROCESS

opinion of value. The capitalization rate represents the relationship between net operating income and value.

Related to the Direct Capitalization Method is the Discounted Cash Flow Method. In this method, periodic cash flows (which consist of net operating income less capital costs) and a reversionary value are developed and discounted to a present value using an internal rate of return that is determined by analyzing current investor yield requirements for similar investments.

The reliability of the Income Capitalization Approach depends upon whether investors actively purchase the subject property type for income potential, as well as the quality and quantity of available income and expense data from comparable investments.

Summary

This Appraisal employs only the Income Capitalization Approach as we are valuing the leasehold position in the property. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Therefore, we have not employed the Cost Approach or the Sales Comparison Approach to develop an opinion of market value.

VALUATION SERVICES	67	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Methodology

The Income Capitalization Approach is a method of converting the anticipated economic benefits of owning property into a value through the capitalization process. The principle of “anticipation” underlies this approach in that investors recognize the relationship between an asset’s income and its value. In order to value the anticipated economic benefits of a particular property, potential income and expenses must be projected, and the most appropriate capitalization method must be selected.

The two most common methods of converting net income into value are Direct Capitalization and Discounted Cash Flow. In direct capitalization, net operating income is divided by an overall capitalization rate to indicate an opinion of market value. In the discounted cash flow method, anticipated future cash flows and a reversionary value are discounted to an opinion of net present value at a chosen yield rate (internal rate of return).

In our opinion, the direct capitalization analysis method is most appropriate to value the subject property.

Historical Financial Performance of the Subject Property

The subject is an existing assisted living facility. We were provided with financial statements for 2000, 2001, 2002, and year-to-date 2003. The financial statements have been summarized on a following chart.

Potential Gross Income

There is only one type of payment source at the subject for assisted living services; private pay residents. This type of payor is generally considered the most desirable since private pay rates allow for greater profitability than any fixed government rate plans. Therefore, revenue for the subject is received from the monthly rentals of the living units, as well as from other sources such as second person (double occupancy) fees, move-in or processing fees, as well as other miscellaneous revenue.

VALUATION SERVICES	68	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Inn at Willow Glen
INCOME AND OPERATING EXPENSE SUMMARY

		2000												2001
		(January - December)												(January - December)
		Amount			$/Resident			PRD			% of EGI			Amount			$/Resident			PRD			% of EGI
REVENUES
Rental Income		$	1,616,591		$	21,834		$	59.82			78.88	%	$	1,887,474		$	23,898		$	65.47			77.73	%
Rent Concessions		$	(24,557	)	$	(332	)	$	(0.91	)		-1.20	%	$	(495	)	$	(6	)	$	(0.02	)		-0.02	%
Additional Personal Care		$	439,251		$	5,933		$	16.25			21.43	%	$	503,848		$	6,379		$	17.48			20.75	%
Second Occupant		$	—		$	—		$	—			0.00	%	$	—		$	—		$	—			0.00	%
New Resident Fees		$	13,300		$	180		$	0.49			0.65	%	$	33,250		$	421		$	1.15			1.37	%
Other Income		$	4,964		$	67		$	0.18			0.24	%	$	4,201		$	53		$	0.15			0.17	%
GROSS POTENTIAL REV.		$	2,049,549		$	27,682		$	75.84			100.00	%	$	2,428,278		$	30,745		$	84.23			100.00	%
Vacancy/Collection Loss			Inc. Above												Inc. Above
TOTAL NET REVENUE		$	2,049,549		$	27,682		$	75.84			100.00	%	$	2,428,278		$	30,745		$	84.23			100.00	%
OPERATING EXPENSES
Departmental
	General/Administrative	$	55,948		$	756		$	2.07			2.73	%	$	75,871		$	961		$	2.63			3.12	%
	Payroll (Wages)	$	670,532		$	9,056		$	24.81			32.72	%	$	748,645		$	9,479		$	25.97			30.83	%
	Payroll Taxes & Benefits	$	201,234		$	2,718		$	7.45			9.82	%	$	285,559		$	3,616		$	9.91			11.76	%
	Resident Care	$	1,799		$	24		$	0.07			0.09	%	$	2,379		$	30		$	0.08			0.10	%
	Food Services	$	205,597		$	2,777		$	7.61			10.03	%	$	141,573		$	1,793		$	4.91			5.83	%
	Activities	$	11,997		$	162		$	0.44			0.59	%	$	13,157		$	167		$	0.46			0.54	%
	Housekeeping/Laundry	$	28,431		$	384		$	1.05			1.39	%	$	17,819		$	226		$	0.62			0.73	%
	Plant Operations	$	76,319		$	1,031		$	2.82			3.72	%	$	75,008		$	950		$	2.60			3.09	%
	Utilities	$	93,342		$	1,261		$	3.45			4.55	%	$	105,711		$	1,338		$	3.67			4.35	%
	Marketing/Promotions	$	35,871		$	484		$	1.33			1.75	%	$	29,423		$	373		$	1.02			1.21	%
	Operating Lease	$	163,797		$	2,212		$	6.06			7.99	%	$	164,844		$	2,087		$	5.72			6.79	%
Non-Departmental
	Real Estate Taxes	$	69,084		$	933		$	2.56			3.37	%	$	70,115		$	888		$	2.43			2.89	%
	Insurance	$	14,479		$	196		$	0.54			0.71	%	$	23,686		$	300		$	0.82			0.98	%
	Management Fees (5% of EGI)	$	102,477		$	1,384		$	3.79			5.00	%	$	121,414		$	1,537		$	4.21			5.00	%
	Replacement Reserves ($/Unit)	$	24,900		$	336		$	0.92			1.21	%	$	24,900		$	315		$	0.86			1.03	%
TOTAL ALL EXPENSES		$	1,755,807		$	23,714		$	64.97			85.67	%	$	1,900,104		$	24,058		$	65.91			78.25	%
EXPENSE RATIO			85.7	%											78.2	%
NET OPERATING INCOME		$	293,742		$	3,967		$	10.87			14.33	%	$	528,174		$	6,687		$	18.32			21.75	%
OCCUPANCY			89.2	%											95.2	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

		2002												2003 Annualized
		(January - December)												(January - August)
		Amount			$/Resident			PRD			% of EGI			Amount			$/Resident			PRD			% of EGI
REVENUES
Rental Income		$	1,784,829		$	34,271		$	93.89			79.92	%	$	1,812,876		$	30,607		$	83.86			82.03	%
Rent Concessions		$	(54,997	)	$	(1,056	)	$	(2.89	)		-2.46	%	$	(174,252	)	$	(2,942	)	$	(8.06	)		-7.89	%
Additional Personal Care		$	456,628		$	8,768		$	24.02			20.45	%	$	488,570		$	8,249		$	22.60			22.11	%
Second Occupant		$	—		$	—		$	—			0.00	%	$	—		$	—		$	—			0.00	%
New Resident Fees		$	38,000		$	730		$	2.00			1.70	%	$	72,518		$	1,224		$	3.35			3.28	%
Other Income		$	8,754		$	168		$	0.46			0.39	%	$	10,194		$	172		$	0.47			0.46	%
GROSS POTENTIAL REV.		$	2,233,214		$	42,880		$	117.48			100.00	%	$	2,209,905		$	37,311		$	102.22			100.00	%
Vacancy/Collection Loss			Inc. Above												Inc. Above
TOTAL NET REVENUE		$	2,233,214		$	42,880		$	117.48			100.00	%	$	2,209,905		$	37,311		$	102.22			100.00	%
OPERATING EXPENSES
Departmental
	General/Administrative	$	36,412		$	699		$	1.92			1.63	%	$	76,373		$	1,289		$	3.53			3.46	%
	Payroll (Wages)	$	694,485		$	13,335		$	36.53			31.10	%	$	667,257		$	11,266		$	30.86			30.19	%
	Payroll Taxes & Benefits	$	245,074		$	4,706		$	12.89			10.97	%	$	289,353		$	4,885		$	13.38			13.09	%
	Resident Care	$	3,379		$	65		$	0.18			0.15	%	$	1,805		$	30		$	0.08			0.08	%
	Food Services	$	120,879		$	2,321		$	6.36			5.41	%	$	139,776		$	2,360		$	6.47			6.32	%
	Activities	$	11,103		$	213		$	0.58			0.50	%	$	15,747		$	266		$	0.73			0.71	%
	Housekeeping/Laundry	$	13,948		$	268		$	0.73			0.62	%	$	14,093		$	238		$	0.65			0.64	%
	Plant Operations	$	71,696		$	1,377		$	3.77			3.21	%	$	83,898		$	1,416		$	3.88			3.80	%
	Utilities	$	105,020		$	2,017		$	5.52			4.70	%	$	112,553		$	1,900		$	5.21			5.09	%
	Marketing/Promotions	$	39,743		$	763		$	2.09			1.78	%	$	49,452		$	835		$	2.29			2.24	%
	Operating Lease	$	163,971		$	3,148		$	8.63			7.34	%	$	163,713		$	2,764		$	7.57			7.41	%
Non-Departmental
	Real Estate Taxes	$	62,847		$	1,207		$	3.31			2.81	%	$	78,564		$	1,326		$	3.63			3.56	%
	Insurance	$	43,840		$	842		$	2.31			1.96	%	$	44,568		$	752		$	2.06			2.02	%
	Management Fees (5% of EGI)	$	111,661		$	2,144		$	5.87			5.00	%	$	110,495		$	1,866		$	5.11			5.00	%
	Replacement Reserves ($/Unit)	$	24,900		$	478		$	1.31			1.11	%	$	24,900		$	420		$	1.15			1.13	%
TOTAL ALL EXPENSES		$	1,748,958		$	33,582		$	92.01			78.32	%	$	1,872,545		$	31,615		$	86.62			84.73	%
EXPENSE RATIO			78.3	%											84.7	%
NET OPERATING INCOME		$	484,256		$	9,298		$	25.47			21.68	%	$	337,360		$	5,696		$	15.60			15.27	%
OCCUPANCY			62.7	%											71.4	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

		C&W Forecast
		Stabilized Year
		Amount			$/Resident		PRD		% of EGI
REVENUES
Rental Income		$	2,160,600		$	26,031	$	79.24
Rent Concessions		$	—		$	—	$	—
Additional Personal Care		$	478,080		$	5,760	$	17.53
Second Occupant		$	—		$	—	$	—
New Resident Fees		$	33,200		$	400	$	1.22
Other Income		$	10,000		$	120	$	0.37
GROSS POTENTIAL REV.		$	2,681,880		$	32,312	$	124.05
Vacancy/Collection Loss		$	(268,188	)
TOTAL NET REVENUE		$	2,413,692		$	32,312	$	88.53
OPERATING EXPENSES
Departmental
	General/Administrative	$	75,000		$	1,004	$	2.75		3.11	%
	Payroll (Wages)	$	835,000		$	11,178	$	30.62		34.59	%
	Payroll Taxes & Benefits	$	325,000		$	4,351	$	11.92		13.46	%
	Resident Care	$	30,000		$	402	$	1.10		1.24	%
	Food Services	$	150,000		$	2,008	$	5.50		6.21	%
	Activities	$	20,000		$	268	$	0.73		0.83	%
	Housekeeping/Laundry	$	20,000		$	268	$	0.73		0.83	%
	Plant Operations	$	80,000		$	1,071	$	2.93		3.31	%
	Utilities	$	110,000		$	1,473	$	4.03		4.56	%
	Marketing/Promotions	$	40,000		$	535	$	1.47		1.66	%
	Operating Lease	$	164,100		$	2,197	$	6.02		6.80	%
Non-Departmental
	Real Estate Taxes	$	70,000		$	937	$	2.57		2.90	%
	Insurance	$	46,000		$	616	$	1.69		1.91	%
	Management Fees (5% of EGI)	$	120,685		$	1,616	$	4.43		5.00	%
	Replacement Reserves ($/Unit)	$	24,900		$	333	$	0.91		1.03	%
TOTAL ALL EXPENSES		$	2,110,685		$	28,255	$	77.41		87.45	%
EXPENSE RATIO			87.4	%
NET OPERATING INCOME		$	303,007		$	4,056	$	11.11		12.55	%
OCCUPANCY			90.0	%

VALUATION SERVICES	69	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Assisted Living Rate Analysis

The subject has an effective capacity of 83 residents and/or beds. The facility is of average quality construction with a layout and design typical to its age (smaller units, narrow hallways)m which makes marketing a challenge relative to the competition. The following is a description of the types of accommodations that are available at the subject.

Assisted living residents at the subject have the choice of studio and one-bedroom apartment units. The units are small and feature private bathrooms, kitchenettes and adequate closet areas. All of the residents are provided with three daily meals, weekly housekeeping, utilities (except telephone), activities, and scheduled transportation included in their monthly rent. Assisted living or personal care services are an additional monthly fee.

The subject’s actual rental rates (rent roll) were tested for reasonableness against similar facilities in the subject’s market area. In the Competitive Market Analysis section, we identified several existing facilities considered to provide competition for the subject. Data sheets were provided in the Competitive Market Analysis section presented previously. The complexes we surveyed are all considered comparable given that they all provide assisted living units. We note that the facilities are all adequately maintained and they all have a similar amenity package. All of the competing facilities have been discussed in detail in the Competitive Market Analysis section of the report.

The table below summarizes the subject’s unit types and the actual and asking monthly rents.

Inn at Willow Glen

						In House Rents				Asking Rents
		No.		Occ.		Monthly		$/Unit		Monthly		$/Unit
Unit		Units		Units		Revenue		Per Mo.		Revenue		Per Mo.
Assisted Living
Studio			35		31	$	55,065	$	1,776	$	83,125	$	2,375
Studio Large			41		38	$	88,265	$	2,323	$	101,475	$	2,475
	Total - Studio		76		69	$	143,330	$	2,077	$	184,600	$	2,429
One-Bedroom			7		7	$	21,010	$	3,001	$	21,000	$	3,000
	Total - One-Bedroom		7		7	$	21,010	$	3,001	$	21,000	$	3,000
Assisted Totals			83		76	$	143,330	$	1,886	$	184,600	$	2,224
Totals			83		76	$	143,330	$	1,886	$	184,600	$	2,224

It appears that the current in-house average rates generally fall below most of the asking rates at the subject. Overall, the average rate is $1,886 per month, which is 18 percent below the average asking rate of $2,224 per month. We feel a slight increase for the in-house rates is reasonable, noting that a rate increase was just recently instigated in October 2003. This increase will not adversely affect the stabilized occupancy level at the subject.

VALUATION SERVICES	70	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Base Rental Rates

The following chart details our reconciled base rental rates for all unit types at the subject. These rates were concluded to in the Competitive Market Analysis section of the report.

Inn at Willow Glen
Reconciled Market Rental Rates

	Resident	No.		No.		Market
Unit Type	Type	Units		Beds		Rent
Studio	AL		35		35	$	1,850
Studio Large	AL		41		41	$	2,300
One-Bedroom	AL		7		7	$	3,000
Totals			83		83

Other Revenues

In addition to room revenues, the subject receives additional income from additional personal care, new resident fees (entrance fees), second person fees, as well as miscellaneous revenue from such items as barber/beauty income, laundry services, meal and guest fees, food catering, health supplies, etc.

Additional Personal Care

This relates to the additional costs for personal care to those residents who require additional care. The historical, current and forecast revenue from this source is shown below.

Year		Total		$/Resident		PRD
	2000	$	439,251	$	5,933	$	16.25
	2001	$	503,848	$	6,379	$	17.48
	2002	$	456,628	$	8,768	$	24.02
2003 Annualized		$	488,570	$	8,249	$	22.60
C&W Forecast		$	478,080	$	5,760	$	17.53

The base monthly rates at the subject do not include any personal care. All personal care at the subject is charged in addition to the base monthly rental rate. Specifically, there are eight base levels or tiers of care services available (based on a point system) that are determined from a monthly need assessment basis. The levels of personal care range from $225 per month (Level A) up to an additional $1,425 per month for Level 7 services. If a resident requires services above Level 7, there is an additional charge of $5.00 per point.

Review of the rent roll showed that of the existing residents, 55 residents (72 percent of existing total) were paying for personal care services. The average charge equated to $927.45 per month, which would indicate an average Level 3 care level. Based on the data, we have forecast that 60 percent of the resident mix will pay an average of $800 per month for personal

VALUATION SERVICES	71	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

care services. This equates to Year 1 revenue of $478,080, which is consistent with the recent pattern at the subject.

New Resident Fees

New resident fees at the subject are $2,000 per resident, which falls within the upperportion of the range of the comparables from $950 to $2,500. This amount is considered reasonable given the subject’s location and occupancy rate.

The typical turnover in an assisted living facility is between 20 and 28 months with a midrange of two years. This is equivalent to 50 percent of the census turning over each year. For the subject, we are estimating that 40 percent of the residents will pay entry or new resident fees during the subsequent 12 months. The historical, current and forecast revenue from this source is shown below.

Year		Total		$/Resident
	2000	$	13,300	$	180
	2001	$	33,250	$	421
	2002	$	38,000	$	730
2003 Annualized		$	72,518	$	1,224
C&W Forecast		$	33,200	$	400

Based on the data, we have forecast Year 1 new resident fees at $33,200. The annualized 2003 data indicates a relatively high revenue, however, this is due to high number of new residents that moved into the facility after seeing atypical attrition in the mid to latter part of 2002. Our forecast is consistent with previous trends that reflected normal occupancy.

Second Person Fees

The subject charges a fee of $780 per month for a double occupant in the same unit. This would be applicable to a spouse or sibling. The historical revenue data for the subject did not include any line item breakdown for this category. At the time of inspection, there were only two double occupancies at the subject. Due to the smaller unit composition of the subject, any revenue from double occupancies is minimal. We believe that our other income forecast that follows would more than account for any revenue from this source.

Other Income

This category includes revenue received from the subject’s barber/beauty income, laundry services, cable TV revenue, meal and guest fees, food catering, health supplies, parking, etc. The historic costs for this category are shown in the following table.

VALUATION SERVICES	72	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Year		Total		$/Resident		PRD
	2000	$	4,964	$	67	$	0.18
	2001	$	4,201	$	53	$	0.15
	2002	$	8,754	$	168	$	0.46
2003 Annualized		$	10,194	$	172	$	0.47
C&W Forecast		$	10,000	$	120	$	1.22

Based on the data, we have forecast Year 1 revenue from this source at $10,000. This is seen as being consistent with the historic revenue for the subject.

Concessions/Rental Allowances

At the time of inspection, the subject was not offering any rent concessions. The property had been using concessions in the latter part of 2002 and first part of 2003 to release units that had seen atypical attrition. Concessions at the subject were discontinued several months ago. Concessions are believed to be a negligible part of the market used only to stimulate lease-up of any unforeseen vacancies and should not have be of any major significance to a property like the subject. Therefore, no allowance for rent concessions will be applied to the subject.

Vacancy and Collection Loss

Both the investor and the appraiser are primarily interested in the annual revenue an income property is likely to produce over a specified period of time, rather than the income it could produce if it were always 100 percent occupied and all tenants were paying their rent in full and on time. A normally prudent practice is to expect some income loss as tenants vacate, fail to pay rent, or pay their rent late. Model units or other rent loss, if necessary, is addressed separately.

The subject, as of the most current rent roll provided, was 95 percent occupied. This is higher than current average occupancy levels for the market area overall. Rent comparable occupancies range from 90 to 100 percent. Occupancy at the subject was 89 percent in 2000, 95 percent in 2001, 63 percent in 2002 and year-to-date 2003 annualizes out to 71 percent. As noted, the subject’s occupancy has increased strongly over the last several months and the facility is presently nearly full.

In consideration of the above, as well as the general market conditions and market positioning of the subject, we have forecasted a stabilized vacancy and collection loss of 10.00 percent for the subject.

Effective Gross Income

The following table summarizes the projected estimate of stabilized income based on the above findings. The stabilized revenues reflect what we believe would be anticipated by a purchaser of the subject and are based on current market rents and trends.

VALUATION SERVICES	73	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Inn at Willow Glen
STABILIZED OPERATING INCOME

												PER
	RESIDENT	NO.		NO.			MONTHLY					ACTUAL
UNIT TYPE	TYPE	UNITS		BEDS			RATE		INCOME			RESIDENT
Studio	AL		35		35		$	1,850	$	777,000
Studio Large	AL		41		41		$	2,300	$	1,131,600
One-Bedroom	AL		7		7		$	3,000	$	252,000
Total			83		83				$	2,160,600		$	26,031
Additional Personal Care					60	%	$	800	$	478,080		$	5,760
Second Person					0	%	$	800	$	—		$	—
New Resident Fees					40	%	$	1,000	$	33,200		$	400
Other									$	10,000		$	120
TOTAL POTENTIAL GROSS INCOME									$	2,681,880		$	32,312
LESS: VACANCY @					10.0	%			$	(268,188	)
EFFECTIVE GROSS INCOME									$	2,413,692		$	32,312

Opinion of Expenses

We have developed an opinion of the property’s annual operating expenses after reviewing its historical performance and reviewing the operating statements of similar senior living properties. We were provided with operating statements for 2000, 2001, 2002, and year-to-date 2003. This information was previously summarized.

We were not provided with the staffing requirements for the facility and we were not able to analyze the expenses on this basis. We have supported our estimate of projected expenses with other senior living facilities in the region, as well as from overall industry statistics. We also note that the reader is cautioned when reviewing the comparable expenses for individual facilities, in that the reporting of expenses varies by property and that different congregate living facilities offer different services. All comparisons will be made on an actual resident basis.

Expense Comparables

The expense comparables have been summarized on the following page.

VALUATION SERVICES	74	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

SUMMARY OF COMPARABLE OPERATING EXPENSES
ASSISTED LIVING FACILITIES

																													ASHA						ASHA
																													Lower			ASHA			Upper
Facility					Confidential									Confidential									Confidential						Quartile			Median			Quartile
Reporting Period						2002									2002									2002						2002			2002			2002
Year Built						1999									2001									1990						N/A			N/A			N/A
No. of AL Units						89									72									11						N/A			N/A			N/A
No. of ALZ Units						13									0									0						N/A			N/A			N/A
Total Units						102									114									187						N/A			N/A			N/A
Occupancy						83	%								85	%								98	%					N/A			N/A			N/A
Resident Days						30,901									35,493									66,890
		Per						% of			Per						% of			Per						% of
		Resident			$/RD			EGI			Resident			$/RD			EGI			Resident			$/RD			EGI
TOTAL NET REVENUES		$	37,505		$	102.75					$	25,443		$	69.71					$	34,768		$	95.26					$	29,046		$	34,264		$	38,878
EXPENSES
	General & Administrative	$	756		$	2.07			2.02	%	$	1,110		$	3.04			3.25	%	$	1,129		$	3.09			3.25	%	$	1,115		$	1,433		$	1,889
	Payroll (Wages/Salaries)	$	11,593		$	31.76			30.91	%	$	8,553		$	23.43			23.52	%	$	8,179		$	22.41			23.52	%		N/A			N/A			N/A
	Payroll Taxes & Benefits	$	3,815		$	10.45			10.17	%	$	2,144		$	5.88			8.62	%	$	2,996		$	8.21			8.62	%	$	1,575		$	2,068		$	3,003
	Resident Care	$	219		$	0.60			0.59	%	$	609		$	1.67			0.82	%	$	286		$	0.78			0.82	%	$	4,253		$	6,123		$	7,259
	Food Services	$	1,786		$	4.89			4.76	%	$	1,207		$	3.31			6.32	%	$	2,196		$	6.02			6.32	%	$	2,704		$	3,529		$	4,892
	Activities	$	58		$	0.16			0.16	%	$	58		$	0.16			0.53	%	$	184		$	0.50			0.53	%		N/A			N/A			N/A
	Housekeeping	$	119		$	0.32			0.32	%	$	101		$	0.28			0.86	%	$	299		$	0.82			0.86	%	$	532		$	815		$	1,130
	Plant Operations	$	644		$	1.77			1.72	%	$	510		$	1.40			4.05	%	$	1,409		$	3.86			4.05	%	$	580		$	916		$	1,356
	Utilities	$	1,536		$	4.21			4.09	%	$	1,180		$	3.23			5.19	%	$	1,805		$	4.94			5.19	%	$	1,086		$	1,306		$	1,526
	Marketing/Promotions	$	527		$	1.44			1.41	%	$	439		$	1.20			1.57	%	$	546		$	1.49			1.57	%	$	858		$	1,349		$	2,008
	Real Estate Taxes	$	705		$	1.93			1.88	%	$	520		$	1.43			3.62	%	$	1,257		$	3.45			3.62	%	$	648		$	1,011		$	1,597
	Insurance	$	611		$	1.67			1.63	%	$	400		$	1.10			3.32	%	$	1,154		$	3.16			3.32	%	$	278		$	463		$	726
ADJUSTED OPERATING EXPENSES		$	22,369		$	73.84			59.64	%	$	16,832		$	55.56			61.66	%	$	21,439		$	70.77			61.66	%	$	20,959		$	24,058		$	29,438
Management Fee		$	1,875		$	5.14			5.00	%	$	1,272		$	3.49			5.00	%	$	1,738		$	0.00			5.00	%	$	1,249		$	1,713		$	2,082
Expense Ratio Before																														76	%		75	%		81	%
	Reserves		65	%								71	%								67	%
Reserves			—			—			—			—			—			—			—			—			—		$	181		$	326		$	525

Source: The State of Seniors Housing, 2002, ASHA. (Data is for Assisted Living Facilities)

Note: Each line expense for ASHA derived from seperately sorted data columns and may not add up under totals.

* All comparable categories based on Actual Unit (Per Resident)

VALUATION SERVICES	75	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

General & Administrative

These costs, for the basis of the subject analysis, include office supplies, licenses/permits,dues/subscriptions, travel/meals, communications/telephone, resident activities and transportation. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	55,948	$	756	$	2.07		2.73	%
	2001	$	75,871	$	961	$	2.63		3.12	%
	2002	$	36,412	$	699	$	1.92		1.63	%
2003 Annualized		$	76,373	$	1,289	$	3.53		3.46	%
C&W Forecast		$	75,000	$	1,004	$	2.75		3.11	%

The expense comparables showed expenses for this category from $ 756 to $1,129 per resident (average of $ 999 per resident), while the industry data showed a range from $1,115 to $1,889 per resident (median of $1,433 per resident). The subject’s actual expenses fall towards the lower end of the range of the comparable properties. We believe that a higher cost would be warranted for the property based on the market data. We have forecast Year 1 general and administrative costs at $75,000 or $1,004 per resident.

Payroll (Wages and Salaries)

These costs, for the basis of the subject analysis, include all wage and salary costs for the employees. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	670,532	$	9,056	$	24.81		32.72	%
	2001	$	748,645	$	9,479	$	25.97		30.83	%
	2002	$	694,485	$	13,335	$	36.53		31.10	%
2003 Annualized		$	667,257	$	11,266	$	30.86		30.19	%
C&W Forecast		$	835,000	$	11,178	$	30.62		34.59	%

The expense comparables showed expenses for this category from $8,179 to $11,593 per resident (average of $9,442 per resident), while no data was provided by the ASHA industry data. The subject’s actual expenses fall towards the lower portion of the comparable range and we believe a slightly higher cost would be reasonable. We have forecast Year 1 wages and salary costs at $835,000 or $11,178 per resident.

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Payroll Taxes and Benefits

These costs, for the basis of the subject analysis, include cost for the employee pension plan, employee incentives, vacation pay, employee benefits and payroll taxes. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	201,234	$	2,718	$	7.45		9.82	%
	2001	$	285,559	$	3,616	$	9.91		11.76	%
	2002	$	245,074	$	4,706	$	12.89		10.97	%
2003 Annualized		$	289,353	$	4,885	$	13.38		13.09	%
C&W Forecast		$	325,000	$	4,351	$	11.92		13.46	%

The expense comparables showed expenses for this category from $2,144 to $3,815 per resident (average of $2,985 per resident), while the industry data showed a range from $1,575 to $3,003 per resident (median of $2,068 per resident). The subject’s actual expenses fall at the upper end of the range by the comparable properties, but are considered reasonable. We have forecast Year 1 payroll taxes and benefits costs at $325,000 or $4,351 per resident.

Resident Care

This expense is for the costs associated with the personal or assisted living services for the assisted living residents. These include all health care and special needs supplies and related activities, but does not include payroll. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	1,799	$	24	$	0.07		0.09	%
	2001	$	2,379	$	30	$	0.08		0.10	%
	2002	$	3,379	$	65	$	0.18		0.15	%
2003 Annualized		$	1,805	$	30	$	0.08		0.08	%
C&W Forecast		$	30,000	$	402	$	1.10		1.24	%

The expense comparables showed expenses for this category from $ 219 to $ 609 per resident (average of $ 371 per resident), while the industry data showed a range from $4,253 to $7,259 per resident (median of $6,123 per resident). The industry data included wages and salaries that we have categorized separately. The subject’s actual expenses are seen as falling well below the average costs by the comparable properties. As such, we believe a prudent operator would allocate a higher allowance, especially as over one-half of the subject’s residents are

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paying for additional resident or personal care. Based on this, we have forecast Year 1 resident care costs at $30,000 or $ 402 per resident.

Food Services

These costs include raw food costs, as well as kitchen supplies. The residents at the subject are provided with three complete meals per day. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	205,597	$	2,777	$	7.61		10.03	%
	2001	$	141,573	$	1,793	$	4.91		5.83	%
	2002	$	120,879	$	2,321	$	6.36		5.41	%
2003 Annualized		$	139,776	$	2,360	$	6.47		6.32	%
C&W Forecast		$	150,000	$	2,008	$	5.50		6.21	%

The expense comparables showed expenses for this category from $1,207 to $2,196 per resident (average of $1,729 per resident), while the industry data showed a range from $2,704 to $4,892 per resident (median of $3,529 per resident). The subject’s actual expenses are bracketed by the expense comparisons. We have forecast Year 1 food services costs at $150,000 or $2,008 per resident.

Activities

This category is for the activities and recreation costs, as well as transportation costs. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	11,997	$	162	$	0.44		0.59	%
	2001	$	13,157	$	167	$	0.46		0.54	%
	2002	$	11,103	$	268	$	0.73		0.62	%
2003 Annualized		$	15,747	$	266	$	0.73		0.71	%
C&W Forecast		$	20,000	$	268	$	0.73		0.83	%

The expense comparables showed expenses for this category from $ 58 to $ 184 per resident (average of $ 100 per resident), while no data was provided by the ASHA industry data. The

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subject’s actual expenses fall at the upper end of the range shown by the comparable properties. We have forecast Year 1 activities costs at $20,000 or $ 268 per resident.

Housekeeping/Laundry

This category is for all housekeeping costs, including all supplies requisite to housekeeping and laundry services. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	28,431	$	384	$	1.05		1.39	%
	2001	$	17,819	$	226	$	0.62		0.73	%
	2002	$	13,948	$	268	$	0.73		0.62	%
2003 Annualized		$	14,093	$	238	$	0.65		0.64	%
C&W Forecast		$	20,000	$	268	$	0.73		0.83	%

The expense comparables showed expenses for this category from $ 101 to $ 299 per resident (average of $ 173 per resident), while the industry data showed a range from $ 532 to $1,130 per resident (median of $ 815 per resident). The industry data included wages and salaries that we have categorized separately. The subject’s actual expenses are supported by the comparable properties. We have forecast Year 1 housekeeping costs at $20,000 or $ 268 per resident.

Plant Operations

These costs include general repairs and maintenance, elevator contracts, supplies and equipment purchases for the facility. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	76,319	$	1,031	$	2.82		3.72	%
	2001	$	75,008	$	950	$	2.60		3.09	%
	2002	$	71,696	$	1,377	$	3.77		3.21	%
2003 Annualized		$	83,898	$	1,416	$	3.88		3.80	%
C&W Forecast		$	80,000	$	1,071	$	2.93		3.31	%

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The expense comparables showed expenses for this category from $ 510 to $1,409 per resident (average of $ 854 per resident), while the industry data showed a range from $ 580 to $1,356 per resident (median of $ 916 per resident). The subject’s actual expenses are supported by the comparable properties. We have forecast Year 1 plant operations costs at $80,000 or $1,071 per resident.

Utilities

This expense is for the annual cost for natural gas, electricity, water/sewer, cable TV and trash removal. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	93,342	$	1,261	$	3.45		4.55	%
	2001	$	105,711	$	1,338	$	3.67		4.35	%
	2002	$	105,020	$	2,017	$	5.52		4.70	%
2003 Annualized		$	112,553	$	1,900	$	5.21		5.09	%
C&W Forecast		$	110,000	$	1,473	$	4.03		4.56	%

The expense comparables showed expenses for this category from $1,180 to $1,805 per resident (average of $1,507 per resident), while the industry data showed a range from $1,086 to $1,526 per resident (median of $1,306 per resident). The subject’s actual expenses are supported by the comparable properties. We have forecast Year 1 utility costs at $110,000 or $1,473 per resident.

Marketing/Promotions

This expense is directly connected to the advertising and marketing of the complex for such things as newspapers and brochures, resident retention, etc. These costs also include the payroll costs of the marketing staff. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	35,871	$	484	$	1.33		1.75	%
	2001	$	29,423	$	373	$	1.02		1.21	%
	2002	$	39,743	$	763	$	2.09		1.78	%
2003 Annualized		$	49,452	$	835	$	2.29		2.24	%
C&W Forecast		$	40,000	$	535	$	1.47		1.66	%

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The expense comparables showed expenses for this category from $ 439 to $ 546 per resident (average of $ 504 per resident), while the industry data showed a range from $ 858 to $2,008 per resident (median of $1,349 per resident). The subject’s actual expenses are supported by the comparable properties. We have forecast Year 1 marketing costs at $40,000 or $ 535 per resident.

Real Estate Taxes

This cost is for the annual real and personal property tax liability for the subject. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	69,084	$	933	$	2.56		3.37	%
	2001	$	70,115	$	888	$	2.43		2.89	%
	2002	$	62,847	$	1,207	$	3.31		2.81	%
2003 Annualized		$	78,564	$	1,326	$	3.63		3.56	%
C&W Forecast		$	70,000	$	937	$	2.57		2.90	%

The expense comparables showed expenses for this category from $ 520 to $1,257 per resident (average of $ 828 per resident), while the industry data showed a range from $ 648 to $1,597 per resident (median of $1,011 per resident). Please refer to the Real Estate Taxes and Assessments section of the report for a discussion on how the Year 1 taxes were estimated.We have forecast the Year 1 real estate tax expense at $70,000 or $ 937 per resident and which is based on a market value premise.

Insurance

This cost is for the annual liability insurance for the property. The historical costs, as well as our forecast for this category are shown below.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	14,479	$	196	$	0.54		0.71	%
	2001	$	23,686	$	300	$	0.82		0.98	%
	2002	$	43,840	$	842	$	2.31		1.96	%
2003 Annualized		$	44,568	$	752	$	2.06		2.02	%
C&W Forecast		$	46,000	$	616	$	1.69		1.91	%

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The expense comparables showed expenses for this category from $ 400 to $1,154 per resident (average of $ 722 per resident), while the industry data showed a range from $ 278 to $ 726 per resident (median of $ 463 per resident). Insurance costs for senior living properties have increased strongly over the last one to two years. The subject’s actual expenses are supported by the comparable properties. We have forecast Year 1 insurance costs at $46,000 or $ 616 per resident.

Management Fee

The subject is managed by ARV at a rate equal to 5.0 percent of effective gross income. According to data by The 2002 State of Senior Housing Report, the median management fee for congregate living facilities is 5.0 percent, with a general range from 5.0 to 7.0 percent. We have concluded to a 5.0 percent management fee and which equates to a Year 1 expense of $120,685 or $1,616 per resident in our analysis.

Operating Lease

This expense relates to the operating lease for the property. Review of the lease abstract for the property, as well as the historical operating statements showed the following lease costs for the subject.

Year		Total		$/Resident		PRD		% of EGI
	2000	$	163,797	$	2,212	$	6.06		7.99	%
	2001	$	164,844	$	2,087	$	5.72		6.79	%
	2002	$	163,971	$	3,148	$	8.63		7.34	%
2003 Annualized		$	163,713	$	2,764	$	7.57		7.41	%
C&W Forecast		$	164,100	$	2,197	$	6.02		6.80	%

Based on the limited information, we have forecast Year 1 operating lease costs at $164,100.

Replacement Reserves

Replacement reserves are necessary for replacement of roof covering, mechanical systems, furnishings, appliances, etc. For a facility such as the subject, it is reasonable to deduct one to two percent of net resident revenues for replacement reserves. The ASHA industry data shows a range of reserve unit allowances from $ 181 to $ 525 per unit with a median of $ 326 per unit. In the case of the subject and its date of construction, we have deducted an amount equal to $300 per unit and which equates to a total cost of $24,900 or $ 333 per resident, which is well supported by the industry data.

Expense Summary

Overall, the first year expenses for the subject (including management fees and reserves) are projected at $2,110,685 ($28,255 per resident) and 87.45 percent of effective gross income. The sale comparables indicated expense ratios from 52.75 to 69.17 percent (average of 63.90 percent), while the industry data showed a range from 76 to 81 percent (median of 75 percent).

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Additionally, the subject has operated at expense ratios ranging from 55.7 to 63.8 percent over the last three years (includes management and reserve allowances).

We note that, according to The Senior Care Acquisition Report 2003, that the average expense ratio for assisted living facilities was 75.8 percent in 2002 and which represented an approximately eight percent increase from 70.4 percent in 2001. The survey noted, however, that many of the properties used in the sampling were troubled which resulted in a higher reported operating expense basis.

Furthermore, operating margins for assisted living facilities were reported at 30.8 percent for the median, 18.4 percent for the lower quartile and 34.7 percent for the upper quartile according to the State of Senior Housing Report 2002.

Our conclusion equates to a net operating income per resident of $4,056, which is below the most recent full operating year (2002) of $10,513 per resident. The difference, however, is directly related to our stabilized market occupancy that is higher than that witnessed in 2002, as well as having increased some expense levels to market levels. As such, our expense and resultant net operating income estimate is considered reasonable in light of the historical data. A summary of our Year 1 proforma is presented below.

Inn at Willow Glen
STABILIZED OPERATING STATEMENT

						Total		PR		PRD		% of EGI
EFFECTIVE GROSS INCOME						$	2,413,692	$	32,312	$	88.53
EXPENSES
General/Administrative						$	75,000	$	1,004	$	2.75		3.11	%
Payroll (Wages)						$	835,000	$	11,178	$	30.62		34.59	%
Payroll Taxes & Benefits						$	325,000	$	4,351	$	11.92		13.46	%
Resident Care						$	30,000	$	402	$	1.10		1.24	%
Food Services						$	150,000	$	2,008	$	5.50		6.21	%
Activities						$	20,000	$	268	$	0.73		0.83	%
Housekeeping/Laundry						$	20,000	$	268	$	0.73		0.83	%
Plant Operations						$	80,000	$	1,071	$	2.93		3.31	%
Utilities						$	110,000	$	1,473	$	4.03		4.56	%
Marketing/Promotions						$	40,000	$	535	$	1.47		1.66	%
Operating Lease						$	164,100	$	2,197	$	6.02		6.80	%
Real Estate Taxes						$	70,000	$	937	$	2.57		2.90	%
Insurance						$	46,000	$	616	$	1.69		1.91	%
TOTAL OPERATING EXPENSES				81.4	%	$	1,965,100	$	26,307	$	72.07		81.41	%
Management Fees		5.0	%			$	120,685	$	1,616	$	4.43		5.00	%
Replacement Reserves	$	300				$	24,900	$	333	$	0.91		1.03	%
TOTAL EXPENSES						$	2,110,685	$	28,255	$	77.41		87.45	%
NET OPERATING INCOME						$	303,007	$	4,056	$	11.11		12.55	%

(*) Per Actual Resident

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Discounted Cash Flow Method

In the Discounted Cash Flow Method, we employed Microsoft Excel to model the income characteristics of the property and to make a variety of cash flow assumptions. We attempted to reflect the most likely investment assumptions of typical buyers and sellers in this particular market segment. The following table illustrates the assumptions used in the discounted cash flow analysis.

Terminal Capitalization Rate Selection

A terminal capitalization rate was used to develop an opinion of the market value of the leasehold position at the end of the lease term. The rate is applied to the net operating income following Year 14. We developed an opinion of an appropriate terminal rate based on indicated rates in today’s market.

In determining an appropriate capitalization rate, the rates of return have been derived by applying three different methods: market extraction from the sales comparables, our findings reported in The Senior Care Acquisition Report, 2003, published by Irving Levin Associates, Inc., findings from the Senior Care Participants Survey completed by Cushman & Wakefield, Inc., and from Band-of-Investment.

The capitalization rate was determined by analyzing investment rates of return acceptable to buyers. The rate of return on an investment is determined by analyzing several aspects of that investment and then assigning a risk associated with those aspects. Elements usually considered are:

• Reliability of the gross income prediction. How certain is it that the income will be forthcoming? Income is more dependable when the property is leased on a long-term basis to financially responsible tenants than when rented on a month-to-month basis to less reliable tenants.

• Reliability of the expense prediction. Is there great danger of having expenses increase materially, or is there a fair chance that they will remain about the same or even decrease?

• Expense ratio. If the expenses are low in relation to gross income, the quality of the net income may be better, because a moderate reduction in gross income or a moderate increase in expenses does not affect the net income substantially.

• Burden of management. Even when real estate management is employed, a property that requires constant attention, because of either maintenance or rent collection problems, is less desirable than one that needs minimal management. A long-term lease that requires a tenant to take care of all repairs and to pay taxes and insurance presents a situation that is relatively free from this burden of management.

• Marketability of the property. An investment that has marketability and liquidity appeals to a wider group of investors than one lacking those attributes.

• Stability of value. The value or market price of a piece of real property tends to remain within a narrower range for longer periods of time than do most other commodities.

As described previously, the gross income projected for the property is subject to such uncertainties as competition from other facilities and fluctuations in demand for the subject’s services. Moreover, the subject property has limited marketability and liquidity because a purchaser must have the appropriate operating license from the applicable state regulatory

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agencies, which limit the number of potential investors and would, in any potential sale of the property, create impediments and delays.

Going-In Capitalization Rate

The first method used to derive the capitalization rate was a review of comparable sales that have occurred in the subject’s regional area. The following table summarizes the overall capitalization rates of several recent transactions of similar assisted living properties that provide an indication of current rates:

CAPITALIZATION RATE SUMMARY

		Date	Year					Capitalization
No.	Property Name	of Sale	Built		Occupancy			Rate
1	Carmel Village	Jan-03		1986		97	%		11.14	%
2	Emerald Hills	Sep-02		1999		95	%		11.19	%
3	Mapleride of Laguna Creek	Jan-02		1999		95	%		10.55	%
4	Woodmark at Summit Ridge	Feb-02		1998		95	%		12.94	%
5	Manor at Lakeside	Aug-01		1981		95	%		11.56	%
6	Atria Redding	Jul-01		2000		95	%		12.50	%
Low				1981		95	%		10.55	%
High				2000		97	%		12.94	%
Median				1999		95	%		11.38	%
Average				1994		95	%		11.65	%

The overall capitalization rates of the comparable sales range from 10.55 to 12.94 percent, with an average indicated of 11.65 percent. These rates are reported to be after management fee and reserves. The capitalization rates reflect actual buyer expectations of existing facilities and are directly applicable to the subject and the spread in the capitalization rates is 239 basis points. Although this is a relatively wide range in rates, the sales nevertheless are felt to provide a good comparison of estimating a market capitalization rate. We believe that based on the market positioning, age, quality and condition of the subject, a capitalization rate in the lower to middle portion of the range would be warranted. From this, we have concluded to a range from 11.00 to 11.50 percent for the subject.

Industry Findings

To further test the capitalization rates, data on assisted living acquisition trends in The Senior Care Acquisition Report, Eighth Edition, 2003, was consulted. The report indicated that after two years of declining capitalization rates for assisted living properties, 2002 saw an increase in rates to a reported average of 12.20 percent. This information is summarized in the graph below.

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In addition, Cushman & Wakefield, Inc. has surveyed senior care participants regarding their investment parameters for senior housing properties. This recent information has been summarized in the following table.

2003 Participants Survey

							Change From 2002					Change From 2001
				Survey
Property Type	Survey Range			Average			Basis Point		%			Basis Point		%
Capitalization Rates
55+ Senior Apartments		7.00% - 10.25	%		8.15	%		-7		0.9	%		-68		-7.6	%
Independent Living		9.00% - 10.50	%		9.55	%		-5		0.5	%		-30		-3.0	%
Assisted Living		10.00% - 12.25	%		10.85	%		-17		1.6	%		-8		-7.2	%
Skilled Nursing		11.50% - 18.00	%		14.15	%		16		-1.1	%		-61		-4.2	%
Continuing Care Retirement Community		9.00% - 11.50	%		10.40	%		-35		3.4	%		-15		-1.4	%
Internal Rates of Return
55+ Senior Apartments		9.50% - 15.00	%		10.60	%		-15		1.4	%		-20		-1.8	%
Independent Living		10.00% - 15.00	%		11.90	%		-25		2.1	%		-65		-5.7	%
Assisted Living		12.00% - 17.00	%		15.30	%		42		-2.7	%		-22		-1.5	%
Skilled Nursing		13.00% - 20.00	%		16.30	%		-25		1.5	%		-165		-9.1	%
Continuing Care Retirement Community		9.00% - 17.00	%		13.00	%		-25		1.9	%		-135		-9.2	%

Source: Senior Care Participants Survey, 2003 by Cushman & Wakefield, Inc.

In reviewing the 2003 survey, capitalization rates for assisted living facilities ranged from 10.00 to 12.25 percent with an average indication of 10.85 percent. This data is seen as being nearly 135 basis points below that reported previously in The Senior Care Acquisition Report, Eighth Edition, 2003. The 2003 C&W survey also shows that capitalization rates have declined slightly over those reported in 2002 and 2001.

In choosing the appropriate capitalization rate for the subject, we have considered its location, occupancy, as well as the overall condition and utility of the property. The subject is a mid-sized

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assisted living facility located in a favorable demographic area in California. The market area is considered to be at an equilibrium basis with no under- or over-supply at this time. Based on the data and characteristics of the subject and marketplace, we believe a capitalization rate of between 11.00 to 11.50 percent to be appropriate for the property.

Band of Investment

The Band of Investment technique accounts for the combination of equity and prevailing financing which are banded together to finance this type of real estate. The rate developed is a weighted average, the weights being percentages of the total value, which are occupied by the mortgage and equity positions.

After surveying several commercial mortgage lenders and consulting the most recent Senior Care Participants Survey, published by Cushman & Wakefield, Inc. and the Senior Care Acquisition Report, published by Irving Levin Associates, it is our opinion that a typical creditworthy owner could obtain financing from a lending source in an amount equal to 75 percent of value at an annual interest rate of 8.50 percent. A typical loan period for this type of real estate ranges from 20 to 30 years. Utilizing a 25-year amortization period at an 8.50 percent interest rate (payable monthly) yields a mortgage constant of 0.0966273.

For a review of investor rates of return, reference is made to the previous table, which showed investment parameters for assisted living properties.

As shown in the table, internal rates of return or equity dividend rates for senior housing properties ranged from 9.50 to 20.00 percent. Independent living facilities fall within the lower to middle portion of the range from 10.00 to 15.0 percent with an average indicated rate of 11.90 percent. Assisted living facilities fall within the middle portion at 12.00 to 17.0 percent with an average indicated rate of 15.30 percent.

Based on the data, we believe a prudent investor in a senior housing property like the subject would accept an initial annual return of between 10 percent and 15 percent of an equity investment in anticipation of a stable income flow and property appreciation over time. From this, and based on the subject’s physical, locational and competitive structure, a rate from within the middle portion of the latter range, or 14.0 percent would be reasonable.

It should be emphasized that the equity dividend rate is not necessarily the same as an equity yield rate or true rate of return on equity capital. The equity dividend rate is an equity capitalization that reflects all benefits that can be recognized by the equity investor as of the date of purchase. The overall capitalization rate is developed as follows:

Band of Investment Technique

75.0	%	MORTGAGE	X	0.0966273 Mortgage Constant	=	0.0724
25.0	%	Equity	X	0.1400 Equity Dividend	=	0.0350
100.0	%	Total				0.1074
				OAR = 10.74%

Based on the data, we have estimated a market based capitalization rate of 11.50 percent for the property. However, a premium to the going-in capitalization rate is believed warranted to allow for the risk involved through the remaining term of the lease. Investors would typically add 150 to 250 basis points to the going-in cap rate to arrive at a terminal capitalization rate under a

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leasehold situation with a remaining term such as the subject’s. As a result, we have applied a 13.50 percent terminal capitalization rate in our analysis.

Discount Rate Selection

We developed an opinion of future cash flows and discounted that income stream at an internal rate of return (yield rate) currently required by investors for similar-quality real property. We note that due to the end of the lease, there is no reversion to the property as it will revert to the lessor.

Review of the 2003 Senior Housing Participants Survey presented earlier showed a wide range of rates of return for senior properties from a low of 9.75 percent to as high as 27 percent. The adjusted averages ranged from 12.8 percent for independent living facilities to 15.1 percent for licensed assisted living facilities.

Based on investor parameters and given our knowledge of the risks associated with such a facility, we have applied a 15.50 percent discount rate to the subject cash flows to arrive at our final value estimate. This rate is noted as being higher than the current investor rates that were reported in the 2003 Senior Housing Participants Survey.

Due to the risk in the property in that the lease in near the end of its first option period and we are assuming they exercise the second and final 10-year option period, we believe that an increase of between 150 and 200 basis points in the discount rate would be appropriate.

As such, we believe that a 15.50 percent discount rate is considered reasonable based on the age, size, condition and quality of the subject, as well as the competitive nature of the market. Therefore, we have discounted our cash flow and reversionary value projections at a discount rate of return of 15.50 percent.

Summary of Discounted Cash Flow Assumptions

Modeling Assumptions
Holding Period:	14 years
Start Date:	November 22, 2003
End Date	November 22, 2017
Vacancy & Collection Loss:	10.0%
Consumer Price Index (CPI):	3.50%
Expense Growth Rate:	3.50%
Property Tax Growth Rate:	3.50%
Rates of Return
Discount Rate:	15.50%
Terminal Cap Rate:	13.50%
Reversionary Sales Cost:	N/A

Discounted Cash Flow Method Conclusion

Based on the discount rate selected above, the value of the leasehold interest is $1,950,000, rounded. Our cash flow projection and valuation matrix is presented below.

VALUATION SERVICES	88	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Inn at Willow Glen
DISCOUNTED CASH-FLOW ANALYSIS - LEASEHOLD

ASSUMPTIONS

INFLATION (INCOME)	3.5	%
OPERATING EXPENSE RATIO	81.4	%
RESERVES	$300
MANAGEMENT FEE	5.0	%
CAPITALIZATION RATE	13.50	%
COSTS OF SALE	2.00	%
DISCOUNT RATE	15.50	%

FINANCIAL FORECAST

PERIODS				Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7
EFFECTIVE GROSS INCOME				$	2,413,692	$	2,498,171	$	2,585,607	$	2,676,103	$	2,769,767	$	2,866,709	$	2,967,044
LESS: OPERATING EXPENSES				$	1,965,100	$	2,033,879	$	2,105,064	$	2,178,741	$	2,254,997	$	2,333,922	$	2,415,610
LESS: MANAGEMENT FEE		5.0	%	$	120,685	$	124,909	$	129,280	$	133,805	$	138,488	$	143,335	$	148,352
LESS: RESERVES	$	300		$	24,900	$	25,772	$	26,674	$	27,607	$	28,573	$	29,573	$	30,608
CASH FLOW				$	303,007	$	313,613	$	324,589	$	335,950	$	347,708	$	359,878	$	372,473

PERIODS	Year 8		Year 9		Year 10		Year 11		Year 12		Year 13		Year 14
EFFECTIVE GROSS INCOME	$	3,070,890	$	3,178,371	$	3,289,614	$	3,404,751	$	3,523,917	$	2,769,767	$	2,866,709
LESS:	$	2,500,156	$	2,587,661	$	2,678,230	$	2,771,968	$	2,868,986	$	2,254,997	$	2,333,922
LESS:	$	153,545	$	158,919	$	164,481	$	170,238	$	176,196	$	138,488	$	143,335
LESS:	$	31,680	$	32,789	$	33,936	$	35,124	$	36,353	$	27,607	$	28,573
CASH FLOW	$	385,510	$	399,003	$	412,968	$	427,422	$	442,382	$	348,674	$	360,878
														13.50	%
													$	2,673,169
														($53,463	)
													$	2,619,706

NET PRESENT VALUE	$	1,949,646
	$	1,950,000	(ROUNDED)

VALUATION SERVICES	89	ADVISORY GROUP

RECONCILIATION AND FINAL VALUE OPINION

Valuation Methodology Review and Reconciliation

This Appraisal employs only the Income Capitalization Approach as we are valuing the leasehold position in the property. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that this approach would be considered necessary and applicable for market participants. Therefore, we have not employed the Cost Approach or the Sales Comparison Approach to develop an opinion of market value.

The approaches indicated the following values:

Cost Approach		N/A
Sales Comparison Approach:		N/A
Income Capitalization Approach:	$	1,950,000

The Income Capitalization Approach is typically considered the most appropriate approach to utilize when valuing going concerns such as nursing homes and assisted living facilities. This approach considers the income potential of the property. In our Income Capitalization Approach to value, the anticipated monetary benefits of the leasehold position were converted into a value estimate. Within the Income Capitalization Approach, discounted cash flow was used as it is the most common method used by investors and purchasers in acquiring leasehold properties.

Based on our Complete Appraisal as defined by the Uniform Standards of Professional Appraisal Practice, we have developed an opinion that the “as-is” going concern market value of the leasehold estate of the referenced property, subject to the assumptions, limiting conditions, certifications, and definitions, on October 15, 2003 was:

ONE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS

$1,950,000

Personal Property Allocation

Included in the above estimate of market value is the contributing value of the personal property at the subject property, or the furnishings, fixtures and equipment (FF&E). FF&E is generally considered to be part of the assisted living facility and is typically sold with the building. It is therefore considered to be a part of the property’s total value. FF&E includes the unit and public area furnishings, kitchen equipment, service/maintenance equipment and other machinery. We estimated the value of the FF&E. According to the Marshall Valuation Service Manual, the cost new for FF&E for an assisted living facility is approximately $3,500 per unit.

Physical deterioration (depreciation) must be deducted for the FF&E. The subject was completed in 1977. Based on our physical inspection of the property, we are of the opinion that the personal property is currently in average physical condition. We have estimated that the subject’s FF&E has a useful life of 10 years and we have estimated the current effective age at 8 years. This equates to a 80 percent depreciation factor, as summarized in the following table.

VALUATION SERVICES	90	ADVISORY GROUP

RECONCILIATION AND FINAL VALUE OPINION

Furniture, Fixtures and Equipment

Value of FF&E Per Unit As New	$	3,500
Number of Units		83
Total Value of FF&E As New (Including 15% Profit factor)	$	495,075
Physical Life (Year)		10
Average Effective Age (Years)		8
Percent Depreciated (%)		80	%
Percent Value Remaining (%)		20	%
Depreciated Value (Rounded)	$	100,000

The contributing value of the FF&E is believed to be the cost of the FF&E less its accrued depreciation or $100,000, rounded.

Business Value (Going Concern)

Assisted living facilities are undisputedly a combination of business and real estate; the day-to-date operation of an assisted living facility represents a business over and above the real estate value. Numerous theories have been developed over time in an attempt to isolate the business component of a senior housing facility. As the property is subject to an operating lease and we are valuing only the leasehold interest, this indicates that all of the value is attributable to $1,950,000 in business value.

VALUATION SERVICES	91	ADVISORY GROUP

ASSUMPTIONS AND LIMITING CONDITIONS

“Report” means the appraisal or consulting report and conclusions stated therein, or a letter opinion, to which these Assumptions and Limiting Conditions are annexed.

“Property” means the subject of the Report

“C&W” means Cushman & Wakefield, Inc. or its subsidiary that issued the Report.

“Appraiser(s)” means the employee(s) of C&W who prepared and signed the Report.

The Report has been made subject to the following assumptions and limiting conditions:

1.	No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated. No survey of the Property was undertaken.
2.	The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate.The owner of the Property may have provided some of such information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report.
3.	The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions.
4.	The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited. Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person other than the party to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales or promotional or offering or SEC material without C&W’s prior written consent.
	Any authorized user of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including attorneys’ fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person or entity.
5.	Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal.
6.	The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to

VALUATION SERVICES	92	ADVISORY GROUP

ASSUMPTIONS AND LIMITING CONDITIONS

	discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value estimate contained in the Report is based.
7.	The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. C&W assumes no responsibility for the soundness of structural members nor for the condition of mechanical equipment, plumbing or electrical components.
8.	The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties.
9.	The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser’s best estimates of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser’s task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and supply and demand.
10.	Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value.
11.	Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the Property. C&W recommends that an expert in this field be employed.
12.	If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as only one factor together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report.
13.	In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies

VALUATION SERVICES	93	ADVISORY GROUP

ASSUMPTIONS AND LIMITING CONDITIONS

	actually collected by C&W or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made.
14.	If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients. C&W disclaims any and all liability to any party other than the party which retained C&W to prepare the Report.
15.	By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions stated herein.

Extraordinary Assumptions

An extraordinary assumption is defined as “an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser’s opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis.” (USPAP 2001 Edition, ASB of The Appraisal Foundation, 1/1/2001, page 2).

This Appraisal assumes that the property meets the licensing requirements of the State of California as a residential care facility for the elderly and continues to remain in compliance with applicable life safety codes.

This Appraisal employs no other Extraordinary Assumptions.

Hypothetical Conditions

A hypothetical condition is defined as “that which is contrary to what exists, but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis.” (USPAP 2001 Edition, ASB of The Appraisal Foundation, 1/1/2001, page 3).

This Appraisal employs no Hypothetical Conditions.

VALUATION SERVICES	94	ADVISORY GROUP

CERTIFICATION OF APPRAISAL

We certify that, to the best of our knowledge and belief:

1.	The statements of fact contained in this report are true and correct.
2.	The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and is our personal, impartial, and unbiased professional analyses, opinions, and conclusions.
3.	We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.
4.	We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.
5.	Our engagement in this assignment was not contingent upon developing or reporting predetermined results.
6.	Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
7.	Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.
8.	Mark E. Bryant made a personal inspection of the property that is the subject of this report. John M. Vissotzky, MAI, Managing Director, Valuation Advisory Services, reviewed and approved the report but did not inspect the property.
9.	No one provided significant real property appraisal assistance to the persons signing this report.
10.	The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.
11.	As of the date of this report, Appraisal Institute continuing education for John M. Vissotzky, MAI is current.

Mark E. Bryant	John M. Vissotzky, MAI
Managing Director	Managing Director
Senior Housing/Healthcare Industry Group
California Certified General Appraiser
License No. AG02572

VALUATION SERVICES	95	ADVISORY GROUP

ADDENDA

Addenda Contents
ADDENDUM A:	Letter of Engagement
ADDENDUM B:	Legal Description
ADDENDUM C:	Demographics
ADDENDUM D:	Property Exhibits
ADDENDUM E:	Operating Lease
ADDENDUM F:	Historical Operating Statements
ADDENDUM G:	Qualifications of the Appraisers

VALUATION SERVICES	96	ADVISORY GROUP

ADDENDA

ADDENDUM A: Letter of Engagement

September 30, 2003

Mr. Douglas Armstrong
General Counsel
ARV Assisted Living, Inc.
245 Fischer Avenue, D-1
Costa Mesa, CA 92626

Re: 12 Assisted Living Facilities
In California and Arizona

Dear Mr. Armstrong:

Thank you for requesting our proposal for appraisal services. This proposal letter, with its attachments, will become, upon your acceptance, our letter of engagement to provide the services outlined herein.

THE PARTIES TO THIS AGREEMENT: Cushman & Wakefield of Georgia, Inc, Cushman & Wakefield of California, Inc, and Cushman & Wakefield of Arizona, Inc. will prepare the appraisals. We understand that ARV Assisted Living, Inc. (“ARV”) and its affiliates are the clients in this assignment and will be referred to herein, collectively, at times as the “Client” and the report will be addressed to ARV and/or one or more of its affiliates as requested by ARV.

The appraisal will be prepared and submitted to the Client for use only in connection with the proxy solicitation/tender offers filed with the SEC and distributed to the holders of limited partnership interests in American Retirement Villas Properties II and American Retirement Villas Properties III, L.P. (the “Partnerships”). Unless we otherwise consent in writing, the appraisal cannot be used (other than in the material related to the proxy solicitation/tender offer referred to above) for any purpose. If the Appraisal is submitted to a lender or investor with the prior approval of C&W, such party should consider this Appraisal as only one factor together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in the Appraisal.

REPORTING REQUIREMENTS: We have agreed to prepare a Complete Appraisal in a Self-Contained format. The market value of the Fee Simple or Leasehold Interest will be presented As Is. You have also requested that we include the Going Concern Value as of the specified date of value. The valuation methods utilized in these reports will include the Income Approach, Sale Comparison Approach, and Cost Approach if all deemed applicable in producing a credible value estimate. The appraisal reports will be signed by an Appraisal Institute member holding the title of MAI (Member Appraisal Institute), Any appraisal report will

VALUATION SERVICES	ADVISORY GROUP

Mr. Douglas Armstrong
ARV Assisted Living, Inc.
September 30, 2003
Page 2

contain reliance language to the effect that the report is for the use and benefit of ARV, any of its affiliates, agents, and advisors and that the report and references to the report may be included and quoted in any tender offer or solicitation document (whether electronic or hard copy format) in connection with the transactions involving the Partnership referred to above.

PROPERTY INFORMATION: The twelve subject properties are:

ARV PORTFOLIO

Property	Units		City	State	YR Built		Appraisal fee
Covina Villa		63	Covina	CA		1977	$	5,500
Montego Heights Lodge		163	Walnut Creek	CA		1978	$	4,500
R.I. Of Burlingame		67	Burlingame	CA		1977	$	4,500
R.I. Of Campbell		71	Campbell	CA		1977	$	4,500
R.I. Of Daly City		95	Daly City	CA		1975	$	4,500
R.I. Of Fremont		68	Fremont	CA		1977	$	4,500
R.I. Of Fullerton		68	Fullerton	CA		1974	$	4,500
R.I. Of Sunnyvale		120	Sunnyvale	CA		1977	$	4,500
Valley View Lodge		125	Walnut Creek	CA		1986	$	4,500
Inn @ Willow Glen		83	San Jose	CA		1977	$	5,000
Chandler Villas		164	Chandler	AZ		1988	$	5,500
Villa Las Posas		123	Camarillo	CA		1997	$	5,500
		1,210					$	57,500

The entire fee is inclusive of any travel expenses and is a net fee to ARV or its Designated Affiliates

REGULATIONS OF FEDERAL AGENCIES: Federal banking regulations require banks and savings and loan associations to employ appraisers where a FIRREA compliant appraisal must be used in connection with mortgage loans or other transactions involving federally regulated lending institutions, including mortgage bankers/brokers. The appraisal being prepared would comply with the requirements of FIRREA if it were being delivered for use by a federally regulated institution. This appraisal will be prepared in accordance with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation, the Standards of Professional Practice and the Code of Ethics of the Appraisal Institute.

STANDARD ASSUMPTIONS AND LIMITING CONDITIONS: Our report will be subject to our standard Assumptions and Limiting Conditions, which will be incorporated into the appraisal. The appraisal report may also be subject to any Extraordinary Assumptions and Hypothetical Conditions.

CONSENT: We understand that you intend to include, in the tender offer/proxy solicitation materials referred to above, a copy of our appraisal report, a description of the report and a summary of the procedures we followed in preparing our report, and our basis for, and the

VALUATION SERVICES	ADVISORY GROUP

Mr. Douglas Armstrong
ARV Assisted Living, Inc.
September 30, 2003
Page 3

methods we used in arriving at, the conclusions reflected in our report. We agree to assist in the preparation of such description and summary and consent to your inclusion in the tender officer/proxy solicitation material of a copy of the appraisal report and a description and summary reasonably acceptable to us. Furthermore, you agree to pay the reasonable fees, of our legal counsel for the review of any such description and summary to be included in such material which is the subject of the requested consent.

In the event the Client provides a copy of this appraisal to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, ARV hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including reasonable attorneys’ fees, incurred in investigating and defending any claim arising from the use of, or reliance upon, the appraisal by any such unauthorized person or entity. ARV also hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers, and employees harmless from and against all damages, expenses, claims, costs, including reasonable attorneys’ fees, incurred in investigating and defending any claim arising from the reliance upon the appraisal by any limited partner of the Partnerships or in connection with the tender offer/proxy solicitation material described herein. Notwithstanding the foregoing, neither ARV nor any of its affiliates shall be required to indemnify or hold harmless C&W, its affiliates or any of their respective shareholders, directors, officers or employees for or against any losses, damages, expenses, claims or costs resulting from the gross negligence, willful misconduct or bad faith of C&W, its affiliates or any of their respective shareholders, directors, officers, or employees. This indemnification shall be binding on ARV, its successors and assigns.

If the Appraisal is referred to or included in any offering material or prospectus, (other than the proxy solicitation/tender offer material referred to above), the Appraisal shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients. C&W disclaims any and all liability to any party other than the party which retained C&W to prepare the Appraisal.

INFORMATION NEEDED TO COMPLETE THE ASSIGNEMNT: We understand that you will provide the following information for our review, if available.

• Plot Plan/Survey and Legal Description

• Building plans

• Original construction and site acquisition costs

• Cost of any major expansions, modifications or repairs incurred over the past three years/Capital Expense Budget

• Operating Statements for three previous years plus year-to-date

• Most recent real estate tax bill or statement

• Operating Budgets

VALUATION SERVICES	ADVISORY GROUP

Mr. Douglas Armstrong
ARV Assisted Living, Inc.
September 30, 2003
Page 4

• Sales history of the subject property over the past three years at a minimum

• Rent roll

• On Site Contact – Name and Phone #

When appropriate, we will include graphics such as maps, photographs and charts to assist in visualizing our findings. The final reports will be delivered electronically. We will provide hard copies upon request.

Fee and Schedule of Payment: The fee for this assignment shall be $57,500 in total (please see previous chart for individual fees), payable at the time of transmission of the report electronically or in three (3) bound copies. A retainer equal to fifty percent ($28,750) of the fee shall be paid when you return this engagement letter signed by you below authorizing the assignment to us. The balance of the fee will be due upon delivery of the report. Payment of the fee is not contingent on the appraised value, outcome of the consultation report, a loan closing, or any other prearranged condition.

Additional fees will be charged on an hourly basis for any work which exceeds the scope of this proposal, including performing additional valuation scenarios, additional research and conference calls or meetings with any party which exceed the time allotted for an assignment of this nature. If we are requested to stop working on this assignment, for any reason, prior to our completion of the appraisal, we will be entitled to bill you for the time put in to date at our hourly rates.

Response to Review: We agree to respond to your review of our report within five (5) business days of your communication to us. Correspondingly, you will have twenty-one (21) days from receipt of our report to communicate your review. We reserve the right to bill you for responding to your review beyond this time period.

Authorizing the Assignment and Report Delivery: We agree to complete the assignment within (21) days of receipt of your written authorization to proceed. You may authorize the assignment by signing this letter and returning it to us with the requested retainer .

Responding to Subpoena or Other Judicial Command to Produce Documents: If we receive a subpoena or other judicial command to produce documents or to provide testimony involving this assignment in connection with a lawsuit or proceeding, we will use reasonable efforts to notify you of our receipt of same. However, if we are not a party to these proceedings, you agree to reimburse us for the reasonable out-of-pocket expenses that we incur in responding to any subpoena or judicial command, including reasonable attorneys’ fees, if any, as they are incurred. We will be compensated at the then prevailing hourly rates of the personnel responding to the subpoena or command for testimony.

Limitation on Liability: By signing this agreement, except as may be prohibited by applicable law, Client expressly agrees that its sole and exclusive remedy for any and all losses or damages relating to this agreement shall be limited to the amount of the appraisal fee paid by the Client. In the event that the Client, or any other party entitled to do so, makes a claim against C&W or any of its affiliates or any of their respective officers or employees in connection with or in any way relating to this engagement or the appraisal, the maximum damages recoverable from C&W or any of its affiliates or their respective officers or employees shall be

VALUATION SERVICES	ADVISORY GROUP

Mr. Douglas Armstrong
ARV Assisted Living, Inc.
September 30, 2003
Page 5

the amount of the monies actually collected by us for this assignment and under no circumstances shall any claim for consequential damages be made.

You acknowledge that any opinions and conclusions expressed by the Cushman & Wakefield professionals during this assignment are representations made as employees and not as individuals. C&W’s responsibility is limited to the client.

Thank you for calling on us to render these services and we look forward to working with you.
Sincerely,

VALUATION SERVICES	ADVISORY GROUP

ADDENDA

ADDENDUM B: Legal Description

EXHIBIT A

D 311 PAGE 558

ORDER NO. 66796

DESCRIPTION

All that certain real property situate in the City of San Jose, County of Santa Clara, State of California, being all of Lot 5 and a portion of Lot 7 of Block 6, as said Lots are shown on that certain Map entitled, “Map of the Sainsevain Villa”, filed June 19, 1876 in Book “A” of Maps, at page 11, Santa Clara County Records, described as follows:

BEGINNING at a point in the Easterly line of said Lot 7, said point bears 42.00 feet (measured at right angles) Northerly from the center line of Pedro Street, as said center line is shown on that certain Map of Tract No. 1779, filed in Book 76 of Maps at pages 8 and 9, Santa Clara County Records; thence from said Point of Beginning along the Easterly line of said Lots N. 0° 00’ 37” E., 188.10 feet (188.00 Record) to the Northeasterly corner of said Lot 5; thence along the Northerly line of said Lot 5, N. 89° 59’ 23” W. 370.30 feet (370.00 Record) to the Easterly line of Northrup Street (60.00 feet wide); thence along said Easterly line of Northrup Street, S. 0° 00’ 37” W., 168.10 feet; thence along a curve to the left, having a radius of 20.00 feet, through a central angle of 90° 00’ 00” for an arc length of 31.42 feet to a point 42.00 feet (measured at right angles) Northerly from said center line of Pedro Street; thence parallel with said center line, S. 89° 59’ 23” E., 350.30 feet to the Point of Beginning.

9-26-97-SJ4-06-L
264-5-66
40-001

BW/OM/bf

(A) 264-5-66
(9-10-76)

-2-

ADDENDA

ADDENDUM C: Demographics

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		2000					2002					2007
Population by Age		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Population			210,566					217,534					233,700
	Age 45 - 54		24,306		11.54	%		25,995		11.95	%		29,596		12.66	%
	Age 55 - 59		7,990		3.79	%		9,034		4.15	%		11,196		4.79	%
	Age 60 - 64		5,938		2.82	%		6,434		2.96	%		8,360		3.58	%
	Age 65 - 69		5,090		2.42	%		5,210		2.40	%		6,011		2.57	%
	Age 70 - 74		5,086		2.42	%		5,047		2.32	%		5,087		2.18	%
	Age 75 - 79		4,920		2.34	%		4,902		2.25	%		5,002		2.14	%
	Age 80 - 84		3,626		1.72	%		3,862		1.78	%		4,190		1.79	%
	Age 85 and over		3,373		1.60	%		3,719		1.71	%		4,321		1.85	%
Age 55 and over			36,024		17.11	%		38,209		17.56	%		44,167		18.90	%
Age 65 and over			22,096		10.49	%		22,741		10.45	%		24,611		10.53	%
Total Population, Male			108,002					111,318					119,299
	Age 45 - 54		12,428		11.51	%		13,282		11.93	%		15,085		12.64	%
	Age 55 - 59		3,948		3.66	%		4,456		4.00	%		5,504		4.61	%
	Age 60 - 64		2,827		2.62	%		3,076		2.76	%		4,008		3.36	%
	Age 65 - 69		2,313		2.14	%		2,375		2.13	%		2,743		2.30	%
	Age 70 - 74		2,119		1.96	%		2,107		1.89	%		2,116		1.77	%
	Age 75 - 79		2,008		1.86	%		1,999		1.80	%		2,039		1.71	%
	Age 80 - 84		1,279		1.18	%		1,328		1.19	%		1,441		1.21	%
	Age 85 and over		952		0.88	%		1,015		0.91	%		1,187		0.99	%
Age 55 and over			15,445		14.30	%		16,355		14.69	%		19,038		15.96	%
Age 65 and over			8,670		8.03	%		8,823		7.93	%		9,526		7.99	%
Total Population, Female			102,564					106,216					114,401
	Age 45 - 54		11,878		11.58	%		12,712		11.97	%		14,511		12.68	%
	Age 55 - 59		4,042		3.94	%		4,578		4.31	%		5,692		4.98	%
	Age 60 - 64		3,111		3.03	%		3,358		3.16	%		4,353		3.80	%
	Age 65 - 69		2,777		2.71	%		2,835		2.67	%		3,268		2.86	%
	Age 70 - 74		2,967		2.89	%		2,941		2.77	%		2,971		2.60	%
	Age 75 - 79		2,912		2.84	%		2,904		2.73	%		2,963		2.59	%
	Age 80 - 84		2,348		2.29	%		2,534		2.39	%		2,748		2.40	%
	Age 85 and over		2,421		2.36	%		2,704		2.55	%		3,135		2.74	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 1 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

	2000					2002					2007
Population by Age	Census		Pct.			Estimate		Pct.			Projection		Pct.
Age 55 and over		20,578		20.06	%		21,853		20.57	%		25,129		21.97	%
Age 65 and over		13,426		13.09	%		13,918		13.10	%		13.10		13.19	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 2 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		2000					2002					2007
Population by Single Race Classification		Census		Pct.			Estimate		Pct.			Projection		Pct.
White Alone			127,577					128,261					129,397
	Age 65 and over		17,320		13.58	%		17,544		13.68	%		18,367		14.19	%
Black or African American Alone			7,654					7,962					8,773
	Age 65 and over		263		3.44	%		291		3.66	%		324		3.69	%
American Indian and Alaska Native Alone			1,866					2,031					2,460
	Age 65 and over		91		4.87	%		96		4.72	%		121		4.92	%
Asian Alone			24,468					26,557					31,263
	Age 65 and over		2,697		11.02	%		2,923		11.01	%		3,515		11.24	%
Native Hawaiian and Other Pacific Islander Alone			693					725					849
	Age 65 and over		23		3.36	%		24		3.34	%		27		3.15	%
Some Other Race Alone			37,440					40,595					47,525
	Age 65 and over		1,156		3.09	%		1,269		3.13	%		1,553		3.27	%
Two or More Races			10,869					11,403					13,434
	Age 65 and over		545		5.02	%		594		5.21	%		704		5.24	%
		2000					2002					2007
Population by Hispanic or Latino		Census		Pct.			Estimate		Pct.			Projection		Pct.
Hispanic or Latino			71,686					75,697					85,158
	Age 65 and over		3,262		4.55	%		3,277		4.33	%		3,673		4.31	%
Not Hispanic or Latino			138,881					141,836					148,542
	Age 65 and over		18,833		13.56	%		19,464		13.72	%		20,938		14.10	%
		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 55 - 64			7,620					8,847					10,948
	Income less than $15,000		1,261		16.56	%		563		6.36	%		409		3.73	%
	Income $15,000 - $24,999		1,012		13.28	%		627		7.09	%		602		5.50	%
	Income $25,000 - $34,999		1,129		14.82	%		654		7.39	%		648		5.92	%
	Income $35,000 - $49,999		1,214		15.93	%		985		11.13	%		931		8.51	%
	Income $50,000 - $74,999		1,477		19.39	%		1,686		19.05	%		1,608		14.69	%
	Income $75,000 - $99,999		801		10.51	%		1,205		13.62	%		1,662		15.18	%
	Income $100,000 - $149,999		509		6.68	%		1,575		17.81	%		1,955		17.86	%
	Income $150,000 - $249,999		126		1.65	%		1,198		13.54	%		1,914		17.48	%
	Income $250,000 - $499,999		40		0.52	%		289		3.26	%		990		9.05	%
	Income $500,000 and more		14		0.18	%		66		0.75	%		229		2.09	%
Median Household Income			39,800					73,658					94,194

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 3 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 4 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 65 - 69			4,241					3,050					3,455
	Income less than $15,000		1,261		29.72	%		349		11.45	%		227		6.57	%
	Income $15,000 - $24,999		850		20.04	%		402		13.18	%		351		10.15	%
	Income $25,000 - $34,999		669		15.79	%		374		12.26	%		364		10.53	%
	Income $35,000 - $49,999		558		13.15	%		483		15.82	%		490		14.18	%
	Income $50,000 - $74,999		480		11.33	%		528		17.32	%		597		17.29	%
	Income $75,000 - $99,999		217		5.12	%		313		10.25	%		455		13.17	%
	Income $100,000 - $149,999		119		2.80	%		296		9.71	%		420		12.16	%
	Income $150,000 - $249,999		41		0.96	%		248		8.14	%		338		9.79	%
	Income $250,000 - $499,999		16		0.38	%		41		1.34	%		175		5.07	%
	Income $500,000 and more		3		0.07	%		16		0.52	%		38		1.10	%
Median Household Income			24,941					47,391					62,437
Householder Age 70 - 74			3,455					2,978					2,941
	Income less than $15,000		1,210		35.01	%		363		12.18	%		206		7.02	%
	Income $15,000 - $24,999		750		21.71	%		402		13.50	%		309		10.52	%
	Income $25,000 - $34,999		579		16.76	%		350		11.75	%		326		11.08	%
	Income $35,000 - $49,999		500		14.48	%		466		15.64	%		389		13.23	%
	Income $50,000 - $74,999		402		11.64	%		547		18.37	%		527		17.93	%
	Income $75,000 - $99,999		175		5.07	%		305		10.24	%		398		13.54	%
	Income $100,000 - $149,999		79		2.29	%		284		9.54	%		349		11.88	%
	Income $150,000 - $249,999		39		1.13	%		207		6.95	%		273		9.29	%
	Income $250,000 - $499,999		15		0.42	%		38		1.28	%		129		4.40	%
	Income $500,000 and more		4		0.12	%		17		0.56	%		33		1.12	%
Median Household Income			23,881					47,023					61,364
Householder Age 75 - 79			3,048					3,178					3,189
	Income less than $15,000		1,313		43.08	%		574		18.07	%		330		10.35	%
	Income $15,000 - $24,999		615		20.19	%		583		18.33	%		479		15.02	%
	Income $25,000 - $34,999		393		12.89	%		447		14.07	%		475		14.89	%
	Income $35,000 - $49,999		272		8.91	%		526		16.54	%		473		14.84	%
	Income $50,000 - $74,999		190		6.24	%		451		14.19	%		521		16.34	%
	Income $75,000 - $99,999		117		3.84	%		237		7.45	%		341		10.71	%
	Income $100,000 - $149,999		41		1.36	%		171		5.37	%		271		8.51	%
	Income $150,000 - $249,999		11		0.36	%		158		4.98	%		184		5.76	%
	Income $250,000 - $499,999		5		0.16	%		26		0.81	%		99		3.12	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 5 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
	Income $500,000 and more		1		0.03	%		6		0.19	%		15		0.47	%
Median Household Income			17,695					34,632					44,842

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 6 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 80 - 84			2,212					2,469					2,629
	Income less than $15,000		1,036		46.84	%		450		18.20	%		271		10.30	%
	Income $15,000 - $24,999		454		20.51	%		469		19.00	%		421		16.02	%
	Income $25,000 - $34,999		294		13.30	%		354		14.34	%		385		14.66	%
	Income $35,000 - $49,999		188		8.48	%		399		16.17	%		400		15.21	%
	Income $50,000 - $74,999		136		6.15	%		352		14.23	%		423		16.09	%
	Income $75,000 - $99,999		89		4.03	%		175		7.07	%		284		10.81	%
	Income $100,000 - $149,999		33		1.48	%		126		5.10	%		212		8.05	%
	Income $150,000 - $249,999		13		0.59	%		113		4.59	%		135		5.13	%
	Income $250,000 - $499,999		4		0.18	%		26		1.05	%		83		3.16	%
	Income $500,000 and more		1		0.07	%		6		0.24	%		15		0.57	%
Median Household Income			16,916					33,887					43,888
Householder Age 85 and over			1,679					2,185					2,509
	Income less than $15,000		756		45.01	%		410		18.76	%		263		10.48	%
	Income $15,000 - $24,999		325		19.37	%		416		19.05	%		402		16.01	%
	Income $25,000 - $34,999		200		11.93	%		317		14.49	%		372		14.82	%
	Income $35,000 - $49,999		132		7.84	%		341		15.61	%		384		15.30	%
	Income $50,000 - $74,999		104		6.18	%		315		14.43	%		391		15.60	%
	Income $75,000 - $99,999		60		3.55	%		146		6.68	%		270		10.76	%
	Income $100,000 - $149,999		26		1.57	%		117		5.34	%		197		7.86	%
	Income $150,000 - $249,999		1		0.06	%		108		4.94	%		144		5.72	%
	Income $250,000 - $499,999		1		0.06	%		15		0.70	%		78		3.10	%
	Income $500,000 and more		0		0.00	%		0		0.00	%		9		0.34	%
Median Household Income			16,411					33,360					43,513

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 7 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Households by Household Income		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Households			73,695					79,476					84,165
	Income less than $15,000		13,359		18.13	%		5,445		6.85	%		3,475		4.13	%
	Income $15,000 - $24,999		11,209		15.21	%		5,927		7.46	%		4,846		5.76	%
	Income $25,000 - $34,999		11,333		15.38	%		6,076		7.64	%		5,393		6.41	%
	Income $35,000 - $49,999		13,811		18.74	%		9,427		11.86	%		7,518		8.93	%
	Income $50,000 - $74,999		13,377		18.15	%		15,580		19.60	%		13,115		15.58	%
	Income $75,000 - $99,999		6,475		8.79	%		11,820		14.87	%		12,865		15.29	%
	Income $100,000 - $149,999		3,350		4.55	%		13,445		16.92	%		15,883		18.87	%
	Income $150,000 - $249,999		816		1.11	%		9,574		12.05	%		13,313		15.82	%
	Income $250,000 - $499,999		248		0.34	%		1,835		2.31	%		6,567		7.80	%
	Income $500,000 and more		89		0.12	%		349		0.44	%		1,189		1.41	%
Average Household Income		$	44,768				$	90,196				$	114,712
Median Household Income		$	36,229				$	70,641				$	90,028
Per Capita Income		$	17,494				$	32,856				$	40,745

		1990*					2002					2007
Specified Owner-Occupied Housing Unit Values		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Specified Owner-Occupied Housing Unit Values			28,217					29,795					31,276
	Value less than $25,000		100		0.35	%		35		0.12	%		32		0.10	%
	Value $25,000 - $49,999		121		0.43	%		106		0.36	%		54		0.17	%
	Value $50,000 - $74,999		145		0.51	%		69		0.23	%		87		0.28	%
	Value $75,000 - $99,999		373		1.32	%		59		0.20	%		49		0.16	%
	Value $100,000 - $149,999		1,568		5.56	%		242		0.81	%		124		0.40	%
	Value $150,000 - $199,999		3,393		12.03	%		524		1.76	%		262		0.84	%
	Value $200,000 - $299,999		11,921		42.25	%		2,425		8.14	%		1,188		3.80	%
	Value $300,000 - $399,999		6,857		24.30	%		5,824		19.55	%		2,794		8.93	%
	Value $400,000 - $499,999		2,507		8.88	%		7,624		25.59	%		4,818		15.40	%
	Value $500,000 Or More		1,232		4.37	%		12,888		43.26	%		21,868		69.92	%
Median Specified Owner-Occupied Housing Unit Value			270,546					473,672					642,531

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 8 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		2000					2002					2007
Group Quarters by Population Type		Census		Pct.			Estimate		Pct.			Projection		Pct.
Institutionalized:			2,736					2,740					2,754
	Correctional Institutions		1,216		44.44	%		1,219		44.48	%		1,226		44.51	%
	Nursing Homes		1,056		38.58	%		1,057		38.56	%		1,062		38.55	%
	Other Institutions		465		16.98	%		465		16.96	%		467		16.94	%
Noninstitutionalized			5,891					5,902					5,920

	2000		2002		2007
Tenure of Occupied Housing Units	Census		Estimate		Projection
Owner Occupied		34,387		35,220		37,044
Renter Occupied		43,013		44,256		47,120

			Pop 65
1990* Census Household Type and Relationship			and Over		Pct.
Total				22,614
In Family Households				13,704		60.60	%
	Householder			7,375		32.61	%
	Spouse			4,838		21.39	%
	Other relative			1,407		6.22	%
	Non-Relative			84		0.37	%
In Group Quarters				1,094		4.84	%
	Institutionalized			1,023		4.53	%
	Other			71		0.31	%
In Non-Family Households				7,816		34.56	%
	Male Householder			1,389		6.14	%
		Living Alone		1,226		5.42	%
		Not Living Alone		162		0.72	%
	Female Householder			6,026		26.65	%
		Living Alone		5,723		25.31	%
		Not Living Alone		304		1.34	%
	Non-Relative			401		1.77	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 9 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

1990* Census Household Income - Monthly Owner							65 Yrs
Costs as a Percent of 1989 Household Income		Total Units		Pct.			and Over		Pct.
Total Specified Owner-Occupied Housing Units			28,819					8,756
	Less than 20%		14,276		49.54	%		6,166		70.42	%
	20 to 24%		3,222		11.18	%		637		7.27	%
	25 to 29%		3,111		10.79	%		466		5.32	%
	30 to 34%		2,430		8.43	%		300		3.42	%
	35% or more		5,548		19.25	%		1,075		12.27	%
	Not Computed		232		0.81	%		113		1.30	%

1990* Census Household Income							65 Yrs
Gross Rent as a Percent of 1989 Household Income		Total Units		Pct.			and Over		Pct.
Total Specified Owner-Occupied Housing Units			40,195					5,119
	Less than 20%		9,299		23.14	%		621		12.13	%
	20 to 24%		6,084		15.14	%		384		7.49	%
	25 to 29%		5,268		13.11	%		488		9.54	%
	30 to 34%		3,971		9.88	%		508		9.93	%
	35% or more		14,469		36.00	%		2,854		55.75	%
	Not Computed		1,104		2.75	%		265		5.17	%

						65 Yrs
1990* Census Occupied Housing Units	Total Units		Pct.			and Over		Pct.
Owner Occupied Units		33,297		45.26	%		10,145		66.40	%
Renter Occupied Units		40,274		54.74	%		5,133		33.60	%
Complete Plumbing Facilities		73,264		99.58	%		15,200		99.49	%
Lacking Plumbing Facilities		307		0.42	%		73		0.48	%
With Telephone		72,083		97.98	%		15,133		99.05	%
No Telephone		1,495		2.03	%		147		0.96	%
One or more Vehicles		65,814		89.46	%		11,402		74.63	%
No Vehicles Available		7,757		10.54	%		3,869		25.32	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 10 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

1990* Census Poverty Status													75 Yrs
By Household Type By Age of Householder			Total		Pct.			Age 65 - 74		Pct.			and Over		Pct.
Total Households				74,068					7,971					6,803
Married Couple Family				32,088		43.32	%		3,765		47.23	%		2,132		31.34	%
Other Family				11,707		15.81	%		713		8.95	%		752		11.05	%
	Male Householder			3,936		5.31	%		201		2.53	%		140		2.06	%
	Female Householder			7,771		10.49	%		512		6.42	%		611		8.99	%
Non-Family				30,272		40.87	%		3,493		43.82	%		3,919		57.61	%
	Householder Living Alone			21,753		29.37	%		3,271		41.04	%		3,674		54.01	%
	Householder not Living Alone			8,519		11.50	%		222		2.78	%		245		3.60	%
Above Poverty				67,219		90.75	%		7,235		90.76	%		6,093		89.57	%
	Married Couple Family			30,731		41.49	%		3,649		45.78	%		2,079		30.57	%
	Other Family			9,918		13.39	%		673		8.45	%		687		10.09	%
		Male Householder		3,588		4.84	%		196		2.46	%		140		2.06	%
		Female Householder		6,330		8.55	%		478		5.99	%		546		8.03	%
Non-Family				26,570		35.87	%		2,912		36.54	%		3,327		48.91	%
		Householder Living Alone		19,364		26.14	%		2,729		34.23	%		3,131		46.02	%
		Householder not Living Alone		7,205		9.73	%		184		2.30	%		197		2.89	%
Below Poverty				6,849		9.25	%		737		9.24	%		709		10.43	%
	Married Couple Family			1,357		1.83	%		116		1.45	%		52		0.77	%
	Other Family			1,789		2.42	%		40		0.50	%		65		0.96	%
		Male Householder		348		0.47	%		6		0.07	%		0		0.00	%
		Female Householder		1,441		1.95	%		34		0.43	%		65		11.00	%
Non-Family				3,703		5.00	%		581		7.29	%		592		8.70	%
		Householder Living Alone		2,389		3.23	%		543		6.81	%		544		7.99	%
		Householder not Living Alone		1,314		1.77	%		38		0.48	%		48		0.71	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 11 of 24

Senior Life Report
Area(s): Radius 3.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

1990* Census Mobility and Disability								65 Yrs					75 Yrs
Civilian Noninstitutionalized Persons Age 16 and Over			Total		Pct.			and Over		Pct.			and Over		Pct.
Persons				155,435					21,638					9,201
With Mblty or Care Lmts				10,737		6.91	%		4,618		21.34	%		2,978		32.36	%
	Mobility Limits Only			2,979		1.92	%		1,660		7.67	%		1,133		12.32	%
	Self Care Limits Only			4,806		3.09	%		1,254		5.80	%		625		6.79	%
	Both Limits			2,952		1.90	%		1,704		7.87	%		1,220		13.26	%
No Mblty or Care Limits				144,698		93.09	%		17,020		78.66	%		6,224		67.64	%
With a Work Disability				15,877		10.21	%		6,789		31.38	%
	In Labor Force			4,380		2.82	%		434		2.01	%
		Employed		3,918		2.52	%		397		1.83	%
		Unemployed		462		0.30	%		37		0.17	%
	Not in Labor Force			11,497		7.40	%		6,355		29.37	%
		Prevented from Working		9,926		6.39	%		5,505		25.44	%
		Not Prevented from Wrk		1,571		1.01	%		850		3.93	%
No Work Disability				139,557		89.79	%		14,852		68.64	%
	In Labor Force			105,096		67.61	%		2,599		12.01	%
		Employed		99,489		64.01	%		2,502		11.56	%
		Unemployed		5,607		3.61	%		97		0.45	%
	Not in Labor Force			34,461		22.17	%		12,253		56.63	%

*     Census 2000 SF3 (long form) data is not yet available. Data Items resented 1990 Census figures converted to Census 2000 geographies.

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 12 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		2000					2002					2007
Population by Age		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Population			614,756					634,694					680,955
	Age 45 - 54		71,385		11.61	%		76,569		12.06	%		86,895		12.76	%
	Age 55 - 59		23,906		3.89	%		26,999		4.25	%		33,449		4.91	%
	Age 60 - 64		18,735		3.05	%		20,230		3.19	%		26,315		3.86	%
	Age 65 - 69		15,648		2.55	%		15,998		2.52	%		18,547		2.72	%
	Age 70 - 74		14,083		2.29	%		14,028		2.21	%		14,152		2.08	%
	Age 75 - 79		12,172		1.98	%		12,218		1.93	%		12,486		1.83	%
	Age 80 - 84		7,969		1.30	%		8,606		1.36	%		9,312		1.37	%
	Age 85 and over		7,128		1.16	%		7,989		1.26	%		9,289		1.36	%
Age 55 and over			99,641		16.21	%		106,068		16.71	%		123,550		18.14	%
Age 65 and over			57,000		9.27	%		58,839		9.27	%		63,786		9.37	%
Total Population, Male			313,462					323,128					346,050
	Age 45 - 54		35,833		11.43	%		38,435		11.89	%		43,511		12.57	%
	Age 55 - 59		11,565		3.69	%		13,059		4.04	%		16,174		4.67	%
	Age 60 - 64		8,707		2.78	%		9,365		2.90	%		12,272		3.55	%
	Age 65 - 69		7,164		2.29	%		7,301		2.26	%		8,483		2.45	%
	Age 70 - 74		6,095		1.94	%		6,070		1.88	%		6,127		1.77	%
	Age 75 - 79		5,003		1.60	%		5,016		1.55	%		5,148		1.49	%
	Age 80 - 84		2,901		0.93	%		3,075		0.95	%		3,340		0.97	%
	Age 85 and over		2,047		0.65	%		2,220		0.69	%		2,603		0.75	%
Age 55 and over			43,483		13.87	%		46,105		14.27	%		54,146		15.65	%
Age 65 and over			23,211		7.40	%		23,681		7.33	%		25,700		7.43	%
Total Population, Female			301,294					311,566					334,905
	Age 45 - 54		35,552		11.80	%		38,134		12.24	%		43,385		12.95	%
	Age 55 - 59		12,342		4.10	%		13,939		4.47	%		17,275		5.16	%
	Age 60 - 64		10,027		3.33	%		10,865		3.49	%		14,043		4.19	%
	Age 65 - 69		8,484		2.82	%		8,697		2.79	%		10,064		3.01	%
	Age 70 - 74		7,988		2.65	%		7,958		2.55	%		8,025		2.40	%
	Age 75 - 79		7,169		2.38	%		7,203		2.31	%		7,338		2.19	%
	Age 80 - 84		5,068		1.68	%		5,531		1.78	%		5,972		1.78	%
	Age 85 and over		5,080		1.69	%		5,768		1.85	%		6,686		2.00	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 13 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

	2000					2002					2007
Population by Age	Census		Pct.			Estimate		Pct.			Projection		Pct.
Age 55 and over		56,158		18.64	%		59,963		19.25	%		69,404		20.72	%
Age 65 and over		33,789		11.21	%		35,158		11.28	%		11.28		11.37	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 14 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		2000					2002					2007
Population by Single Race Classification		Census		Pct.			Estimate		Pct.			Projection		Pct.
White Alone			322,625					322,008					320,903
	Age 65 and over		40,332		12.50	%		41,030		12.74	%		42,598		13.27	%
Black or African American Alone			19,474					19,645					20,636
	Age 65 and over		897		4.60	%		942		4.79	%		995		4.82	%
American Indian and Alaska Native Alone			5,172					5,611					6,756
	Age 65 and over		270		5.22	%		284		5.06	%		351		5.19	%
Asian Alone			125,828					135,920					157,139
	Age 65 and over		10,386		8.25	%		11,105		8.17	%		13,240		8.43	%
Native Hawaiian and Other Pacific Islander Alone			2,262					2,366					2,710
	Age 65 and over		93		4.09	%		97		4.08	%		105		3.88	%
Some Other Race Alone			107,862					116,157					134,682
	Age 65 and over		3,414		3.17	%		3,685		3.17	%		4,488		3.33	%
Two or More Races			31,532					32,988					38,130
	Age 65 and over		1,609		5.10	%		1,696		5.14	%		2,010		5.27	%

		2000					2002					2007
Population by Hispanic or Latino		Census		Pct.			Estimate		Pct.			Projection		Pct.
Hispanic or Latino			201,424					212,294					238,058
	Age 65 and over		9,215		4.58	%		9,655		4.55	%		11,092		4.66	%
Not Hispanic or Latino			413,331					422,400					442,897
	Age 65 and over		47,785		11.56	%		49,185		11.64	%		52,694		11.90	%

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 55 - 64			22,281					25,516					31,547
	Income less than $15,000		2,937		13.18	%		1,212		4.75	%		910		2.88	%
	Income $15,000 -$24,999		2,816		12.64	%		1,432		5.61	%		1,384		4.39	%
	Income $25,000 - $34,999		3,134		14.07	%		1,632		6.40	%		1,584		5.02	%
	Income $35,000 - $49,999		3,893		17.47	%		2,589		10.15	%		2,418		7.66	%
	Income $50,000 - $74,999		4,933		22.14	%		4,627		18.14	%		4,445		14.09	%
	Income $75,000 - $99,999		2,904		13.03	%		3,815		14.95	%		4,581		14.52	%
	Income $100,000 - $149,999		1,397		6.27	%		5,228		20.49	%		6,277		19.90	%
	Income $150,000 - $249,999		239		1.07	%		4,231		16.58	%		6,363		20.17	%
	Income $250,000 - $499,999		60		0.27	%		660		2.59	%		3,142		9.96	%
	Income $500,000 and more		15		0.07	%		90		0.35	%		442		1.40	%
Median Household Income			43,769					83,294					103,608

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 15 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 16 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 65 - 69			10,248					8,763					9,930
	Income less than $15,000		2,748		26.82	%		810		9.24	%		548		5.52	%
	Income $15,000 - $24,999		2,152		21.00	%		1,018		11.61	%		913		9.19	%
	Income $25,000 - $34,999		1,596		15.58	%		1,055		12.04	%		987		9.94	%
	Income $35,000 - $49,999		1,470		14.34	%		1,426		16.27	%		1,355		13.65	%
	Income $50,000 - $74,999		1,269		12.38	%		1,725		19.68	%		1,861		18.74	%
	Income $75,000 - $99,999		451		4.40	%		1,029		11.74	%		1,444		14.54	%
	Income $100,000 -$149,999		235		2.29	%		1,027		11.72	%		1,377		13.86	%
	Income $150,000 - $249,999		60		0.59	%		562		6.42	%		987		9.94	%
	Income $250,000 - $499,999		24		0.24	%		87		0.99	%		390		3.93	%
	Income $500,000 and more		3		0.03	%		25		0.28	%		68		0.69	%
Median Household Income			25,642					51,065					65,603
Householder Age 70 - 74			7,580					7,772					7,679
	Income less than $15,000		2,465		32.52	%		802		10.31	%		467		6.08	%
	Income $15,000 -$24,999		1,724		22.75	%		939		12.08	%		761		9.91	%
	Income $25,000 - $34,999		1,269		16.73	%		914		11.76	%		774		10.07	%
	Income $35,000 - $49,999		1,150		15.18	%		1,251		16.09	%		1,020		13.28	%
	Income $50,000 - $74,999		1,004		13.25	%		1,491		19.18	%		1,427		18.58	%
	Income $75,000 - $99,999		328		4.32	%		886		11.41	%		1,077		14.03	%
	Income $100,000 -$149,999		163		2.15	%		910		11.71	%		1,048		13.65	%
	Income $150,000 - $249,999		53		0.70	%		490		6.31	%		771		10.04	%
	Income $250,000 - $499,999		16		0.22	%		71		0.91	%		283		3.69	%
	Income $500,000 and more		4		0.05	%		19		0.24	%		50		0.65	%
Median Household Income			24,403					49,766					64,338
Householder Age 75 - 79			5,949					7,314					7,328
	Income less than $15,000		2,749		46.20	%		1,264		17.28	%		739		10.09	%
	Income $15,000 -$24,999		1,253		21.06	%		1,372		18.76	%		1,112		15.17	%
	Income $25,000 - $34,999		781		13.13	%		980		13.40	%		1,086		14.82	%
	Income $35,000 - $49,999		497		8.36	%		1,201		16.43	%		1,044		14.24	%
	Income $50,000 - $74,999		376		6.32	%		1,125		15.38	%		1,245		17.00	%
	Income $75,000 - $99,999		167		2.80	%		592		8.10	%		833		11.37	%
	Income $100,000 - $149,999		59		1.00	%		455		6.22	%		668		9.12	%
	Income $150,000 - $249,999		12		0.19	%		277		3.79	%		409		5.58	%
	Income $250,000 - $499,999		8		0.13	%		38		0.51	%		170		2.32	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 17 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
	Income $500,000 and more		1		0.02	%		9		0.12	%		21		0.28	%
Median Household Income			16,604					35,505					45,445

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 18 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 80 - 84			4,069					5,171					5,478
	Income less than $15,000		2,022		49.70	%		943		18.24	%		567		10.35	%
	Income $15,000 -$24,999		868		21.34	%		1,048		20.26	%		914		16.69	%
	Income $25,000 - $34,999		530		13.03	%		702		13.58	%		844		15.41	%
	Income $35,000 - $49,999		349		8.58	%		813		15.72	%		785		14.33	%
	Income $50,000 - $74,999		239		5.87	%		765		14.80	%		886		16.18	%
	Income $75,000 - $99,999		117		2.86	%		381		7.36	%		603		11.00	%
	Income $100,000 - $149,999		45		1.12	%		291		5.62	%		453		8.27	%
	Income $150,000 -$249,999		15		0.36	%		189		3.65	%		276		5.04	%
	Income $250,000 - $499,999		5		0.14	%		31		0.60	%		130		2.37	%
	Income $500,000 and more		3		0.07	%		9		0.18	%		20		0.36	%
Median Household Income			15,840					33,450					42,882
Householder Age 85 and over			3,058					4,323					4,979
	Income less than $15,000		1,463		47.85	%		834		19.29	%		545		10.94	%
	Income $15,000 -$24,999		599		19.57	%		899		20.80	%		859		17.26	%
	Income $25,000 - $34,999		358		11.69	%		617		14.28	%		787		15.81	%
	Income $35,000 - $49,999		229		7.50	%		681		15.76	%		737		14.81	%
	Income $50,000 - $74,999		166		5.42	%		611		14.12	%		802		16.10	%
	Income $75,000 - $99,999		82		2.67	%		261		6.05	%		500		10.03	%
	Income $100,000 -$149,999		36		1.19	%		239		5.52	%		355		7.12	%
	Income $150,000 - $249,999		2		0.05	%		157		3.63	%		264		5.30	%
	Income $250,000 - $499,999		2		0.07	%		20		0.46	%		112		2.25	%
	Income $500,000 and more		3		0.10	%		3		0.08	%		18		0.36	%
Median Household Income			15,083					31,917					41,047

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 19 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		1990*					2002					2007
Households by Household Income		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Households			193,615					209,441					221,477
	Income less than $15,000		28,770		14.86	%		11,824		5.65	%		7,820		3.53	%
	Income $15,000 -$24,999		25,763		13.31	%		13,376		6.39	%		11,193		5.05	%
	Income $25,000 - $34,999		28,362		14.65	%		13,966		6.67	%		12,582		5.68	%
	Income $35,000 - $49,999		38,193		19.73	%		22,538		10.76	%		17,867		8.07	%
	Income $50,000 - $74,999		42,384		21.89	%		40,406		19.29	%		33,289		15.03	%
	Income $75,000 - $99,999		19,536		10.09	%		33,815		16.15	%		33,667		15.20	%
	Income $100,000 -$149,999		9,251		4.78	%		40,966		19.56	%		45,379		20.49	%
	Income $150,000 - $249,999		1,668		0.86	%		27,710		13.23	%		39,325		17.76	%
	Income $250,000 - $499,999		457		0.24	%		4,255		2.03	%		17,882		8.07	%
	Income $500,000 and more		113		0.06	%		587		0.28	%		2,472		1.12	%
Average Household Income		$	46,691				$	92,620				$	116,408
Median Household Income		$	40,637				$	76,931				$	95,783
Per Capita Income		$	16,445				$	30,232				$	37,222

		1990*					2002					2007
Specified Owner-Occupied Housing Unit Values		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Specified Owner-Occupied Housing Unit Values			82,014					87,879					92,400
	Value less than $25,000		353		0.43	%		113		0.13	%		100		0.11	%
	Value $25,000 - $49,999		469		0.57	%		405		0.46	%		222		0.24	%
	Value $50,000 - $74,999		396		0.48	%		301		0.34	%		367		0.40	%
	Value $75,000 - $99,999		1,180		1.44	%		166		0.19	%		207		0.22	%
	Value $100,000 -$149,999		5,209		6.35	%		875		1.00	%		487		0.53	%
	Value $150,000 -$199,999		12,149		14.81	%		1,991		2.27	%		1,207		1.31	%
	Value $200,000 - $299,999		39,111		47.69	%		8,952		10.19	%		5,141		5.56	%
	Value $300,000 - $399,999		17,169		20.93	%		20,545		23.38	%		11,080		11.99	%
	Value $400,000 - $499,999		4,265		5.20	%		24,713		28.12	%		16,362		17.71	%
	Value $500,000 Or More		1,714		2.09	%		29,817		33.93	%		57,228		61.93	%
Median Specified Owner-Occupied Housing Unit Value			254,341					442,862					596,369

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 20 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

		2000					2002					2007
Group Quarters by Population Type		Census		Pct.			Estimate		Pct.			Projection		Pct.
Institutionalized:			3,908					4,098					4,460
	Correctional Institutions		1,246		31.88	%		1,331		32.47	%		1,469		32.93	%
	Nursing Homes		2,180		55.77	%		2,227		54.33	%		2,329		52.23	%
	Other Institutions		483		12.35	%		541		13.20	%		662		14.84	%
Noninstitutionalized			8,057					8,345					8,751

	2000		2002		2007
Tenure of Occupied Housing Units	Census		Estimate		Projection
Owner Occupied		103,302		105,794		111,416
Renter Occupied		100,889		103,647		110,061

			Pop 65
1990* Census Household Type and Relationship			and Over		Pct.
Total				50,128
In Family Households				33,035		65.90	%
	Householder			16,802		33.52	%
	Spouse			10,566		21.08	%
	Other relative			5,193		10.36	%
	Non-Relative			474		0.95	%
In Group Quarters				1,874		3.74	%
	Institutionalized			1,789		3.57	%
	Other			85		0.17	%
In Non-Family Households				15,219		30.36	%
	Male Householder			2,734		5.45	%
		Living Alone		2,411		4.81	%
		Not Living Alone		323		0.64	%
	Female Householder			11,677		23.29	%
		Living Alone		11,054		22.05	%
		Not Living Alone		622		1.24	%
	Non-Relative			809		1.61	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 21 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

1990* Census Household Income - Monthly Owner							65 Yrs
Costs as a Percent of 1989 Household Income		Total Units		Pct.			and Over		Pct.
Total Specified Owner-Occupied Housing Units			84,137					18,123
	Less than 20%		38,648		45.93	%		12,575		69.39	%
	20 to 24%		10,177		12.10	%		1,385		7.64	%
	25 to 29%		9,549		11.35	%		1,021		5.63	%
	30 to34%		7,607		9.04	%		664		3.66	%
	35% or more		17,637		20.96	%		2,279		12.58	%
	Not Computed		519		0.62	%		199		1.10	%

1990* Census Household Income							65 Yrs
Gross Rent as a Percent of 1989 Household Income		Total Units		Pct.			and Over		Pct.
Total Specified Owner-Occupied Housing Units			94,378					10,288
	Less than 20%		22,604		23.95	%		1,177		11.44	%
	20 to 24%		14,549		15.42	%		876		8.51	%
	25 to 29%		12,652		13.41	%		1,111		10.80	%
	30 to 34%		9,358		9.92	%		1,034		10.05	%
	35% or more		32,932		34.89	%		5,677		55.18	%
	Not Computed		2,285		2.42	%		414		4.02	%

						65 Yrs
1990* Census Occupied Housing Units	Total Units		Pct.			and Over		Pct.
Owner Occupied Units		99,002		51.13	%		22,009		68.09	%
Renter Occupied Units		94,638		48.87	%		10,313		31.91	%
Complete Plumbing Facilities		192,774		99.55	%		32,186		99.58	%
Lacking Plumbing Facilities		865		0.45	%		128		0.39	%
With Telephone		190,385		98.32	%		32,075		99.24	%
No Telephone		3,263		1.69	%		244		0.75	%
One or more Vehicles		178,560		92.21	%		25,079		77.59	%
No Vehicles Available		15,079		7.79	%		7,234		22.38	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 22 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

1990* Census Poverty Status													75 Yrs
By Household Type By Age of Householder			Total		Pct.			Age 65 - 74		Pct.			and Over		Pct.
Total Households				194,496					18,175					13,016
Married Couple Family				96,070		49.39	%		9,101		50.07	%		4,072		31.28	%
Other Family				33,734		17.34	%		2,120		11.66	%		1,475		11.33	%
	Male Householder			10,762		5.53	%		417		2.29	%		270		2.07	%
	Female Householder			22,971		11.81	%		1,703		9.37	%		1,205		9.26	%
	Non-Family			64,692		33.26	%		6,954		38.26	%		7,469		57.39	%
	Householder Living Alone			45,952		23.63	%		6,393		35.18	%		7,081		54.40	%
	Householder not Living Alone			18,740		9.63	%		561		3.09	%		388		2.98	%
Above Poverty				178,365		91.71	%		16,607		91.37	%		11,543		88.68	%
	Married Couple Family			91,851		47.23	%		8,755		48.17	%		3,925		30.16	%
	Other Family			28,282		14.54	%		1,956		10.76	%		1,385		10.64	%
		Male Householder		9,822		5.05	%		400		2.20	%		270		2.07	%
		Female Householder		18,459		9.49	%		1,556		8.56	%		1,115		8.57	%
	Non-Family			58,232		29.94	%		5,896		32.44	%		6,232		47.88	%
		Householder Living Alone		41,494		21.33	%		5,416		29.80	%		5,914		45.44	%
		Householder not Living Alone		16,738		8.61	%		480		2.64	%		318		2.44	%
Below Poverty				16,131		8.29	%		1,568		8.63	%		1,473		11.32	%
	Married Couple Family			4,219		2.17	%		346		1.90	%		146		1.12	%
	Other Family			5,452		2.80	%		164		0.90	%		90		0.69	%
		Male Householder		940		0.48	%		17		0.09	%		0		0.00	%
		Female Householder		4,512		2.32	%		147		0.81	%		90		7.28	%
	Non-Family			6,460		3.32	%		1,058		5.82	%		1,237		9.50	%
		Householder Living Alone		4,458		2.29	%		977		5.38	%		1,167		8.97	%
		Householder not Living Alone		2,002		1.03	%		81		0.45	%		70		0.54	%

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 23 of 24

Senior Life Report
Area(s): Radius 5.0

1185 PEDRO ST	Latitude:	37.313037
SAN JOSE, CA 95126-3757	Longitude:	-121.907877

1990* Census Mobility and Disability								65 Yrs					75 Yrs
Civilian Noninstitutionalized Persons Age 16 and Over			Total		Pct.			and Over		Pct.			and Over		Pct.
Persons				430,781					48,337					18,831
With Mblty or Care Lmts				28,531		6.62	%		10,135		20.97	%		6,162		32.72	%
	Mobility Limits Only			7,965		1.85	%		3,828		7.92	%		2,470		13.12	%
	Self Care Limits Only			13,118		3.05	%		2,623		5.43	%		1,193		6.33	%
	Both Limits			7,448		1.73	%		3,684		7.62	%		2,500		13.27	%
No Mblty or Care Limits				402,251		93.38	%		38,202		79.03	%		12,669		67.28	%
With a Work Disability				39,947		9.27	%		15,078		31.19	%
	In Labor Force			11,853		2.75	%		862		1.78	%
		Employed		10,550		2.45	%		792		1.64	%
		Unemployed		1,303		0.30	%		70		0.14	%
	Not in Labor Force			28,095		6.52	%		14,217		29.41	%
		Prevented from Working		24,182		5.61	%		12,458		25.77	%
		Not Prevented from Wrk		3,913		0.91	%		1,758		3.64	%
No Work Disability				390,834		90.73	%		33,263		68.81	%
	In Labor Force			298,507		69.29	%		5,864		12.13	%
		Employed		282,073		65.48	%		5,546		11.47	%
		Unemployed		16,434		3.82	%		318		0.66	%
	Not in Labor Force			92,327		21.43	%		27,399		56.68	%

*     Census 2000 SF3 (long form) data is not yet available. Data Items resented 1990 Census figures converted to Census 2000 geographies.

Prepared on: October 20, 2003      09:16 AM

© 2002 Claritas. All rights reserved. (800) 866-6511 Page 24 of 24

ADDENDA

ADDENDUM D: Operating Lease

Reviewed By: Noah Bilenker
Date: October 16, 2002

ARV
LEASE ABSTRACT¹²
Inn at Willow Glen
Pedro and Northrup Streets, San Jose, California

Lessor	T.M. Chang, Yoshie F. Chang and Tobias H.T. Chang, as successor in interest to San Jose Investors Company, a California limited partnership (Assignment)
Lessee	American Retirement Villas Properties II, as successor in interest to Retirement Inn of San Jose, a California limited partnership (Assignment)
Guarantors	None
Documents Abstracted	Lease dated as of November 23, 1977
	Assignment and Assumption of Lease Agreement between Retirement Inn of San Jose, as Assignor, and American Retirement Villas Properties II, as Assignee, dated as of April 11, 1989 (“Assignment”)
Leased Property	Inn at Willow Glen, Pedro and Northrup Streets, San Jose, California
Term Commencement Date	November 23, 1977(§a)
Expiration Date	November 22, 1997 (§a) (1980 Amendment missing)
Minimum Rent	$40,000 per year ($ 1 0,000 quarterly) (§b(6))
Additional Rent	Bonus Rent: Lessee must pay $40,000 times the percentage which annual rents exceed 1981 rent (§b(6))
	Expenses: Lessee must pay all expenses of operation, debt service, mortgage insurance premium, taxes, insurance, ordinary maintenance, utilities, assessments, impounds required by lender of FHA insured loan, and any and all other costs, expenses and charges relating to the premises,

¹² All capitalized terms used but not defined herein shall have the meanings set forth in the Lease.

	except as applicable to normal wear and tear (§b)
Extension/Renewal Option and Rent	Lessee has an option for two additional 10 year terms (§a) (1980 Amendment missing)
Late Charges	Default for 30 days grants Lessor the option to accelerate all remaining rent to come immediately due or to terminate the Lease (§1)
Subleasing/Assignment Restrictions (Change in Control)	Lessor’s prior written consent required for assignment or sublet (§j)
Recourse Liability	Silent
Certain Lessee Covenants	None
Reserves/Escrows	None
Recourse Documents	None
Miscellaneous Documents	Amendment to Lease dated February 20, 1980 (missing)
Miscellaneous	None

LEASE

          This lease, executed at Mill valley, California is made on November 23, 1977, between SAN JOSE INVESTORS COMPANY, a California Limited partnership, hereinafter referred to as Lessor, and RETIREMENT INN OF SAN JOSE, a California Limited partnership, hereinafter referred to as Lessee. Lessor warrants and represents that he is the owner of that certain real property located at the Northeast Corner of Pedro and Northrup Streets in San Jose, California and more particularly described as follows:

SEE EXHIBIT “A” ATTACHED HERETO,
AND FULLY INCORPORATED HEREIN,

          Lessor does hereby lease said premises co Lessee under the following covenants and conditions:

          (a) This lease is for the term of 20 years commencing on the 23rd day of November, 1977, and ending on the 22nd day of November, 1997, and the Lessee shall have the option to renew this lease for two additional 10 year periods on the same conditions as contained herein.

          (b) Lessee agrees to pay all expenses of operation, debt service, mortgage insurance premium, taxes, insurance, ordinary maintenance, utilities, assessments, impounds required by lender of FHA insured loan, and any and all other costs, expenses and charges relating to the premises, except as applicable to normal wear and tear and except as otherwise noted for the calendar year 1978. The following rental schedule shall apply:

1)     During 1977 Lessee shall pay all expenses as defined above.

2)     During 1978 Lessee shall pay all expenses as defined above, over and above $150,000, which is to be paid directly by Lessor to service the FHA insured loan;

3)     During 1979 Lessee shall pay all expenses as defined above and pay to Lessor an additional $12,000 on September 10, 1979 and $12,000 on December 10, 1979;

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     4) During 1980 Lessee shall pay all expenses as defined above and pay to Lessor four quarterly payments of $7,500 each on the 10th of March, June, September and December;

     5) During 1981 Lessee shall pay all expenses as defined above and pay to Lessor four quarterly payments of $10,000 each on the 10th of March, June, September, and December;

     6) During the remainder of the term of the lease, Lessee shall continue to pay all expenses as defined above and pay to Lessor four quarterly payments of $10,000 each on the 10th of March, June, September and December. Additionally, Lessee agrees to pay bonus rent, which shall be calculated by multiplying $40,000 times the percentage which annual rents exceed 1981 (the base year) rents. Bonus payment shall be made within 30 days of the close of the calendar year and Lessor shall have access to the books of Lessee to verify said bonus payment.

          (c) Lessee shall furnish and equip at its expense said premises in accordance with FHA requirements and with sufficient furnishings and equipment of operate a retirement home for elderly persons and shall maintain said furnishings and equipment in good condition allowing for ordinary wear and tear. Before leasing or purchasing said equipment, the Lessee shall submit a list of furnishings and non-realty items to Lessor and shall obtain the approval of the Lessor. If the furniture is leased or utilized as collateral in any financing arrangement, the Lessee agrees to execute a security agreement and financing statement to cover the said furnishings and non-realty items. The Lessor agrees to said security agreement and financing arrangement being subordinate to the Lessee’s leasing or financing arrangement. Lessee agrees to forfeit all right, title and interest in said furnishings and equipment in case of a default under this lease.

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          (d) As a further consideration of this lease, Lessee agrees and binds himself:

     1) To pay punctually all City, State and Federal taxes, or any other taxes, general and special assessments and any other charges of any description except Income and Inheritance taxes of the Lessor, which may be levied or assessed against the property, and to deliver to Lessor all receipts for same.

     2) To maintain in force an insurance policy or policies which will insure and indemnify Lessor against liability or financial loss resulting from damage or injury occurring to property or persons (including malpractice if applicable) in or about the demised premises, naming Lessor as an additional named insured. The liability under such insurance policies shall be not less than $1,000,000.00. Lessee shall be obliged to carry malpractice insurance only so long as such can be obtained at a premium rate, which shall not exceed twice the rate in effect at the inception of this lease. If Lessee fails to maintain such policies in force, Lessor may obtain the same and the premiums thereon shall be added to the next rental installment due hereunder as additional rental. Lessee shall provide Lessor with a certificate of such insurance and such insurance shall contain a provision that such shall not be subject to cancellation without giving Lessor ten (10) days written notice and the right to pay said premiums to prevent cancellation.

     3) To carry and pay for fire insurance with extended coverage endorsement for the protection of Lessor upon the demised premises, the policy limits of which insurance policies shall not be less than 100 percent of the replacement cost as stated on FHA Form 2264 of said buildings and any improvements thereto.

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     4) to maintain the property in good condition; to make at its own expense all ordinary repairs, whether structural or non-structural, it being understood, however, that any structural alterations shall be subject to approval of the Lessor and HUD. This responsibility shall include the irrigation systems, lawns, plantings, boiler, easily removable items and all other miscellaneous items referred to in the specifications. The Lessee shall execute contracts for the maintenance of the mechanical, electrical, air conditioning, heating systems, boilers, elevators, and other similar equipment. Copies of these contracts shall be submitted to Lessor for approval and shall be returned to Lessee within seven (7) working days thereof.

          The rental paid as specified above shall be net to Lessor, free of any and all costs and expenses incurred in complying with the above conditions, and any and all costs or expenses or liability for damages, except those costs and expenses attributed to normal wear and tear, in connection with the property shall be paid by Lessee.

          (e) The premises herein leased shall be used exclusively for housing for the elderly.

          (f) The leased premises and appurtenances, including the locks, keys, plumbing, elevators, plate glass, heating system and all other fixtures are accepted by the Lessee in their present condition.

          (g) Should Lessor agree to make further improvements to premises, Lessee agrees, if Lessor deems it impossible or impractical to make improvements agreed upon before possession is given, that Lessor may begin the work on the improvements after Lessee is duly installed in the property, and there shall be no reduction or waiver of any part of the rent because of said work. No alterations shall be made without the prior written approval of the Lessor and HUD.

          (h) As the expiration of this lease, or its termination for other causes, Lessee is obligated to immediately surrender

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possession, and should Lessee fail to do so, he consents to pay as liquidated damages five (5) times the rent per day, with attorney’s fees, costs, etc. Lessee also expressly waives any notice to vacate at the expiration of this lease and all legal delays, and hereby confesses judgment with costs placing Lessor in possession to be executed at once. Should Lessor allow or permit Lessee to remain in the leased premises after the expiration of this Lease, this shall not be construed as a reconduction of this lease.

          (i) Should premises be vacated or abandoned by Lessee because of ejectment for breach hereof, or otherwise, then the rent for the unexpired term, with Attorney’s fees, shall at once become due and payable, and Lessor, at his option, has the right to cancel this lease, or re-enter and let said premises for such price and on such terms as may be immediately obtainable and apply the net amount realized to the payment of the rent.

          (j) Lessee shall not assign this lease or any interest therein or any part thereof, and shall not sublet any part or portion of said premises without the written consent of the Lessor and HUD first having been obtained. Any assignment or subletting without the consent of Lessor and HUD, either by voluntary or involuntary act, or by operation of law, including bankruptcy, shall be null and void, and the Lessor may, at his option, terminate this lease.

          (k) Lessee agrees to and shall:

     1) Maintain and conduct his business in a lawful manner, provided, however, that should he fail to do so, such failure is brought to his attention, and he immediately thereafter remedies or rectifies his failure in such respect, his original failure shall not be deemed a breach of this provision.

     2) Comply promptly with all federal, state and municipal statutes and ordinances, and with all regulations, orders, and directives or appropriate governmental agencies, as such statutes, ordinances, regulations, orders and directives now exist or may hereafter be provided concerning the use and safety of the leased premises, and, at

-5-

his sole expense, make any repairs, changes or modifications in, on or to the leased premises required by any of the foregoing.

          (l) Should the Lessee at any time violate any of the conditions of this lease; or fail to pay the rent, water bill (or other expenses assumed under this lease), punctually at maturity, as stipulated; or upon the adjudication of Lessee in bankruptcy, the appointment of a receiver for Lessee, or the filing of a bankruptcy, receivership or respite petition by the Lessee; or upon Lessee’s suspension, failure or insolvency, and should such violation continue for a period of thirty days after written notice has been given to Lessee, then the rent for the whole unexpired term of this lease shall, without putting Lessee in default, at once become due and payable; and in such event, Lessor shall have the option either at once to demand the entire rent for the whole term, or to immediately cancel this lease, without putting Lessee in default, Lessee to remain responsible for all damages or losses suffered by Lessor, Lessee hereby assenting thereto and expressly waiving the legal notices to vacate the premises.

          (m) Should Lessee at any time use the leased premises or any portion thereof for any illegal or unlawful purpose, or commit, or permit or tolerate the commission therein of any act made punishable by fine or imprisonment under the laws of the United States or the State of California, or any ordinance of the appropriate municipality, the remedies set forth in the preceding paragraph shall be available to Lessor immediately without necessity of giving any written notice or any other notice to Lessee.

          (n) Failure to strictly and promptly enforce these conditions shall not operate as a waiver of Lessor’s rights, Lessor expressly reserving the right to always enforce prompt payment of rent, or to cancel this lease, regardless of any indulgencies or extensions previously granted. The receiving by Lessor or Lessor’s representative of any rent in arrears, or after notice of institution of any suit for possession, or for cancellation of this lease, will not be considered as a waiver of such notice of suit, or of

-6-

any of the rights of Lessor.

          (o) The Lessee agrees that it will, at all times, indemnify and save, protect and keep harmless, the Lessor, and the said demised premises from every and all costs, loss, damage, liability, expense, penalty and fine whatsoever which may arise from or be claimed against said Lessor or the demised premises, or damage of whatever kind or character consequent upon or arising from any neglect or fault of the Lessee or his agents and employees in the use and occupancy of the premises, including injuries or losses incurred while on the demised premises or activities conducted by Lessee off the premises, or consequent upon or arising from any failure by said Lessee to so comply and conform with all laws, statutes, ordinances and regulations of the United States, the State of California and appropriate municipality in which said premises are situate, now and hereafter in force; and if any suits or proceedings shall be brought against the Lessor or the said demised premises, on account of any alleged violation thereof, or failure to comply and conform therewith, or on account of any damage, omission, neglect (or use of said premises), by the Lessee or his agents and employees, or any other person on said premises, that he, the Lessee, will defend the same, and will pay whatever judgment or judgments which may be recovered against the Lessor or against the said demised premises on account thereof.

          (p) At all times during the term of this lease, the Lessors shall have the right, by themselves, their agents and employees, to enter into and upon the leased premises during reasonable business hours for the purpose of examining and inspecting the same and determining whether the Lessee shall have complied with its obligations hereunder in respect to the care and maintenance of the premises and the repairs or rebuilding of the improvements thereon when necessary.

          (q) The Lessor shall have the privilege at all times, by themselves or an auditor, of examining all such books or accounts and other records of the Lessee relating to this project. Copies

-7-

ADDENDA

ADDENDUM E: Property Exhibits

ADDENDA

ADDENDUM F: Historical Operating Statements

Pll - ITEM 6

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2003
	Version	AA
	Community	Inn at Willow Glen
	Department	Total Department
	Month	Along Columns
	GL Account	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL			AUG			AUG YTD
40005 Revenue-Rental		158,809			157,289			148,743			95,201			167,549			150,890			161,690			175,637			1,215,807
40010 Revenue-Rent Refunds/Proration		(911	)		(701	)		(602	)		(731	)		(3,797	)		(481	)		—			—			(7,223	)
Total Rental Revenue		157,898			156,588			148,141			94,470			163,752			150,408			161,690			175,637			1,208,584
40110 Revenue-AL Level 1		2,500			2,500			2,500			1,917			3,508			3,520			5,056			5,317			26,817
40115 Revenue-AL Level 2		5,088			5,983			5,254			2,300			4,162			3,599			3,350			3,100			32,837
40120 Revenue-AL Level 3		11,925			12,333			8,150			3,541			10,248			6,520			8,830			7,400			68,947
40125 Revenue-AL Level 4		8,390			8,275			8,727			6,388			11,169			10,050			9,131			8,000			70,129
40130 Revenue-AL Level 5		4,705			3,625			4,256			4,474			5,267			6,647			11,711			13,025			53,709
40135 Revenue-AL Level 6		2,850			3,138			4,775			(1,283	)		2,755			5,700			5,700			8,249			31,885
40140 Revenue-AL Level 7		8,144			4,620			4,520			3,465			5,462			870			5,431			8,876			41,389
Total AL Services Revenue		43,602			40,474			38,182			20,802			42,572			36,906			49,209			53,966			325,713
40515 Revenue-Other		1,490			705			1,282			587			669			992			450			621			6,796
40525 Revenue-Processing/App Fees		4,145			2,000			1,000			—			10,000			16,000			11,200			4,000			48,345
Total Other Revenue		5,635			2,705			2,282			587			10,669			16,992			11,650			4,621			55,141
40575 Rev-Process Fee Concessions		—			—			—			—			(10,000	)		(12,000	)		—			—			(22,000	)
40015 Rev-Rent Concessions		(10,496	)		(13,738	)		(11,993	)		1,354			(14,698	)		(13,825	)		(4,975	)		(3,223	)		(71,594	)
40215 Rev-A/L Concessions		(5,628	)		(5,783	)		(7,426	)		4,114			(2,312	)		(1,875	)		(1,635	)		(2,028	)		(22,574	)
Total Concessions		(16,124	)		(19,521	)		(19,419	)		5,468			(27,011	)		(27,700	)		(6,610	)		(5,250	)		(116,168	)
Total Revenue		191,011			180,246			169,185			121,326			189,982			178,607			215,939			228,974			1,473,270
50005 Payroll Expense-Regular		53,307			48,537			55,268			44,636			66,078			51,378			53,863			51,170			424,238
50405 Payroll Expense-Overtime		2,171			2,236			1,903			1,773			1,413			2,666			2,483			2,226			16,872
50705 Payroll Expense-Doubletime		558			27			122			159			31			281			140			148			1,466
51005 Bonuses		2,447			3,035			2,491			3,141			6,847			2,268			937			768			21,933
51505 Vacation, Sick, Holiday		3,037			3,270			5,048			4,098			5,403			4,200			5,372			4,249			34,676
51805 Employee Recognition		440			120			127			92			81			220			159			128			1,367
52005 Payroll Taxes		7,016			5,733			5,716			4,611			6,381			5,077			4,759			4,518			43,812
52505 401K/401A		151			184			117			200			186			169			155			236			1,398
52805 Group Insurance		4,831			4,025			4,443			4,559			3,767			4,080			5,581			6,734			38,020
53005 Worker’s Comp Insurance		3,408			3,408			3,443			23,079			3,541			4,420			5,725			4,673			51,697
Total Payroll Expenses		77,365			70,575			78,679			86,349			93,727			74,758			79,174			74,850			635,478
53305 Outside Service - Medical		—			—			—			—			—			—			—			—			—
53505 Temporary Services		—			—			—			—			—			—			—			—			—
53510 Temporary Services - AL		—			—			—			—			—			—			—			—			—
54005 Payroll Service		267			646			268			(26	)		381			350			226			294			2,405
55005 Outside Service Other		(143	)		—			—						—			—			—			—			(143	)
Total Purchase Services		123			646			268			(26	)		381			350			226			294			2,262
Total Payroll Related		77,488			71,222			78,947			86,322			94,108			75,108			79,400			75,145			637,740
Total Payroll Related % Total Revenue		41	%		40	%		47	%		71	%		50	%		43	%		37	%		33	%		43	%
56505 Food		8,998			7,848			9,958			4,679			9,533			5,736			17,041			15,539			79,333
57005 Housekeeping		996			777			883			781			799			301			1,054			1,570			7,160
57505 Kitchen Supplies		1,167			814			2,449			608			1,024			866			1,544			3,619			12,090
58005 Assisted Living Supplies		369			124			162			77			85			406			102			(121	)		1,203
59005 Laundry & Linen/Uniforms		—			2,319			32			(378	)		330			(203	)		159			(24	)		2,235
59010 Laun/Lin/Unif Kitchen		192			189			161			80			282			211			179			468			1,781
59015 Laund/Lin/Unit Housekeeping		—			—			—			—			—			—			—			—			—
59505 Activities-Asst Lving		1,013			462			920			736			911			1,320			1,061			1,675			8,098
59510 Banquet Expense		300			300			300			230			370			300			300			300			2,400
59555 NMS-Foodservices		—			—			—			—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—			—			—			—
Total Variable Expense		13,034			12,832			14,865			6,814			13,333			8,937			21,438			23,027			114,279
60005 Office Supplies		487			538			1,287			471			1,204			1,325			753			463			6,528
61005 Repairs and Maint - Building		—			—			342			—			—			—			—			—			342
61010 Repairs - Phone System		—			—			—			—			—			—			—			—			—
61015 Repairs - Electrical		58			—			400			162			300			(285	)		14			199			847
61020 Repairs - Plumbing		1,010			143			—			52			454			1,008			1,404			724			4,794
61025 Repairs - Fire Systems		589			—			26			93			—			—			285			—			992
61030 Repairs - HVAC		—			—			—			—			—			—			—			215			215
61035 Repairs - Gen. Supplies		316			425			480			123			1,159			579			23			1,777			4,881
61040 Repairs - Equipment		793			169			1,544			629			2,075			502			5,526			(3,480	)		7,758
61045 Repairs - Other Interior		675			—			605			77			302			125			339			303			2,426
61055 Repairs - Other Exterior		—			—			—			1,561			—			—			250			550			2,361
61100 Loss on Early Retierment Asset		—			491			1,310			—			—			(174	)		133			(3	)		1,756
Total Repair & Maintenance		3,441			1,227			4,706			2,697			4,289			1,755			7,974			285			26,373
61505 Contracts - Elevator		—			743			371			495			979			371			371			371			3,702
61510 Contracts - Floor Maint		—			—			—			—			—			—			—			—			—
61515 Contracts - Alarm/Fire		71			(0	)		183			86			138			172			254			274			1,177
61520 Contracts-HVAC		—			—			—			350			563			456			456			456			2,282
61525 Contracts - Pest Control		153			167			164			121			207			164			424			164			1,562
61535 Contracts - Other		44			44			44			62			243			81			81			81			680
Total Service Contracts		267			953			762			1,114			2,129			1,244			1,586			1,347			9,403
62005 Land Maintenance		745			745			1,003			571			1,324			1,260			745			810			7,203
Total Land Maintenance		745			745			1,003			571			1,324			1,260			745			810			7,203
62505 Rental/Lease - Cable		988			988			988			758			1,219			988			988			988			7,905
62510 Rental/Lease - Security		245			—			245			—			—			—			245			—			735
62525 Rental/Lease - Furniture		334			457			212			457			547			359			—			202			2,568
62535 Rental/Lease - Equipment		261			331			267			120			250			150			215			150			1,745
62540 Rental/Lease - Auto		—			—			—			—			—			—			—			—			—
62555 Rental/Lease - Other		—			—			—			—			—			—			—			—			—
Total Rental and Leases		1,829			1,776			1,712			1,334			2,016			1,497			1,448			1,340			12,953
63010 Utilities - Electricity		5,771			5,954			5,427			3,707			7,561			6,755			7,695			7,401			50,271
63015 Utilities - Water		579			760			1,025			660			1,228			1,128			1,462			1,637			8,479
63020 Utilities - Gas		877			742			833			500			945			727			751			6			5,381

Pll - ITEM 6

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2003
	Version	AA
	Community	00510 Inn at Willow Glen
	Department	Total Department
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL			AUG			AUGYTD
63025 Utilities - Telephone		516			530			417			656			910			784			993			792			5,598
63030 Utilities - Trash		555			577			577			802			712			577			629			875			5,305
Total Utilities		8,298			8,564			8,278			6,326			11,357			9,970			11,530			10,712			75,035
63505 Marketing and Advertising		291			300			353			204			713			418			237			91			2,606
63510 Printed Materials		112			206			76			500			499			110			168			144			1,815
63515 Special Events		822			1,450			1,119			1,586			3,355			988			1,087			915			11,322
63520 Yellow Pages		766			766			766			461			883			816			816			816			6,089
63525 Newspaper and Magazine		78			78			78			78			178			78			85			78			728
63530 Advertising		54			27			(81	)		—			—			—			—			—			(0	)
64005 Referral Fees - Residents		1,134			—			2,008			—			2,122			2,451			—			2,695			10,409
Total Marketing and Advertising		3,257			2,826			4,318			2,828			7,749			4,859			2,392			4,739			32,968
64505 Computers/Peripherals/Software		—			—			—			—			—			—			—			—			—
65005 Gas		—			—			10			—			—			—			—			—			10
65010 Auto Service And Repair		—			—			40			—			1,048			734			—			1,401			3,222
65015 Other Automobile		250			504			(57	)		107			198			—			190			265			1,456
65505 Travel & Lodging		—			74			79			79			175			478			—						885
66005 Mileage		309			272			280			479			514			41			149			105			2,150
66505 Meals & Entertainment		—			5			36			58			64			—			—			—			164
67005 License and Fingerprints		641			889			1,192			340			1,803			1,018			727			1,033			7,641
68005 Dues and Subscriptions		667			89			—			—			79			79			176			193			1,282
68505 Seminars and Training		210			—			—			—			45			80			160			65			560
69005 Employee Recruiting		—			—			405			—			326			1,082			1,021			986			3,819
69505 Other		261			61			6			150			46			—			(171	)		10			363
69605 Discounts Lost		—			—			(0	)		41			28			31			86			87			273
69610 Discounts Taken		(2	)		(2	)		(53	)		(73	)		(48	)		(60	)		(112	)		(132	)		(483	)
69525 Sales & Use Tax Due		—			—			—			—			—			—			—			—			—
Total Misc. Expenses		2,335			1,892			1,938			1,181			4,277			3,482			2,225			4,012			21,342
Total Operating Expense		111,182			102,573			117,816		109,658				141,786			109,438			129,491			121,879			943,823
Gross Margin		79,829			77,674			51,369			11,668			48,195			67,169			86,448			107,095			529,447
Gross Margin Percent		42	%		43	%		30	%		10	%		26	%		38	%		40	%		47	%		36	%
69705 Casualty Loss		—			—			—			—			—			—			—			—			—
69805 Bad Debt Expense		—			—			—			—			940			4,924			12,315			(6,227	)		11,952
70005 Corporate Allocation		—			—			—			—			—			—			—			—			—
72305 Property Taxes		6,060			6,060			6,060			5,221			8,010			6,338			7,313			7,313			52,376
72405 Insurance-Liability & Hazard		4,670			3,937			3,765			3,616			4,824			336			4,343			4,220			29,712
Total Other Fees		10,730			9,997			9,826			8,837			13,774			11,598			23,971			5,306			94,039
72505 Accounting		421			421			421			390			519			1,218			669			736			4,794
73005 Legal		511			443			785			80			870			507			664			403			4,264
73510 Donations & Contributions		—			—			—			—			89			—			—			—			89
74005 Consulting Fees		—			—			—			59			251			130			—			—			439
74015 Professional Fees - Other		—			—			—			—			500			—			128			151			778
75005 Property Management Fees		9,551			9,012			8,459			6,066			9,417			8,843			10,867			11,455			73,670
75105 Partnership Admin Fees		2,231			2,716			33			1,838			(6,614	)		1,265			1,801			5,463			8,734
75510 Other Penalties/Fin. Fee		16			—			46			12			55			—			66			33			228
75515 Licenses & Fees Legal		—			185			—			—			—			—			—			—			185
75505 Bank Charges		—			—			—			—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—			—			—			—
75525 Collection Fees		—			—			—			—			—			—			—			316			316
Total Professional Fees		12,729			12,777			9,745			8,445			5,087			11,963			14,194			18,556			93,497
EBITDAR		56,369			54,899			31,798			(5,614	)		29,334			43,609			48,283			83,233			341,911
EBITDAR Percent		30	%		30	%		19	%		-5	%		15	%		25	%		22	%		36	%		23	%
77005 Operating Lease		13,664			13,621			13,643			10,459			16,826			13,643			13,643			13,643			109,142
77010 Add’l Lease		6,870			6,705			6,346			4,824			7,984			6,378			7,365			7,975			54,446
Total Leases		20,534			20,326			19,988			15,283			24,810			20,020			21,008			21,618			163,588
80005 Interest Income		(26	)		(26	)		(23	)		(25	)		(24	)		(24	)		(22	)		(16	)		(187	)
80505 Other Non-Operating Income		—			—			—			—			—			(25	)		—			—			(25	)
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—			—			—			—
Total Non-Operating Income/Expense		(26	)		(26	)		(23	)		(25	)		(24	)		(49	)		(22	)		(16	)		(212	)
83005 Interest Expense		—			—			—			—			—			—			—			—			—
83025 Int Exp MIP		—			—			—			—			—			—			—			—			—
Total Interest Expense		—			—			—			—			—			—			—			—			—
EBTDA		35,861			34,600			11,833			(20,872	)		4,547			23,637			27,298			61,632			178,535
EBTDA Percent		19	%		19	%		7	%		-17	%		2	%		13	%		13	%		27	%		12	%
77505 Depreciation		9,485			9,634			7,051			8,607			13,851			11,231			12,012			12,566			84,436
78005 Amortization		573			573			573			439			706			573			573			573			4,582
78015 Amortization - Start Up		—			—			—			—			—			—			—			—			—
Total Depreciation & Amortization		10,058			10,207			7,623			9,046			14,557			11,804			12,585			13,138			89,018
Net Income (Loss)		25,803			24,393			4,210			(29,918	)		(10,010	)		11,833			14,713			48,493			89,517

PII - ITEM A-5

Database:
Cute:
Page: POLAPSVR
Financial Data
Year
Version
Community
Department
Month
GLAccount

2002
AA
Inn at Willow Glen
Total Department
Along Columns
Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
40005 Revenue-Rental		153,506			166,418			153,841			148,257			159,557			148,804			143,385
40010 Revenue-Rent Refunds/Proration		—			—			(500	)		—			(6,317	)		(1,519	)		(427	)
Total Rental Revenue		153,506			166,418			153,341			148,257			153,240			147,285			142,958
40110 Revenue-AL Level 1		4,050			4,512			4,865			6,381			4,366			4,125			3,300
40115 Revenue-AL Level 2		4,750			5,097			6,837			3,948			5,290			4,935			4,458
40120 Revenue-AL Level 3		5,625			7,754			6,685			6,352			8,996			8,069			9,403
40125 Revenue-AL Level 4		10,478			7,273			4,322			3,850			7,863			6,525			4,193
40130 Revenue-AL Level 5		9,675			7,195			9,100			10,820			6,845			6,472			7,175
40135 Revenue-AL Level 6		4,175			4,875			3,396			2,113			3,138			5,235			3,400
40140 Revenue-AL Level 7		1,450			1,450			1,603			1,450			2,940			1,490			3,140
Total AL Services Revenue		40,203			38,156			36,809			34,913			39,438			36,851			35,070
40515 Revenue-Other		472			820			883			610			598			965			853
40525 Revenue-Processing/App Fees		2,000			3,000			1,000			5,000			5,000			2,000			—
Total Other Revenue		2,472			3,820			1,883			5,610			5,598			2,965			853
40575 Rev-Process Fee Concessions		—			—			—			—			—			—			—
40015 Rev-Rent Concessions		(1,376	)		(1,376	)		(3,584	)		(3,534	)		(1,376	)		(2,064	)		(2,314	)
40215 Rev-A/L Concessions		—			—			—			—			—			—			—
Total Concessions		(1,376	)		(1,376	)		(3,584	)		(3,534	)		(1,376	)		(2,064	)		(2,314	)
Total Revenue		194,804			207,018			188,448			185,246			196,900			185,037			176,568
50005 Payroll Expense-Regular		53,389			51,331			55,168			50,189			52,121			53,775			57,078
50405 Payroll Expense-Overtime		5,661			4,497			3,727			3,485			1,858			2,921			2,337
50705 Payroll Expense-Doubletime		1,806			1,159			461			196			217			397			278
51005 Bonuses		2,465			2,415			11,833			2,465			2,565			(2,187	)		2,765
51505 Vacation, Sick, Holiday		3,933			3,933			2,793			3,867			3,962			3,312			4,265
51805 Employee Recognition		—			—			—			354			410			247			—
52005 Payroll Taxes		7,525			6,199			5,669			5,471			4,503			5,097			5,057
52505 401K/401A		209			163			139			130			237			134			140
52805 Group Insurance		4,660			2,986			4,003			3,574			3,697			4,303			4,361
53005 Worker’s Comp Insurance		6,299			5,216			8,906			5,832			5,432			6,167			6,048
Total Payroll Expenses		85,948			77,898			92,699			75,562			75,001			74,166			82,329
53305 Outside Service - Medical		—			—			—			—			—			—			—
53505 Temporary Services		—			—			—			—			—			—			—
53510 Temporary Services - AL		—			—			—			(369	)		—			—			—
54005 Payroll Service		273			232			504			304			247			152			235
55005 Outside Service Other		—			36			—			—			—			—			171
Total Purchase Services		273			268			504			(65	)		247			152			407
Total Payroll Related		86,221			78,166			93,203			75,497			75,248			74,318			82,736
Total Payroll Related % Total Revenue		44	%		38	%		49	%		41	%		38	%		40	%		47	%
56505 Food		8,696			8,501			5,781			11,055			11,834			9,688			6,307
57005 Housekeeping		636			1,725			517			817			1,678			1,340			422
57505 Kitchen Supplies		1,135			1,989			678			900			371			1,089			457
58005 Assisted Living Supplies		336			362			346			121			441			205			70
59005 Laundry & Linen/Uniforms		149			933			172			483			182			—			61
59010 Laun/Lin/Unif Kitchen		107			—			28			—			—			170			40
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—			30
59505 Activities-Asst Lving		752			638			1,265			930			826			447			434
59510 Banquet Expense		300			300			300			300			300			300			300
59555 NMS-Foodservices		—			—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—			—
Total Variable Expense		12,112			14,449			9,087			14,606			15,632			13,239			8,121
60005 Office Supplies		609			441			1,614			964			494			557			889
61005 Repairs and Maint - Building		—			—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—			—
61015 Repairs - Electrical		—			67			—			121			87			—			30
61020 Repairs - Plumbing		740			60			—			350			80			185			1,638
61025 Repairs - Fire Systems		—			—			—			380			—			—			—
61030 Repairs - HVAC		1,022			2,044			—			—			—			—			251
61035 Repairs - Gen. Supplies		576			564			504			—			618			0			418
61040 Repairs - Equipment		502			1,890			918			1,128			740			(49	)		432
61045 Repairs - Other Interior		102			547			61			468			213			17			212
61055 Repairs - Other Exterior		133			—			—			—			135			—			—
61100 Loss on Early Retierment Asset		—			—			—			—			—			—			—
Total Repair & Maintenance		3,074			5,172			1,483			2,446			1,872			152			2,982
61505 Contracts - Elevator		371			371			—			371			371			371			371
61510 Contracts - Floor Maint		250			525			—			—			—			—			—
61515 Contracts - Alarm/Fire		314			72			334			151			(9	)		818			874
61520 Contracts - HVAC		—			—			—			—			—			—			—
61525 Contracts - Pest Control		152			152			152			152			157			157			407
61535 Contracts - Other		261			109			467			179			286			77			434
Total Service Contracts		1,348			1,229			953			853			806			1,424			2,086
62005 Land Maintenance		745			745			1,583			1,451			745			1,490			1,243
Total Land Maintenance		745			745			1,583			1,451			745			1,490			1,243
62505 Rental/Lease - Cable		988			988			988			988			988			988			988
62510 Rental/Lease - Security		320			—			—			232			—			—			232
62525 Rental/Lease - Furniture		—			—			—			—			—			—			—
62535 Rental/Lease - Equipment		557			416			437			(656	)		173			179			241
62540 Rental/Lease - Auto		—			—			—			—			—			—			—
62555 Rental/Lease - Other		—			—			—			—			—			47			122
Total Rental and Leases		1,865			1,404			1,424			564			1,160			1,214			1,583
63010 Utilities - Electricity		5,930			8,081			5,326			5,395			6,120			6,685			6,546
63015 Utilities - Water		670			709			751			1,015			980			747			771
63020 Utilities - Gas		676			667			442			265			663			348			329
63025 Utilities - Telephone		666			318			489			425			624			517			539
63030 Utilities - Trash		619			619			555			555			555			555			555
Total Utilities		8,560			10,394			7,564			7,655			8,942			8,852			8,740
63505 Marketing and Advertising		382			256			246			233			269			336			219
63510 Printed Materials		369			424			1,590			620			400			164			99
63515 Special Events		(243	)		825			311			639			93			269			33
63520 Yellow Pages		488			619			196			469			1,428			1,792			1,857
63525 Newspaper and Magazine		—			846			(655	)		—			701			127			68
63530 Advertising		—			—			—			—			—			—			—
64005 Referral Fees - Residents		—			2,385			2,139			—			2,600			1,162			1,750
Total Marketing and Advertising		996			5,355			3,826			1,961			5,490			3,850			4,026
64505 Computers/Peripherals/Software		—			—			—			—			—			—			—
65005 Gas		—			—			—			—			—			—			—
65010 Auto Service And Repair		466			457			—			(444	)		84			—			405
65015 Other Automobile		767			179			(127	)		182			(34	)		95			—
65505 Travel & Lodging		349			462			186			(149	)		—			—			303
66005 Mileage		48			—			—			—			—			261			168
66505 Meals & Entertainment		—			48			—			—			—			—			50
67005 License and Fingerprints		739			1,151			684			841			1,299			1,162			895
68005 Dues and Subscriptions		81			81			119			199			145			770			79
68505 Seminars and Training		316			338			162			582			332			118			283
69005 Employee Recruiting		562			1,078			718			—			—			239			—

[Additional columns below]

[Continued from above table, first column(s) repeated]

	AUG			SEP			OCT			NOV			DEC			DEC YTD
40005 Revenue-Rental		143,668			140,799			144,934			147,590			154,828			1,805,586
40010 Revenue-Rent Refunds/Proration		(2,047	)		(1,151	)		(4,956	)		(1,863	)		(1,977	)		(20,758	)
Total Rental Revenue		141,620			139,648			139,978			145,727			152,851			1,784,829
40110 Revenue-AL Level 1		2,431			2,475			3,056			2,900			2,900			45,361
40115 Revenue-AL Level 2		5,425			4,834			4,250			4,625			4,379			58,829
40120 Revenue-AL Level 3		10,425			6,767			9,675			8,488			11,545			99,784
40125 Revenue-AL Level 4		5,847			6,008			6,075			12,178			11,824			86,437
40130 Revenue-AL Level 5		8,349			6,613			4,698			6,050			6,295			89,287
40135 Revenue-AL Level 6		2,800			3,092			5,460			4,599			4,402			46,683
40140 Revenue-AL Level 7		1,490			2,915			2,915			3,170			6,233			30,247
Total AL Services Revenue		36,767			32,704			36,128			42,009			47,579			456,628
40515 Revenue-Other		230			330			168			1,289			1,536			8,754
40525 Revenue-Processing/App Fees		4,500			500			9,000			4,000			2,000			38,000
Total Other Revenue		4,730			830			9,168			5,289			3,536			46,754
40575 Rev-Process Fee Concessions		—			—			—			—			—			—
40015 Rev-Rent Concessions		(2,064	)		(2,064	)		(6,394	)		(5,619	)		(9,199	)		(40,964	)
40215 Rev-A/L Concessions		—			—			(260	)		(4,471	)		(9,302	)		(14,033	)
Total Concessions		(2,064	)		(2,064	)		(6,654	)		(10,090	)		(18,501	)		(54,997	)
Total Revenue		181,053			171,118			178,620			182,935			185,466			2,233,214
50005 Payroll Expense-Regular		57,741			55,720			56,626			53,948			55,751			652,837
50405 Payroll Expense-Overtime		2,757			1,741			1,350			1,395			1,573			33,302
50705 Payroll Expense-Doubletime		422			284			9			112			64			5,406
51005 Bonuses		(7,837	)		(3,021	)		(1,221	)		(2,871	)		(2,871	)		4,500
51505 Vacation, Sick, Holiday		2,077			4,020			4,473			4,649			4,842			46,126
51805 Employee Recognition		385			120			400			282			324			2,522
52005 Payroll Taxes		5,221			5,134			4,877			4,685			4,939			64,377
52505 401K/401A		124			172			121			203			199			1,970
52805 Group Insurance		5,159			6,338			2,903			5,449			5,359			52,792
53005 Worker’s Comp Insurance		6,429			5,649			5,576			5,643			5,589			72,788
Total Payroll Expenses		72,479			76,158			75,114			73,496			75,769			936,619
53305 Outside Service - Medical		—			—			—			—			—			—
53505 Temporary Services		—			—			—			—			—			—
53510 Temporary Services - AL		—			—			—			—			—			(369	)
54005 Payroll Service		276			171			313			307			22			3,035
55005 Outside Service Other		32			—			35			—			—			274
Total Purchase Services		308			171			349			307			22			2,940
Total Payroll Related		72,787			76,328			75,463			73,803			75,791			939,559
Total Payroll Related % Total Revenue		40	%		45	%		42	%		40	%		41	%		42	%
56505 Food		7,819			10,260			8,235			11,767			8,573			108,516
57005 Housekeeping		1,153			783			1,014			1,036			697			11,818
57505 Kitchen Supplies		931			629			985			1,035			1,020			11,219
58005 Assisted Living Supplies		252			7			866			39			334			3,379
59005 Laundry & Linen/Uniforms		—			35			—			51			—			2,065
59010 Laun/Lin/Unif Kitchen		145			106			157			205			186			1,144
59015 Laund/Lin/Unif Housekeeping		—			35			—			—			—			65
59505 Activities-Asst Lving		532			517			1,196			936			1,062			9,537
59510 Banquet Expense		300			300			300			300			(1,734	)		1,566
59555 NMS-Foodservices		—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—
Total Variable Expense		11,132			12,672			12,754			15,369			10,138			149,311
60005 Office Supplies		715			624			1,471			740			788			9,905
61005 Repairs and Maint - Building		—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—
61015 Repairs - Electrical		147			170			233			298			145			1,298
61020 Repairs - Plumbing		333			25			610			—			10			4,029
61025 Repairs - Fire Systems		—			—			—			—			—			380
61030 Repairs - HVAC		288			92			—			804			—			4,500
61035 Repairs - Gen. Supplies		309			1,426			(71	)		—			879			5,223
61040 Repairs - Equipment		1,484			1,562			(808	)		1,091			635			9,525
61045 Repairs - Other Interior		552			261			1,197			350			143			4,122
61055 Repairs - Other Exterior		9			—			—			—			750			1,027
61100 Loss on Early Retierment Asset		—			—			—			—			—			—
Total Repair & Maintenance		3,121			3,536			1,160			2,542			2,562			30,104
61505 Contracts - Elevator		371			371			371			371			371			4,085
61510 Contracts - Floor Maint		—			—			—			—			—			775
61515 Contracts - Alarm/Fire		360			71			71			71			262			3,387
61520 Contracts - HVAC		—			353			—			(353	)		—			—
61525 Contracts - Pest Control		157			161			159			159			159			2,126
61535 Contracts - Other		213			44			44			263			504			2,880
Total Service Contracts		1,102			1,000			645			512			1,297			13,253
62005 Land Maintenance		745			794			845			745			745			11,876
Total Land Maintenance		745			794			845			745			745			11,876
62505 Rental/Lease - Cable		988			988			988			988			988			11,851
62510 Rental/Lease - Security		—			—			245			—			—			1,030
62525 Rental/Lease - Furniture		—			—			446			122			252			821
62535 Rental/Lease - Equipment		268			268			155			268			159			2,464
62540 Rental/Lease - Auto		—			—			—			—			—			—
62555 Rental/Lease - Other		—			34			95			—			—			298
Total Rental and Leases		1,256			1,289			1,929			1,377			1,399			16,463
63010 Utilities - Electricity		6,729			6,020			6,709			5,300			6,078			74,919
63015 Utilities - Water		1,360			981			1,221			741			884			10,830
63020 Utilities - Gas		372			396			501			701			855			6,215
63025 Utilities - Telephone		562			515			574			408			631			6,268
63030 Utilities - Trash		555			555			555			555			555			6,787
Total Utilities		9,578			8,467			9,560			7,704			9,004			105,020
63505 Marketing and Advertising		263			451			1,492			407			831			5,384
63510 Printed Materials		25			49			829			667			893			6,129
63515 Special Events		1,145			1,363			651			1,803			917			7,803
63520 Yellow Pages		(3,872	)		2,270			773			796			818			7,633
63525 Newspaper and Magazine		64			64			196			269			78			1,758
63530 Advertising		—			—			—			—			—			—
64005 Referral Fees - Residents		—			—			—			—			1,000			11,036
Total Marketing and Advertising		(2,376	)		4,196			3,941			3,941			4,537			39,743
64505 Computers/Peripherals/Software		—			—			—			—			—			—
65005 Gas		—			—			—			—			—			—
65010 Auto Service And Repair		—			—			106			—			385			1,458
65015 Other Automobile		347			22			40			—			131			1,602
65505 Travel & Lodging		171			—			171			—			141			1,633
66005 Mileage		126			285			130			87			127			1,231
66505 Meals & Entertainment		—			—			24			—			—			122
67005 License and Fingerprints		1,317			915			641			742			1,200			11,585
68005 Dues and Subscriptions		127			145			196			256			71			2,268
68505 Seminars and Training		568			229			198			118			278			3,522
69005 Employee Recruiting		—			100			30			439			—			3,168

PII - ITEM A-5

Database:
Cube:
Page: POLAPSVR
Financial Data
Year
Version
Community
Department
Month
GLAccount

2002
AA
00510 Inn at Willow Glen
Total Department
Along Columns
Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
69505 Other		—			33			8			12			68			181			271
69605 Discounts Lost		—			—			—			—			—			—			—
69610 Discounts Taken		—			—			—			—			—			—			—
69525 Sales & Use Tax Due		—			—			—			—			—			—			—
Total Misc. Expenses		3,328			3,827			1,750			1,222			1,894			2,827			2,453
Total Operating Expense		118,858			121,182			122,487			107,220			112,282			107,923			114,860
Gross Margin		75,947			85,836			65,961			78,026			84,618			77,114			61,708
Gross Margin Percent		39	%		41	%		35	%		42	%		43	%		42	%		35	%
69705 Casualty Loss		—			—			—			—			—			—			—
69805 Bad Debt Expense		(18,295	)		—			—			1,769			2,071			3,325			—
70005 Corporate Allocation		—			—			—			—			—			—			—
72305 Property Taxes		5,735			5,735			5,735			5,735			5,828			5,828			6,060
72405 Insurance-Liability & Hazard		2,212			2,212			2,212			3,784			3,784			3,788			3,784
Total Other Fees		(10,349	)		7,947			7,947			11,288			11,683			12,942			9,845
72505 Accounting		(167	)		633			633			633			953			633			682
73005 Legal		568			358			478			705			400			442			426
73510 Donations & Contributions		—			—			—			—			—			—			—
74005 Consulting Fees		—			—			—			—			—			—			—
74015 Professional Fees - Other		—			—			—			37			—			—			—
75005 Property Management Fees		9,741			10,316			9,457			9,262			9,845			9,252			8,828
75105 Partnership Admin Fees		4,762			2,908			1,767			6,829			(834	)		671			2,835
75510 Other Penalties/Fin. Fee		115			—			49			56			13			—			20
75515 Licenses & Fees Legal		—			—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			205			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—			—
Total Professional Fees		15,019			14,215			12,383			17,522			10,377			11,203			12,791
EBITDAR		71,276			63,675			45,631			49,216			62,558			52,969			39,072
EBITDAR Percent		37	%		31	%		24	%		27	%		32	%		29	%		22	%
77005 Operating Lease		13,664			13,664			13,664			13,664			13,664			13,664			13,664
77010 Add’l Lease		7,156			7,724			7,342			6,910			7,298			6,935			6,683
Total Leases		20,820			21,388			21,006			20,574			20,962			20,599			20,347
80005 Interest Income		(104	)		(101	)		(88	)		(87	)		(105	)		(99	)		(46	)
80505 Other Non-Operating Income		—			—			—			—			—			—			—
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—			—
Total Non-Operating Income/Expense		(104	)		(101	)		(88	)		(87	)		(105	)		(99	)		(46	)
83005 Interest Expense		—			—			—			—			—			—			—
83025 Int Exp MIP		—			—			—			—			—			—			—
Total Interest Expense		—			—			—			—			—			—			—
EBTDA		50,560			42,387			24,713			28,729			41,701			32,468			18,771
EBTDA Percent		26	%		20	%		13	%		16	%		21	%		18	%		11	%
77505 Depreciation		8,800			8,784			8,625			8,653			8,697			8,422			8,525
78005 Amortization		573			573			573			573			573			573			573
78015 Amortization - Start Up		—			—			—			—			—			—			—
Total Depreciation & Amortization		9,372			9,357			9,197			9,226			9,269			8,995			9,098
Net Income (Loss)		41,188			33,030			15,516			19,503			32,431			23,473			9,673

[Additional columns below]

[Continued from above table, first column(s) repeated]

	AUG			SEP			OCT			NOV			DEC			DEC YTD
69505 Other		129			51			55			62			113			982
69605 Discounts Lost		—			—			—			—			2			2
69610 Discounts Taken		—			—			(2	)		—			(4	)		(6	)
69525 Sales & Use Tax Due		—			—			—			—			—			—
Total Misc. Expenses		2,785			1,745			1,589			1,704			2,444			27,568
Total Operating Expense		100,843			110,651			109,356			108,438			108,703			1,342,802
Gross Margin		80,210			60,467			69,264			74,498			76,763			890,412
Gross Margin Percent		44	%		35	%		39	%		41	%		41	%		40	%
69705 Casualty Loss		—			—			—			—			—			—
69805 Bad Debt Expense		—			365			(190	)		(175	)		—			(11,130	)
70005 Corporate Allocation		—			—			—			—			—			—
72305 Property Taxes		6,060			6,060			967			3,044			6,060			62,847
72405 Insurance-Liability & Hazard		6,077			3,575			4,595			4,636			3,180			43,840
Total Other Fees		12,137			10,000			5,372			7,505			9,240			95,558
72505 Accounting		633			953			633			953			(3,043	)		4,129
73005 Legal		350			475			423			429			392			5,448
73510 Donations & Contributions		—			—			—			—			—			—
74005 Consulting Fees		350			(350	)		250			—			—			250
74015 Professional Fees - Other		—			—			—			—			—			37
75005 Property Management Fees		9,053			8,556			8,493			9,585			9,273			111,661
75105 Partnership Admin Fees		2,728			988			1,973			3,136			3,307			31,069
75510 Other Penalties/Fin. Fee		200			6			—			—			6			465
75515 Licenses & Fees Legal		—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			205
75520 Franchise Tax Filing Fee		—			—			—			—			—			—
Total Professional Fees		13,314			10,629			11,772			14,103			9,936			153,265
EBITDAR		54,759			39,838			52,120			52,890			57,587			641,590
EBITDAR Percent		30	%		23	%		29	%		29	%		31	%		29	%
77005 Operating Lease		13,664			13,664			13,664			13,664			13,664			163,971
77010 Add’l Lease		6,697			6,562			6,755			6,756			4,463			81,280
Total Leases		20,361			20,226			20,419			20,420			18,127			245,250
80005 Interest Income		—			(45	)		(435	)		(35	)		(25	)		(1,169	)
80505 Other Non-Operating Income		—			—			—			(214	)		—			(214	)
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—
Total Non-Operating Income/Expense		—			(45	)		(435	)		(249	)		(25	)		(1,383	)
83005 Interest Expense		—			—			—			—			—			—
83025 Int Exp MIP		—			—			—			—			—			—
Total Interest Expense		—			—			—			—			—			—
EBTDA		34,398			19,656			32,136			32,719			39,484			397,723
EBTDA Percent		19	%		11	%		18	%		18	%		21	%		18	%
77505 Depreciation		8,566			8,582			8,633			9,541			9,449			105,276
78005 Amortization		573			573			573			573			573			6,873
78015 Amortization - Start Up		—			—			—			—			—			—
Total Depreciation & Amortization		9,139			9,155			9,206			10,114			10,022			112,149
Net Income (Loss)		25,259			10,502			22,931			22,605			29,463			285,573

PII - ITEM A-5

Database:
Cube:
Page: POLAPSVR
Financial Data
Year
Version
Community
Department
Month
GLAccount

2001
AA
Inn at Willow Glen
Total Department
Along Columns
Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
40005 Revenue-Rental		133,716			142,864			174,503			156,059			159,070			168,868			155,474
40010 Revenue-Rent Refunds/Proration		—			(4,470	)		—			—			(3,041	)		—			(1,890	)
Total Rental Revenue		133,716			138,394			174,503			156,059			156,029			168,868			153,584
40110 Revenue-AL Level 1		4,200			5,787			5,497			4,490			4,025			4,636			4,176
40115 Revenue-AL Level 2		7,075			7,339			8,556			7,525			5,600			5,725			5,755
40120 Revenue-AL Level 3		4,850			5,425			8,077			10,743			7,100			7,170			7,681
40125 Revenue-AL Level 4		4,500			4,300			6,333			3,350			2,532			6,633			6,013
40130 Revenue-AL Level 5		9,400			9,795			11,175			13,550			13,335			14,145			12,063
40135 Revenue-AL Level 6		4,125			4,125			5,500			5,500			6,900			8,300			5,256
40140 Revenue-AL Level 7		—			4,462			1,375			1,375			1,375			1,375			255
Total AL Services Revenue		34,150			41,232			46,513			46,533			40,867			47,984			41,199
40515 Revenue-Other		3,195			(1,757	)		(1,692	)		(787	)		(95	)		904			305
40525 Revenue-Processing/App Fees		1,500			2,750			9,583			(916	)		2,166			5,667			2,500
Total Other Revenue		4,695			994			7,891			(1,703	)		2,071			6,571			2,805
40575 Rev-Process Fee Concessions		—			—			—			—			—			—			—
40015 Rev-Rent Concessions		(495	)		—			—			—			—			—			—
40215 Rev-A/L Concessions		—			—			—			—			—			—			—
Total Concessions		(495	)		—			—			—			—			—			—
Total Revenue		172,066			180,620			228,907			200,889			198,967			223,423			197,588
50005 Payroll Expense- Regular		50,758			52,976			60,692			54,944			57,856			53,919			57,124
50405 Payroll Expense-Overtime		3,166			3,767			4,599			6,783			4,952			4,946			5,410
50705 Payroll Expense-Doubletime		248			764			563			1,313			2,045			1,438			858
51005 Bonuses		1,425			3,775			2,080			14,509			(9,172	)		2,275			6,422
51505 Vacation, Sick, Holiday		7,994			3,864			345			7,329			2,713			5,977			2,308
51805 Employee Recognition		—			134			—			—			—			—			—
52005 Payroll Taxes		7,688			6,731			7,145			8,106			6,099			3,909			5,613
52505 401K/401A		196			190			173			268			262			246			245
52805 Group Insurance		3,119			4,433			4,235			3,583			3,583			(21	)		3,194
53005 Worker’s Comp Insurance		4,263			4,423			4,290			4,138			4,071			4,340			4,184
Total Payroll Expenses		78,858			81,055			84,122			100,974			72,408			77,030			85,358
53305 Outside Service - Medical		—			—			—			—			—			—			—
53505 Temporary Services		—			—			—			—			—			—			—
53510 Temporary Services - AL		—			—			—			—			—			—			—
54005 Payroll Service		129			130			132			158			132			134			134
55005 Outside Service Other		65			—			32			—			1,246			33			64
Total Purchase Services		194			130			164			158			1,378			167			198
Total Payroll Related		79,052			81,185			84,286			101,132			73,786			77,197			85,557
Total Payroll Related % Total Revenue		46	%		45	%		37	%		50	%		37	%		35	%		43	%
56505 Food		7,011			9,915			10,163			11,057			10,005			11,750			9,568
57005 Housekeeping		1,206			802			1,868			1,208			1,118			1,195			1,592
57505 Kitchen Supplies		2,007			1,099			1,273			1,063			1,460			1,205			652
58005 Assisted Living Supplies		260			(27	)		402			—			275			163			229
59005 Laundry & Linen/Uniforms		308			22			684			322			93			176			754
59010 Laun/Lin/Unif Kitchen		—			—			—			—			—			—			—
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—			—
59505 Activities-Asst Lving		1,486			(135	)		831			771			1,416			1,200			1,039
59510 Banquet Expense		319			300			300			300			300			300			300
59555 NMS-Foodservices		—			—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—			—
Total Variable Expense		12,597			11,977			15,521			14,721			14,666			15,989			14,135
60005 Office Supplies		1,077			1,128			506			617			179			462			585
61005 Repairs and Maint - Building		—			—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—			—
61015 Repairs - Electrical		—			599			33			38			200			1,454			1,088
61020 Repairs - Plumbing		1,006			12			564			214			572			199			988
61025 Repairs - Fire Systems		49			—			—			—			—			—			—
61030 Repairs - HVAC		19			—			—			—			—			—			—
61035 Repairs - Gen. Supplies		430			907			(61	)		172			268			489			208
61040 Repairs - Equipment		27			310			191			1,205			1,964			(399	)		1,324
61045 Repairs - Other Interior		406			26			290			368			1,485			450			1,268
61055 Repairs - Other Exterior		8			—			36			—			362			68			(206	)
61100 Loss on Early Retierment Asset		—			—			—			—			—			—			—
Total Repair & Maintenance		1,945			1,853			1,054			1,997			4,851			2,262			4,670
61505 Contracts - Elevator		371			371			372			371			371			371			371
61510 Contracts - Floor Maint		513			—			—			—			—			—			—
61515 Contracts - Alarm/Fire		400			71			1,216			767			—			296			72
61520 Contracts - HVAC		—			—			—			778			—			—			—
61525 Contracts - Pest Control		456			152			152			152			152			152			152
61535 Contracts - Other		108			562			234			54			250			169			54
Total Service Contracts		1,848			1,156			1,974			2,123			773			988			650
62005 Land Maintenance		745			745			852			945			745			1,511			3,167
Total Land Maintenance		745			745			852			945			745			1,511			3,167
62505 Rental/Lease - Cable		898			898			898			33			898			898			1,048
62510 Rental/Lease - Security		330			—			—			—			—			—			220
62535 Rental/Lease - Equipment		457			316			309			601			334			493			238
62540 Rental/Lease - Auto		—			—			—			—			—			—			—
62555 Rental/Lease - Other		—			—			—			—			—			—			—
Total Rental and Leases		1,685			1,214			1,207			634			1,232			1,391			1,505
63010 Utilities - Electricity		5,376			4,934			4,637			3,857			4,903			7,305			8,060
63015 Utilities - Water		671			575			727			733			1,272			1,159			1,684
63020 Utilities - Gas		1,273			1,398			1,260			867			800			588			572
63025 Utilities - Telephone		749			560			460			486			461			272			1,040
63030 Utilities - Trash		606			703			610			610			555			814			676
Total Utilities		8,676			8,170			7,695			6,553			7,991			10,138			12,030
63505 Marketing and Advertising		291			448			253			353			368			452			318
63510 Printed Materials		61			517			370			385			18			70			36
63515 Special Events		152			88			47			1,452			(498	)		663			237
63520 Yellow Pages		648			648			648			871			436			(1,306	)		691
63525 Newspaper and Magazine		85			125			165			145			32			198			127
63530 Advertising		—			—			—			180			—			—			—
64005 Referral Fees - Residents		1,204			—			980			675			1,100			—			—
Total Marketing and Advertising		2,440			1,826			2,462			4,062			1,455			78			1,409
64505 Computers/Peripherals/Software		—			—			—			—			—			—			—
65005 Gas		118			130			175			130			—			64			—
65010 Auto Service And Repair		—			—			204			—			235			—			299
65015 Other Automobile		202			—			241			377			(180	)		186			70
65505 Travel & Lodging		110			9			196			131			341			—			—
66005 Mileage		36			113			—			59			52			37			—
66505 Meals & Entertainment		—			108			36			56			—			—			—
67005 License and Fingerprints		903			1,332			1,147			1,166			1,370			553			764
68005 Dues and Subscriptions		73			—			—			—			858			210			0
68505 Seminars and Training		70			33			530			236			154			98			157
69005 Employee Recruiting		451			(241	)		—			—			—			—			340
69505 Other		36			202			78			—			—			338			125

[Additional columns below]

[Continued from above table, first column(s) repeated]

	AUG			SEP			OCT			NOV			DEC			DEC YTD
40005 Revenue-Rental		165,014			164,856			167,942			159,285			155,581			1,903,231
40010 Revenue-Rent Refunds/Proration		(2,411	)		(240	)		—			(500	)		(3,206	)		(15,757	)
Total Rental Revenue		162,603			164,616			167,942			158,785			152,376			1,887,474
40110 Revenue-AL Level 1		4,758			4,475			5,699			4,063			4,075			55,881
40115 Revenue-AL Level 2		5,875			5,255			7,375			7,768			7,100			80,948
40120 Revenue-AL Level 3		7,900			7,900			6,525			6,845			6,212			86,428
40125 Revenue-AL Level 4		8,428			6,443			8,025			9,658			6,750			72,965
40130 Revenue-AL Level 5		9,142			10,850			9,485			9,863			9,856			132,659
40135 Revenue-AL Level 6		2,471			4,323			5,425			5,825			5,275			63,025
40140 Revenue-AL Level 7		1,375			—			(68	)		141			275			11,941
Total AL Services Revenue		39,949			39,246			42,467			44,164			39,543			503,848
40515 Revenue-Other		340			774			670			1,606			737			4,201
40525 Revenue-Processing/App Fees		4,500			3,000			—			2,000			500			33,250
Total Other Revenue		4,840			3,774			670			3,606			1,237			37,451
40575 Rev-Process Fee Concessions		—			—			—			—			—			—
40015 Rev-Rent Concessions		—			—			—			—			—			(495	)
40215 Rev-A/L Concessions		—			—			—			—			—			—
Total Concessions		—			—			—			—			—			(495	)
Total Revenue		207,392			207,636			211,079			206,554			193,155			2,428,277
50005 Payroll Expense - Regular		57,129			54,880			62,035			57,029			56,549			675,891
50405 Payroll Expense-Overtime		4,880			4,919			4,112			4,410			3,487			55,429
50705 Payroll Expense- Doubletime		1,390			1,773			1,092			887			470			12,841
51005 Bonuses		8,229			8,368			9,198			7,320			4,647			59,076
51505 Vacation, Sick, Holiday		4,048			4,374			4,665			4,402			7,067			55,086
51805 Employee Recognition		443			—			—			—			118			695
52005 Payroll Taxes		5,038			5,047			5,661			4,205			5,080			70,323
52505 401K/401A		245			249			245			196			230			2,746
52805 Group Insurance		6,173			6,779			5,207			4,174			3,656			48,114
53005 Worker’s Comp Insurance		4,383			3,496			4,047			4,047			3,837			49,519
Total Payroll Expenses		91,957			89,886			96,262			86,670			85,140			1,029,720
53305 Outside Service - Medical		—			—			—			—			—			—
53505 Temporary Services		—			—			—			—			2			2
53510 Temporary Services - AL		—			—			—			—			—			—
54005 Payroll Service		134			134			235			217			258			1,929
55005 Outside Service Other		1,018			35			62			—			—			2,553
Total Purchase Services		1,152			169			297			217			260			4,484
Total Payroll Related		93,109			90,055			96,558			86,887			85,400			1,034,204
Total Payroll Related % Total Revenue		45	%		43	%		46	%		42	%		44	%		43	%
56505 Food		9,906			11,612			13,249			13,825			9,632			127,693
57005 Housekeeping		741			631			1,244			1,781			1,348			14,736
57505 Kitchen Supplies		992			862			1,035			879			1,354			13,880
58005 Assisted Living Supplies		197			183			122			228			348			2,379
59005 Laundry & Linen/Uniforms		120			244			148			61			152			3,083
59010 Laun/Lin/Unif Kitchen		—			—			—			—			—			—
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—
59505 Activities-Asst Lving		739			561			943			859			888			10,598
59510 Banquet Expense		300			300			300			336			(795	)		2,559
59555 NMS-Foodservices		—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—
Total Variable Expense		12,995			14,392			17,041			17,969			12,927			174,928
60005 Office Supplies		644			629			792			680			1,034			8,333
61005 Repairs and Maint - Building		—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—
61015 Repairs - Electrical		187			38			19			294			26			3,975
61020 Repairs - Plumbing		321			116			493			36			98			4,619
61025 Repairs - Fire Systems		—			—			—			20			—			70
61030 Repairs - HVAC		573			—			—			428			—			1,021
61035 Repairs - Gen. Supplies		376			450			610			211			365			4,423
61040 Repairs - Equipment		1,031			1,622			142			425			326			8,170
61045 Repairs - Other Interior		352			522			970			(86	)		472			6,525
61055 Repairs - Other Exterior		32			89			—			73			21			483
61100 Loss on Early Retierment Asset		—			—			—			—			—			—
Total Repair & Maintenance		2,873			2,838			2,235			1,401			1,308			29,286
61505 Contracts - Elevator		371			371			371			371			371			4,456
61510 Contracts - Floor Maint		—			—			—			—			—			513
61515 Contracts - Alarm/Fire		471			72			72			(62	)		72			3,447
61520 Contracts - HVAC		—			—			—			—			—			778
61525 Contracts - Pest Control		(949	)		152			152			152			152			1,027
61535 Contracts - Other		135			135			571			1,339			—			3,611
Total Service Contracts		29			731			1,166			1,800			596			13,833
62005 Land Maintenance		1,333			815			1,013			3,182			—			15,053
Total Land Maintenance		1,333			815			1,013			3,182			—			15,053
62505 Rental/Lease - Cable		988			988			988			988			988			10,509
62510 Renlal/Lease - Security		—			—			232			—			—			783
62535 Rental/Lease - Equipment		585			253			653			387			82			4,707
62540 Renlal/Lease - Auto		—			—			—			—			—			—
62555 Renlal/Lease - Other		350			—			—			(350	)		837			837
Total Rental and Leases		1,922			1,240			1,873			1,024			1,907			16,836
63010 Utilities - Electricity		6,431			6,125			6,919			4,295			7,505			70,348
63015 Utilities - Water		1,857			1,038			952			670			667			12,005
63020 Utilities - Gas		580			349			312			479			882			9,360
63025 Utilities - Telephone		654			617			604			226			270			6,399
63030 Utilities - Trash		636			610			610			558			610			7,600
Total Utilities		10,159			8,738			9,399			6,228			9,935			105,711
63505 Marketing and Advertising		233			275			345			189			208			3,733
63510 Printed Materials		2,056			688			606			534			1,240			6,582
63515 Special Events		478			—			165			840			83			3,707
63520 Yellow Pages		638			651			850			630			1,025			6,428
63525 Newspaper and Magazine		200			—			394			314			644			2,427
63530 Advertising		—			—			—			32			27			239
64005 Referral Fees - Residents		1,000			—			1,350			—			—			6,309
Total Marketing and Advertising		4,605			1,613			3,710			2,537			3,226			29,423
64505 Computers/Peripherals/Software		—			—			—			—			230			230
65005 Gas		—			26			—			—			—			642
65010 Auto Service And Repair		96			265			5			17			4			1,124
65015 Other Automobile		91			632			3,458			—			(4,895	)		181
65505 Travel & Lodging		—			—			—			—			—			786
66005 Mileage		—			—			63			248			60			667
66505 Meals & Entertainment		—			—			—			—			—			200
67005 License and Fingerprints		302			1,061			617			1,211			1,856			12,282
68005 Dues and Subscriptions		121			343			12			12			211			1,840
68505 Seminars and Training		—			417			223			287			—			2,206
69005 Employee Recruiting		—			—			—			—			533			1,082
69505 Other		—			—			—			—			17			795

PII - ITEM A-5

Database:
Cube:
Page: POLAPSVR
Financial Data
Year
Version
Community
Department
Month
GLAccount

2001
AA
Inn at Willow Glen
Total Department
Along Columns
Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
69605 Discounts Lost		101			64			40			46			73			6			60
69610 Discounts Taken		(137	)		(84	)		(101	)		(71	)		(161	)		(6	)		(60	)
69525 Sales & Use Tax Due		—			—			—			—			—			—			—
Total Misc. Expenses		1,962			1,666			2,545			2,130			2,742			1,486			1,754
Total Operating Expense		112,026			110,920			118,102			134,914			108,420			111,500			125,461
Gross Margin		60,040			69,700			110,805			65,975			90,547			111,923			72,127
Gross Margin Percent		35	%		39	%		48	%		33	%		46	%		50	%		37	%
69705 Casualty Loss		—			—			—			—			—			—			—
69805 Bad Debt Expense		3,145			8,017			(4,250	)		8,546			(199	)		12,694			—
70005 Corporate Allocation		—			—			—			—			—			—			—
72305 Property Taxes		6,227			5,765			5,955			5,955			5,809			5,809			5,197
72405 Insurance-Liability & Hazard		1,286			1,286			1,285			2,212			2,212			2,134			2,212
Total Other Fees		10,658			15,067			2,990			16,714			7,822			20,637			7,409
72505 Accounting		596			320			458			458			486			486			549
73005 Legal		395			472			422			426			471			355			714
73510 Donations & Contributions		—			—			—			—			—			—			—
74005 Consulting Fees		—			—			157			—			—			—			—
74015 Professional Fees - Other		—			—			—			—			—			—			28
75005 Property Management Fees		6,718			10,916			11,445			10,044			9,948			11,171			9,879
75105 Partnership Admin Fees		1,669			2,639			7,797			1,403			3,821			3,546			2,692
75510 Other Penalties/Fin. Fee		—			—			—			—			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—			—
Total Professional Fees		9,378			14,347			20,280			12,332			14,727			15,558			13,862
EBITDAR		40,004			40,285			87,535			36,930			67,999			75,728			50,856
EBITDAR Percent		23	%		22	%		38	%		18	%		34	%		34	%		26	%
77005 Operating Lease		13,703			14,300			13,684			13,684			13,684			13,684			13,684
77010 Add’l Lease		6,458			7,557			7,010			7,273			7,415			7,870			7,246
Total Leases		20,160			21,857			20,694			20,957			21,099			21,555			20,931
80005 Interest Income		—			(156	)		(164	)		(175	)		(173	)		(165	)		(151	)
80505 Other Non-Operating Income		—			—			—			—			—			—			—
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—			—
Total Non-Operating Income/Expense		—			(156	)		(164	)		(175	)		(173	)		(165	)		(151	)
83005 Interest Expense		—			—			—			—			—			—			—
83025 Int Exp MIP		—			—			—			—			—			—			—
Total Interest Expense		—			—			—			—			—			—			—
EBTDA		19,843			18,585			67,004			16,147			47,073			54,338			30,077
EBTDA Percent		12	%		10	%		29	%		8	%		24	%		24	%		15	%
77505 Depreciation		6,209			6,235			6,398			6,487			6,482			6,622			6,730
78005 Amortization		573			573			573			573			573			573			573
78015 Amortization - Start Up		—			—			—			—			—			—			—
Total Depreciation & Amortization		6,781			6,807			6,970			7,060			7,055			7,195			7,303
Net Income (Loss)		13,062			11,778			60,034			9,087			40,018			47,144			22,774

[Additional columns below]

[Continued from above table, first column(s) repeated]

	AUG			SEP			OCT			NOV			DEC			DEC YTD
69605 Discounts Lost		33			34			12			—			—			468
69610 Discounts Taken		(33	)		(34	)		(12	)		—			—			(698	)
69525 Sales & Use Tax Due		—			—			—			—			—			—
Total Misc. Expenses		610			2,743			4,378			1,775			(1,985	)		21,805
Total Operating Expense		128,278			123,795			138,164			123,484			114,347			1,449,413
Gross Margin		79,114			83,841			72,915			83,071			78,808			978,865
Gross Margin Percent		38	%		40	%		35	%		40	%		41	%		40	%
69705 Casualty Loss		—			—			—			—			—			—
69805 Bad Debt Expense		615			(607	)		50			(40	)		1,719			29,691
70005 Corporate Allocation		—			—			—			—			—			—
72305 Property Taxes		6,250			5,724			5,724			5,724			5,976			70,115
72405 Insurance-Liability & Hazard		2,212			2,212			2,212			2,212			2,212			23,686
Total Other Fees		9,077			7,329			7,986			7,896			9,907			123,491
72505 Accounting		759			549			549			949			2,984			9,144
73005 Legal		393			1,439			449			378			548			6,463
73510 Donations & Contributions		—			—			—			—			—			—
74005 Consulting Fees		—			250			—			—			—			407
74015 Professional Fees - Other		—			—			—			—			—			28
75005 Property Management Fees		9,714			11,038			10,554			10,328			9,658			121,414
75105 Partnership Admin Fees		3,209			3,281			2,947			3,653			3,095			39,751
75510 Other Penalties/Fin. Fee		—			38			18			55			131			242
75515 Licenses & Fees Legal		—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—
Total Professional Fees		14,075			16,594			14,517			15,362			16,416			177,449
EBITDAR		55,962			59,918			50,412			59,812			52,485			677,924
EBITDAR Percent		27	%		29	%		24	%		29	%		27	%		28	%
77005 Operating Lease		13,684			13,684			13,684			13,684			13,684			164,844
77010 Add’l Lease		7,692			7,683			7,827			6,817			7,813			88,661
Total Leases		21,376			21,367			21,511			20,501			21,497			253,505
80005 Interest Income		(151	)		(155	)		(134	)		(145	)		(80	)		(1,650	)
80505 Other Non-Operating Income		—			(15	)		—			—			—			(15	)
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—
Total Non-Operating Income/Expense		(151	)		(170	)		(134	)		(145	)		(80	)		(1,665	)
83005 Interest Expense		—			—			—			—			—			—
83025 Int Exp MIP		—			—			—			—			—			—
Total Interest Expense		—			—			—			—			—			—
EBTDA		34,737			38,720			29,034			39,456			31,069			426,084
EBTDA Percent		17	%		19	%		14	%		19	%		16	%		18	%
77505 Depreciation		6,846			6,934			6,801			6,776			8,807			81,326
78005 Amortization		573			573			573			573			573			6,873
78015 Amortization - Start Up		—			—			—			—			—			—
Total Depreciation & Amortization		7,419			7,507			7,374			7,349			9,380			88,200
Net Income (Loss)		27,318			31,213			21,661			32,107			21,689			337,884

PII - ITEM A-5

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2000
	Version	AA
	Community	Inn at Willow Glen
	Department	Total Department
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
40005 Revenue-Rental		122,669			126,615			119,904			129,190			139,054			142,178			141,107
40010 Revenue-Rent Refunds/Proration		(2,187	)		(1,408	)		—			(4,486	)		—			(638	)		(990	)
Total Rental Revenue		120,482			125,208			119,904			124,704			139,054			141,540			140,117
40110 Revenue-AL Level 1		7, 800			7,297			5,700			6,181			6,350			4,641			6,707
40115 Revenue-AL Level 2		4, 988			3,275			4,061			4,150			5,049			5,165			4,778
40120 Revenue-AL Level 3		8, 550			10,725			6,838			8,006			6,886			5,425			6,288
40125 Revenue-AL Level 4		2,990			3,190			7,510			4,456			7,800			10,766			7,800
40130 Revenue-AL Level 5		4,725			4,725			7,050			9,200			11,160			8,773			9,400
40135 Revenue-AL Level 6		—			—			—			2,980			2,581			2,750			5,500
40140 Revenue-AL Level 7		2, 889			1,375			(2,750	)		—			—			1,220			—
Total AL Services Revenue		31, 942			30,587			28,410			34,974			39,826			38,740			40,472
40515 Revenue-Other		6			420			280			228			520			585			866
40525 Revenue-Processing/App Fees		650			—			500			—			—			4,500			2,250
Total Other Revenue		656			420			780			228			520			5,085			3,116
40575 Rev-Process Fee Concessions		—			—			—			—			—			—			—
40015 Rev-Rent Concessions		—			—			(4,190	)		(11,925	)		(6,930	)		—			(327	)
40215 Rev-A/L Concessions		—			—			—			—			—			—			—
Total Concessions		—			—			(4,190	)		(11,925	)		(6,930	)		—			(327	)
Total Revenue		153,080			156,214			144,904			147,980			172,470			185,365			183,379
50005 Payroll Expense-Regular		51,174			45,680			52,550			41,199			47,049			42,943			39,433
50405 Payroll Expense-Overtime		6,273			4,927			5,630			4,606			4,319			5,038			6,421
50705 Payroll Expense-Doubletime		582			750			955			768			515			899			1,144
51005 Bonuses		800			500			11,705			2,600			800			2,150			500
51505 Vacation, Sick, Holiday		6, 855			4,343			4,514			3,215			1,679			4,788			2,035
51805 Employee Recognition		—			—			—			—			—			—			—
52005 Payroll Taxes		7,787			5,849			7,750			4,413			4,860			4,481			4,166
52505 401K/401A		219			215			305			215			153			200			197
52805 Group Insurance		1,321			1,502			2,553			1,437			5,878			(1,676	)		2,316
53005 Worker’s Comp Insurance		1,908			1,908			2,356			3,633			3,391			3,726			3,130
Total Payroll Expenses		76, 917			65,673			88,317			62,086			68,644			62,548			59,343
53305 Outside Service  -  Medical		498			102			570			—			—			6,888			—
53505 Temporary Services		—			—			1,656			300			(828)			1,591			1,591
53510 Temporary Services  -  AL		—			—			—			—			—			—			—
54005 Payroll Service		—			366			187			122			115			131			129
55005 Outside Service Other		364			87			3			—			(73	)		—			816
Total Purchase Services		861			555			2,415			422			(785	)		8,610			2,536
Total Payroll Related		77, 778			66,227			90,733			62,508			67,859			71,159			61,880
Total Payroll Related % Total Revenue		51	%		42	%		63	%		42	%		39	%		38	%		34	%
56505 Food		16,047			8,461			10,823			10,364			10,832			10,446			10,914
57005 Housekeeping		1,645			986			1,587			1,145			951			1,377			1,762
57505 Kitchen Supplies		1,469			639			1,724			1,157			1,193			1,129			1,211
58005 Assisted Living Supplies		211			168			385			130			111			243			3
59005 Laundry & Linen/Uniforms		1,445			385			203			740			188			102			174
59010 Laun/Lin/Unif Kitchen		—			—			—			—			—			—			—
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—			—
59505 Activities-Asst Lving		710			(45	)		433			601			468			656			271
59510 Banquet Expense		(179	)		2,525			(975	)		1,282			—			(1,282	)		1,282
59555 NMS-Foodservices		—			—			—			15,348			7,098			10,059			7,948
59560 NMS-Housekeeping		—			—			—			4,897			253			(3,515	)		1,547
Total Variable Expense		21,348			13,119			14,180			35,665			21,093			19,215			25,112
60005 Office Supplies		816			2,412			931			603			785			873			1,811
61005 Repairs and Maint  -  Building		—			—			—			—			—			214			(214	)
61010 Repairs  -  Phone System		—			—			—			—			—			—			—
61015 Repairs  -  Electrical		209			25			16			92			60			—			—
61020 Repairs  -  Plumbing		325			345			416			92			605			1,409			351
61025 Repairs  -  Fire Systems		—			—			—			137			110			—			—
61030 Repairs  -  HVAC		—			1,008			681			—			188			—			—
61035 Repairs  -  Gen. Supplies		655			1,663			1,297			484			657			810			731
61040 Repairs  -  Equipment		807			49			964			567			719			122			38
61045 Repairs  -  Other Interior		713			292			2,148			235			190			868			8
61055 Repairs  -  Other Exterior		—			—			1,326			32			606			557			237
61100 Loss on Early Retierment Asset		—			—			—			—			—			—			—
Total Repair & Maintenance		2,708			3,382			6,848			1,641			3,136			3,979			1,152
61505 Contracts  -  Elevator		—			371			371			338			371			963			371
61510 Contracts  -  Floor Maint		171			171			171			171			171			169			31
61515 Contracts  -  Alarm/Fire		215			386			584			297			141			1,056			529
61520 Contracts  -  HVAC		—			—			322			—			—			—			—
61525 Contracts  -  Pest Control		304			152			152			152			152			152			152
61535 Contracts  -  Other		539			433			684			(43	)		17			405			14
Total Service Contracts		1,229			1,514			2,285			915			853			2,745			1,097
62005 Land Maintenance		745			745			745			745			1,118			745			745
Total Land Maintenance		745			745			745			745			1,118			745			745
62505 Rental/Lease  -  Cable		(48	)		850			1,748			850			850			855			1,196
62510 Rental/Lease  -  Security		208			1			—			209			480			—			—
62535 Rental/Lease  -  Equipment		525			140			66			227			7			916			195
62540 Rental/Lease  -  Auto		—			—			—			—			—			—			—
62555 Rental/Lease  -  Other		—			—			35			—			—			7			—
Total Rental and Leases		685			991			1,849			1,286			1,337			1,778			1,391
63010 Utilities  -  Electricity		4,752			4,199			3,345			3,065			3,390			7,889			6,565
63015 Utilities  -  Water		618			831			681			785			1,332			800			1,676
63020 Utilities  -  Gas		1,340			740			721			661			(661	)		670			594
63025 Utilities  -  Telephone		250			1,847			1,156			289			604			584			760
63030 Utilities  -  Trash		1,110			84			667			513			555			625			639
Total Utilities		8,070			7,701			6,570			5,314			5,220			10,568			10,233
63505 Marketing and Advertising		1,549			797			7,843			837			314			1,275			1,327
63510 Printed Materials		3,021			464			—			588			679			11			61
63515 Special Events		100			397			37			409			24			226			29
63520 Yellow Pages		—			—			—			—			—			—			—
63525 Newspaper and Magazine		—			—			—			—			—			—			—
63530 Advertising		—			—			—			—			—			—			—
64005 Referral Fees  -  Residents		—			—			1,380			—			—			3,141			—
Total Marketing and Advertising		4,671			1,658			9,260			1,834			1,017			4,653			1,417
64505 Computers/Peripherals/Software		—			—			—			—			—			—			—
65005 Gas		30			—			300			220			—			—			111
65010 Auto Service And Repair		—			123			—			635			352			113			—
65015 Other Automobile		—			—			—			91			—			—			—
65505 Travel & Lodging		233			359			66			522			66			—			—
66005 Mileage		—			—			65			84			—			—			130
66505 Meals & Entertainment		—			—			332			37			—			—			—
67005 License and Fingerprints		183			685			322			1,027			1,190			1,238			759
68005 Dues and Subscriptions		—			—			—			—			625			443			292
68505 Seminars and Training		106			91			493			—			228			30			—
69005 Employee Recruiting		284			1,304			42			517			(225	)		58			21
69505 Other		—			(25	)		24			55			34			182			10

[Additional columns below]

[Continued from above table, first column(s) repeated]

	AUG			SEP			OCT			NOV			DEC			DEC YTD
40005 Revenue-Rental		138,428			146,393			146,958			157,316			124,401			1,634,215
40010 Revenue-Rent Refunds/Proration		(3,151	)		(645	)		—			—			(4,119	)		(17,624	)
Total Rental Revenue		135,278			145,748			146,958			157,316			120,281			1,616,591
40110 Revenue-AL Level 1		7,750			5,600			5,455			5,863			4,439			73,783
40115 Revenue-AL Level 2		4,600			7,475			7,995			7,286			6,900			65,722
40120 Revenue-AL Level 3		7,750			7,750			9,080			9,300			3,978			90,575
40125 Revenue-AL Level 4		4,875			3,900			3,900			4,875			2,757			64,819
40130 Revenue-AL Level 5		8,225			10,575			10,575			11,123			10,275			105,807
40135 Revenue-AL Level 6		4,125			4,125			4,125			5,500			4,125			35,811
40140 Revenue-AL Level 7		—			—			—			—			—			2,734
Total AL Services Revenue		37,325			39,425			41,130			43,948			32,473			439,251
40515 Revenue-Other		385			608			135			436			495			4,964
40525 Revenue-Processing/App Fees		2000			—			1,750			1,650			—			13,300
Total Other Revenue		2,385			608			1,885			2,086			495			18,264
40575 Rev-Process Fee Concessions		—			—			—			—			—			—
40015 Rev-Rent Concessions		(185	)		—			—			—			(1,000	)		(24,557	)
40215 Rev-A/L Concessions		—			—			—			—			—			—
Total Concessions		(185	)		—			—			—			(1,000	)		(24,557	)
Total Revenue		174,803			185,781			189,974			203,350			152,250			2,049,549
50005 Payroll Expense-Regular		45,720			48,902			53,946			53,278			55,242			577,116
50405 Payroll Expense-Overtime		4,037			5,565			4,477			4,491			2,792			58,577
50705 Payroll Expense-Doubletime		546			465			1,434			592			627			9,277
51005 Bonuses		2,050			1,850			2,700			1,700			1,050			28,405
51505 Vacation, Sick, Holiday		4,461			(1,380	)		4,152			3,102			2,798			40,562
51805 Employee Recognition		—			—			—			—			—			—
52005 Payroll Taxes		3,599			5,129			5,956			5,040			5,323			64,354
52505 401K/401A		200			199			232			203			296			2,635
52805 Group Insurance		(64	)		2,916			2,509			3,025			3,368			25,084
53005 Worker’s Comp Insurance		3,722			3,902			4,212			4,195			4,115			40,195
Total Payroll Expenses		64,273			67,548			79,618			75,625			75,612			846,204
53305 Outside Service  -  Medical		—			—			—			—			—			8,057
53505 Temporary Services		10,096			—			—			—			—			4,311
53510 Temporary Services  -  AL		—			—			—			—			—			10,096
54005 Payroll Service		137			132			135			139			134			1,728
55005 Outside Service Other		140			—			—			—			33			1,371
Total Purchase Services		10,373			132			135			139			167			25,562
Total Payroll Related		74,646			67,680			79,753			75,765			75,779			871,767
Total Payroll Related % Total Revenue		43	%		36	%		42	%		37	%		50	%		43	%
56505 Food		10,858			10,744			13,942			15,626			10,387			139,444
57005 Housekeeping		1,270			845			1,000			1,725			893			15,187
57505 Kitchen Supplies		1,371			1,195			1,744			1,693			768			15,293
58005 Assisted Living Supplies		203			89			61			196			—			1,799
59005 Laundry & Linen/Uniforms		121			263			264			315			173			4,375
59010 Laun/Lin/Unif Kitchen		—			—			—			—			—			—
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—
59505 Activities-Asst Lving		1,449			802			1,426			1,573			298			8,642
59510 Banquet Expense		400			400			400			400			(897	)		3,355
59555 NMS-Foodservices		—			—			—			10,406			—			50,860
59560 NMS-Housekeeping		—			—			—			5,688			—			8,869
Total Variable Expense		15,672			14,338			18,836			37,622			11,622			247,822
60005 Office Supplies		597			723			529			790			887			11,756
61005 Repairs and Maint  -  Building		—			—			—			—			—			—
61010 Repairs  -  Phone System		—			—			—			—			—			—
61015 Repairs  -  Electrical		—			263			—			4			339			1,008
61020 Repairs  -  Plumbing		759			255			17			849			240			5,662
61025 Repairs  -  Fire Systems		—			—			—			403			—			651
61030 Repairs  -  HVAC		—			287			489			545			135			3,334
61035 Repairs  -  Gen. Supplies		(115	)		447			249			616			703			8,198
61040 Repairs  -  Equipment		—			1,964			166			186			155			5,736
61045 Repairs  -  Other Interior		547			685			587			389			244			6,906
61055 Repairs  -  Other Exterior		152			(277	)		30			850			74			3,588
61100 Loss on Early Retierment Asset		—			—			—			—			—			—
Total Repair & Maintenance		1,344			3,624			1,538			3,842			1,889			35,082
61505 Contracts  -  Elevator		371			371			550			371			371			4,821
61510 Contracts  -  Floor Maint		—			—			371			371			371			2,168
61515 Contracts  -  Alarm/Fire		71			150			150			71			344			3,994
61520 Contracts  -  HVAC		—			—			313			316			—			951
61525 Contracts  -  Pest Control		152			—			152			152			(152	)		1,520
61535 Contracts  -  Other		95			89			451			89			47			2,819
Total Service Contracts		689			609			1,986			1,370			982			16,273
62005 Land Maintenance		745			745			745			745			745			9,313
Total Land Maintenance		745			745			745			745			745			9,313
62505 Rental/Lease  -  Cable		850			946			898			898			898			10,792
62510 Rental/Lease  -  Security		—			—			220			—			—			1,118
62535 Rental/Lease  -  Equipment		235			391			428			186			384			3,699
62540 Rental/Lease  -  Auto		—			—			—			—			—			—
62555 Rental/Lease  -  Other		—			—			—			—			—			42
Total Rental and Leases		1,085			1,338			1,547			1,084			1,282			15,651
63010 Utilities  -  Electricity		5,859			4,649			5,650			5,369			4,292			59,024
63015 Utilities  -  Water		1,668			1,458			865			512			623			11,848
63020 Utilities  -  Gas		597			667			539			554			400			6,822
63025 Utilities  -  Telephone		552			472			622			714			692			8,542
63030 Utilities  -  Trash		555			597			603			603			555			7,105
Total Utilities		9,230			7,843			8279			7,753			6,562			93,342
63505 Marketing and Advertising		4,343			266			522			523			428			20,025
63510 Printed Materials		20			—			59			95			34			5,032
63515 Special Events		154			(98	)		80			212			(100	)		1,469
63520 Yellow Pages		—			—			—			—			—			—
63525 Newspaper and Magazine		—			378			148			32			226			784
63530 Advertising		—			—			—			—			—			—
64005 Referral Fees  -  Residents		740			—			—			1,035			2,265			8,561
Total Marketing and Advertising		5,257			547			809			1,897			2,852			35,871
64505 Computers/Peripherals/Software		—			—			—			—			—			—
65005 Gas		143			100			184			97			50			1,234
65010 Auto Service And Repair		—			193			288			—			1			1,706
65015 Other Automobile		—			200			196			—			9			495
65505 Travel & Lodging		—			—			105			190			—			1,541
66005 Mileage		65			—			65			—			—			409
66505 Meals & Entertainment		—			55			—			—			—			424
67005 License and Fingerprints		967			853			682			496			1,257			9,658
68005 Dues and Subscriptions		—			—			222			—			—			1,583
68505 Seminars and Training		252			—			298			—			—			1,498
69005 Employee Recruiting		49			—			285			285			—			2,619
69505 Other		—			25			50			25			44			425

PII - ITEM A-5

Database:
Cube:
Page: POLAPSVR
Financial Data
Year
Version
Community
Department
Month
GLAccount

2000
AA
Inn at Willow Glen
Total Department
Along Columns
Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
69605 Discounts Lost		—			—			—			—			—			—			—
69610 Discounts Taken		(32	)		(23	)		(36	)		(12	)		—			—			—
69525 Sales & Use Tax Due		—			—			—			—			—			—			—
Total Misc, Expenses		804			2,514			1,607			3,177			2,270			2,065			1,323
Total Operating Expense		118,854			100,262			135,006			113,686			104,687			117,778			106,161
Gross Margin		34,226			55,953			9,897			34,294			67,783			67,586			77,217
Gross Margin Percent		22	%		36	%		7	%		23	%		39	%		36	%		42	%
69705 Casualty Loss		—			—			—			—			—			—			—
69805 Bad Debt Expense		2,820			4,882			(5,007	)		(2,046	)		—			—			2,875
70005 Corporate Allocation		—			—			—			—			—			—			—
72305 Property Taxes		5,971			10,542			(219	)		11,322			808			5,685			5,685
72405 Insurance-Liability & Hazard		973			973			980			1,276			1,276			1,286			1,286
Total Other Fees		9,763			16,396			(4,247	)		10,553			2,085			6,971			9,846
72505 Accounting		417			417			417			417			417			346			346
73005 Legal		474			340			164			418			409			675			594
73510 Donations & Contributions		—			—			—			—			—			—			75
74005 Consulting Fees		—			—			—			—			—			—			—
74015 Professional Fees  - Other		—			—			—			—			—			—			—
75005 Properly Management Fees		7,621			7,811			7,278			7,399			8,624			9,268			9,169
75105 Partnership Admin Fees		—			—			—			—			2,937			2,997			3,788
75510 Other Penalties/Fin, Fee		—			—			—			—			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—			—
Total Professional Fees		8,512			8,567			7,859			8,234			12,385			13,286			13,972
EBITDAR		15,950			30,989			6,286			15,508			53,313			47,330			53,400
EBITDAR Percent		10	%		20	%		4	%		10	%		31	%		26	%		29	%
77005 Operating Lease		13,703			16,022			12,018			12,018			13,703			14,753			13,703
77010 Add’l Lease		5,810			5,810			5,810			5,810			5,810			5,810			5,810
Total Leases		19,513			21,832			17,828			77,828			19,513			20,563			19,513
80005 Interest Income		(197	)		(199	)		(201	)		(202	)		(204	)		(206	)		(208	)
80505 Other Non-Operating Income		—			—			—			—			—			—			—
87010 Extraordinary Items  - Net Tax		—			—			—			—			—			—			—
Total Non-Operating Income/Expense		(197	)		(199	)		(201	)		(202	)		(204	)		(206	)		(208	)
83005 Interest Expense		43			43			43			43			(63	)		—			—
83025 Int Exp MIP		—			—			—			—			—			—			—
Total Interest Expense		43			43			43			43			(63	)		—			—
EBTDA		(3,408	)		9,314			(11,384	)		(2,160	)		34,068			26,973			34,095
EBTDA Percent		-2	%		6	%		-8	%		-1	%		20	%		15	%		19	%
77505 Depreciation		5,817			5,805			5,780			6,323			6,323			5,871			6,493
78005 Amortization		573			573			573			573			573			573			573
78015 Amortization  -  Start Up		—			—			—			—			—			—			—
Total Depreciation & Amortization		6,389			6,378			6,353			6,896			6,896			6,444			7,066
Net Income (Loss)		(9,798	)		2,936			(17,737	)		(9,056	)		27,172			20,529			27,029

[Additional columns below]

[Continued from above table, first column(s) repeated]

	AUG			SEP			OCT			NOV			DEC			DEC YTD
69605 Discounts Lost		—			—			—			—			—			—
69610 Discounts Taken		(14	)		(20	)		(41	)		(18	)		(34	)		(230	)
69525 Sales & Use Tax Due		—			—			—			—			—			—
Total Misc, Expenses		1,461			1,406			2,334			7,074			1,327			21,361
Total Operating Expense		110,726			98,851			116,356			131,941			103,927			1,358,237
Gross Margin		64,076			86,930			73,617			71,408			48,323			691,312
Gross Margin Percent		37	%		47	%		39	%		35	%		32	%		34	%
69705 Casualty Loss		—			—			—			—			—			—
69305 Bad Debt Expense		1,820			—			3,520			(245	)		2,923			11,542
70005 Corporate Allocation		—			—			—			—			—			—
72305 Property Taxes		5,685			5,673			5,977			5,977			5,977			69,084
72405 Insurance-Liability & Hazard		1,286			1,286			1,286			1,286			1,286			14,479
Total Other Fees		8,791			6,959			10,784			7,018			10,186			95,105
72505 Accounting		346			473			346			346			1,663			5,949
73005 Legal		414			491			585			348			353			5,265
73510 Donations & Contributions		—			—			—			—			—			75
74005 Consulting Fees		—			—			—			—			—			—
74015 Professional Fees  - Other		—			—			—			—			—			—
75005 Properly Management Fees		8,740			9,289			9,499			10,199			7,581			102,477
75105 Partnership Admin Fees		2,648			4,995			3,326			3,747			(121	)		24,316
75510 Other Penalties/Fin, Fee		—			—			—			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—
Total Professional Fees		12,148			15,248			13,756			14,640			9,475			138,083
EBITDAR		43,138			64,723			49,078			49,750			28,661			458,124
EBITDAR Percent		25	%		35	%		26	%		24	%		19	%		22	%
77005 Operating Lease		13,703			13,703			13,703			13,703			13,068			163,797
77010 Add’l Lease		5,810			5,810			5,810			5,810			13,586			77,495
Total Leases		19,513			19,513			19,513			19,513			26,654			241,292
80005 Interest Income		(209	)		263			(213	)		(215	)		(329	)		(2,120	)
80505 Other Non-Operating Income		—			—			—			—			—			—
87010 Extraordinary Items  - Net Tax		—			—			—			—			—			—
Total Non-Operating Income/Expense		(209	)		263			(213	)		(215	)		(329	)		(2,120	)
83005 Interest Expense		—			—			—			—			—			107
83025 Int Exp MIP		—			—			—			—			—			—
Total Interest Expense		—			—			—			—			—			107
EBTDA		23,834			44,948			29,779			30,452			2,336			218,845
EBTDA Percent		14	%		24	%		16	%		15	%		2	%		11	%
77505 Depreciation		6,094			6,103			6,167			6,161			6,222			73,159
78005 Amortization		573			573			573			573			573			6,873
78015 Amortization  -  Start Up		—			—			—			—			—			—
Total Depredation & Amortization		6,667			6,676			6,740			6,734			6,794			80,033
Net Income (Loss)		17,168			38,272			23,039			23,719			(4,459	)		138,813

ADDENDA

ADDENDUM G: Qualifications of the Appraisers

PROFESSIONAL QUALIFICATIONS

Mark E. Bryant
Managing Director, Senior Housing/Healthcare Industry Group

Mr. Bryant has been involved in the real estate appraisal industry since 1980. Was employed from 1980 to 1986 by Western Appraisals & Survey in Lewiston, Idaho.

Mr. Bryant joined Cushman & Wakefield, Inc. in 1986 in the Valuation Advisory Services Group in Portland, Oregon. Mr. Bryant was named an Associate Director in 1990, given Directorship in 1995 and was named a Managing Director in 2002.

Experience

Appraisal and consulting assignments have included vacant land, office buildings, shopping centers, industrial complexes, commercial properties, single- and multi-family residential properties, motels, senior housing, aviation properties, ad valorem mass appraisals, and other investment properties throughout the United States. Valuations have been made of proposed, partially completed, renovated and existing structures. Has been qualified as an expert witness in bankruptcy litigation in the State of Oregon.

From 1980 to 1985, Mr. Bryant was general real estate appraiser focusing on all property types, including residential, commercial, agriculture and special use properties throughout the country. Western Appraisal also conducted mass appraisals for various assessor offices and Mr. Bryant assisted in ad valorem valuation and board hearings for several county assessor offices.

From 1991 through 1998, Mr. Bryant’s primary focus was on the valuation and consultation on multi-family housing properties, with a special focus on affordable housing properties. He was a senior appraiser for the company’s Affordable Housing Group. Mr. Bryant has personally appraised and/or consulted on in excess of 200 affordable housing properties nationwide.

From 1998 to 2001, Mr. Bryant was a senior appraiser in the Senior Housing/Healthcare Industry Group and prepared appraisals, market surveys and feasibility studies on all facets of senior housing and healthcare properties for corporate and institutional clients. Mr. Bryant has personally appraised and consulted on in excess of 400 senior housing and healthcare facilities nationwide.

Mr. Bryant was named National Co-Director of the Senior Housing/Healthcare Industry Group in 2001. As National Co-Director, his responsibilities include coordination of the firm’s national Senior Housing/Healthcare Industry Group consisting of appraisers who specialize in the valuation of independent living retirement communities, assisted living facilities, continuing care retirement facilities, skilled, intermediate and subacute care nursing homes, hospitals and other healthcare oriented property types.

ADVISORY GROUP

PROFESSIONAL QUALIFICATIONS Mark E. Bryant

Mr. Bryant is also a commercial pilot and doubled as a corporate pilot during his employment in 1980 to 1986 with Western Appraisals and Surveys. Mr. Bryant has appraised numerous aviation properties, including general aviation and corporate hangars, air cargo facilities, terminals, etc. and continues to provide valuation and consultation services nationwide on aviation real estate.

Education

University of Idaho, Moscow, Idaho, Graduated 1981
Degree: Bachelor of Science, Geography

Appraisal Education

Required curriculum for Membership, Appraisal Institute. Has completed continuing education courses and seminars sponsored by the Appraisal Institute and other real estate factions on an annual basis to maintain state licensing requirements.

Memberships and Professional Affiliations

• Associated Member, Appraisal Institute

Licenses

• State of Oregon – Certified General Appraiser – License No. C000186

• State of Montana – Certified General Appraiser – License No. 281

• State of Washington – Certified General Appraiser – License No.

• State of Idaho – Certified General Appraiser – License No. E442OK

• State of Utah – Certified General Appraiser – License No. CG00043062

• State of California – Certified General Appraiser – License No. AG027192

ADVISORY GROUP

PROFESSIONAL QUALIFICATIONS

John M. Vissotzky
Managing Director, Valuation Services, Advisory Group

Mr. Vissotzky entered the real estate business in 1979. Employed from 1979 to 1982 as a real estate appraiser by T. J. Meenach Company in Spokane, Washington. Owner of Vissotzky Appraisal Services, Spokane, Washington from 1982 to 1983. Employed from 1983 to 1986 as a real estate appraiser by Western Appraisals in Lewiston, Idaho.

Joined Cushman & Wakefield, Inc. in March 1986, as Senior Associate, Portland Oregon — Appraisal Division. In April 1989 Mr. Vissotzky was promoted to Manager, Portland Appraisal Division and elected an Assistant Vice President. In 1990 he was elected Vice President. Effective 1999 title was changed to Director and Mr. Vissotzky became a stockholder in Cushman & Wakefield, Inc. In 2000 he was elected Managing Director, Portland Valuation Advisory Services, now Valuation Services. Current responsibilities include management of the Portland office, and a professional staff of 12, with appraisal and consulting coverage throughout the states of Washington, Oregon, Idaho, Utah, Montana, Nebraska, Wyoming, North Dakota, South Dakota and Alaska.

Experience

Appraisal and consulting assignments have included vacant land, office buildings, shopping centers, industrial complexes, commercial properties, residential properties, gravel pits, scenic easements, condemnation and right of way, special use properties and investment properties throughout the Western United States. Valuations have been made of proposed, partially completed, renovated and existing structures. Qualified as an expert witness in condemnation matters in the States of Washington, Idaho and Oregon and testified in divorce litigation in the state of Washington and bankruptcy litigation in the State of Oregon.

Education

Washington State University, Pullman, Washington, Graduated 1979
Degree: Bachelor of Arts, Sociology / Business Administration

Appraisal Education

Successfully completed all courses and experience requirements to qualify for the MAI designation. Also, he has completed the requirements of the continuing education program of the Appraisal Institute.

Memberships, Licenses and Professional Affiliations

• Member, Appraisal Institute - MAI

PROFESSIONAL QUALIFICATIONS John M. Vissotzky, MAI

Mr. Vissotzky is a duly Certified General Real Estate Appraiser in the following states:

        Alaska, #168, expiring 06/30/05
        Georgia, license number 261786
        Idaho, license number CGA-162
        Montana, license number 279RAG
        Nebraska, license number CG230108R
        Oregon, license number C000200
        Utah, license number CG00043063
        Washington, license number 1100382
        Wyoming, license number 14284

Special Awards

Qualified for Attendance to Cushman & Wakefield, Inc. Achievement Conference 1987, 1988, 1995, 1999 and 2001.

Mr. Vissotzky was recipient of the 2002 Francis Corcoran Award offered by Cushman & Wakefield, Inc. signifying Valuation Advisory Services Manager of the Year.