EXHIBIT 99.7

COMPLETE APPRAISAL OF
   REAL PROPERTY

Montego Heights Lodge
1400 Montego Drive
Walnut Creek, Contra Costa County,
California 94598

IN A SELF-CONTAINED
   APPRAISAL REPORT

As of 10/7/03

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

503-297-1734 Tel

503-279-1791 Fax

WWW.CWVAS.COM

October 23, 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
	Montego Heights Lodge
	1400 Montego Drive
	Walnut Creek, Contra Costa County, California 94598
	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 23, 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 163-unit, 163-bed assisted living facility known as Montego Heights Lodge. The facility contains 106,396 ± square feet of gross floor area and is situated on a 4.88 acre site. The facility occupancy was 71 percent at the time of inspection.

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 Appraisal was prepared by Mark E. Bryant under the supervision of John M. Vissotzky, MAI. This Appraisal employs all three typical approaches to value: the Cost Approach, the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that all approaches would be considered meaningful and applicable in developing a credible value conclusion.

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 fee simple estate of the referenced property, subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, “as-stabilized” on April 1, 2004 was:

SIX MILLION ONE HUNDRED THOUSAND DOLLARS

$6,100,000

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 fee simple estate of the referenced property, subject to the assumptions and limiting conditions, certifications, Extraordinary Assumptions and Hypothetical Conditions, if any, and definitions, “as-is” on October 7, 2003 was:

FIVE MILLION SIX HUNDRED THOUSAND DOLLARS

$5,600,000

The above value estimates are inclusive of $130,000 in personal property and $0 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.

Douglas Armstrong
ARV Assisted Living, Inc.
October 23, 2003
Page 3

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

SUMMARY OF SALIENT FACTS

Common Property Name:	Montego Heights Lodge
Location:	1400 Montego Drive Walnut Creek, Contra Costa County, California 94598 The site is situated on the north side of Montego Drive at Tampico Street.
Property Description:	The property consists of a one-building, four-story assisted living facility containing 163 units and 163 beds on a 4.88-acre parcel of land.
Assessor’s Parcel Number:	140-250-024
Interest Appraised:	Fee Simple Estate
Date of Value:
As Is:	October 7, 2003
As Stabilized:	April 1, 2004
Date of Inspection:	October 7, 2003
Ownership:	ARV Montego Heights, L.P.
Occupancy:	Current physical occupancy is 71 percent
Current Property Taxes
Total Assessment:	$9,588,056
2002-2003 Property Taxes:	$120,421
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.
Site & Improvements
Zoning:	OC
Land Area:	4.88 acres or 215,573 ± square feet
Number of Units:	163
Number of Beds:	163
Number of Stories:	Four
Number of Buildings:	One
Year Built:	1978
Type of Construction:	Wood frame
Gross Building Area:	106,396 square feet
Parking:	38 spaces (0.31 Unit).

VALUATION SERVICES	ADVISORY GROUP

SUMMARY OF SALIENT FACTS

VALUE INDICATORS
Cost Approach:
Indicated Value:	$8,500,000
Sales Comparison Approach:
Indicated Value (As Is):	$5,700,000
Income Capitalization Approach
Direct Capitalization
Net Operating Income:	$704,378
Capitalization Rate:	11.50%
Indicated Value:	$6,100,000
FINAL VALUE CONCLUSION
Going Concern Market Value As-	$6,100,000
Stabilized Fee Simple:
Going Concern Market Value As-Is	$5,600,000
Fee Simple:
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.

VALUATION SERVICES	ADVISORY GROUP

SUBJECT PHOTOGRAPHS

Front view of property

West elevation of property

VALUATION SERVICES	ADVISORY GROUP

SUBJECT PHOTOGRAPHS

Rear view of property

Rear view of property

VALUATION SERVICES	ADVISORY GROUP

SUBJECT PHOTOGRAPHS

Dining room

Typical hallway

VALUATION SERVICES	ADVISORY GROUP

SUBJECT PHOTOGRAPHS

Typical unit

Typical unit

VALUATION SERVICES	ADVISORY GROUP

SUBJECT PHOTOGRAPHS

Kitchen

Library

VALUATION SERVICES	ADVISORY GROUP

SUBJECT PHOTOGRAPHS

Street view east on Montego Drive.

Street view west on Montego Drive.

VALUATION SERVICES	ADVISORY GROUP

TABLE OF CONTENTS

INTRODUCTION	1
OAKLAND REGIONAL ANALYSIS	6
LOCAL AREA ANALYSIS	23
SENIOR LIVING INDUSTRY OVERVIEW	25
MANAGEMENT AND OPERATIONS OVERVIEW	33
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
LAND VALUATION	68
COST APPROACH	74
SALES COMPARISON APPROACH	78
INCOME CAPITALIZATION APPROACH	87
RECONCILIATION AND FINAL VALUE OPINION	110
ASSUMPTIONS AND LIMITING CONDITIONS	113
CERTIFICATION OF APPRAISAL	116
ADDENDA	117

VALUATION SERVICES	ADVISORY GROUP

INTRODUCTION

Identification of Property

Common Property Name:	Montego Heights Lodge
Location:	1400 Montego Drive
	Walnut Creek, Contra Costa County, California 94598
	The site is situated on the north side of Montego Drive at Tampico Street.
Property Description:	The property consists of a one-building, four-story assisted living facility containing 163 units and 163 beds situated on a 4.88 acre site.
Assessor’s Parcel Number:	140-250-024

Property Ownership and Recent History

Current Ownership:	ARV Montego Heights, L.P., a wholly owned subsidiary of American Retirement Villas Properties II (a California limited Partnership).
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.

Intended Use and Users of the Appraisal

This Appraisal is intended to provide an opinion of the going concern market value of the fee simple 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 7, 2003 under the “as-is” premise and April 1, 2004 under the “as-stabilized” premise. The property was inspected on October 7, 2003 by Mark E. Bryant. John M. Vissotzky, MAI has reviewed the report and did not inspect the property.

Property Rights Appraised

Fee simple 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

VALUATION SERVICES	1	ADVISORY GROUP

INTRODUCTION

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 all three typical approaches to value: the Cost Approach, the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that all approaches would be considered meaningful and applicable in developing a credible value conclusion.

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.

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

VALUATION SERVICES	2	ADVISORY GROUP

INTRODUCTION

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.

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.

Market Value As Is on Appraisal Date

The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; related to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning.

Prospective Value Upon Reaching Stabilized Occupancy

The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs, and other carrying charges are assumed to have been incurred.

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

VALUATION SERVICES	3	ADVISORY GROUP

INTRODUCTION

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 owner.

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 Contra Costa County assessor as Assessor’s Parcel Number 140-250-024. The legal description for the subject is located in the Addenda.

VALUATION SERVICES	4	ADVISORY GROUP

REGIONAL MAP

VALUATION SERVICES	5	ADVISORY GROUP

OAKLAND 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 Walnut Creek, California within Contra Costa County, which is part of the Oakland Primary Metropolitan Statistical Area (PMSA) and the greater San Francisco-Oakland-San Jose Consolidated Metropolitan Statistical Area (CMSA).

Regional Economic and Demographic Analysis

Regional Area Overview

The Oakland Primary Metropolitan Statistical Area (PMSA) consists of the counties of Alameda and Contra Costa and is located on the east shore of San Francisco Bay. The PMSA encompasses nearly 1,457 square miles. The Oakland PMSA (Oakland) is part of the greater San Francisco-Oakland-San Jose Consolidated Metropolitan Statistical Area (CMSA) which includes the 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).

VALUATION SERVICES	6	ADVISORY GROUP

OAKLAND REGIONAL ANALYSIS

LOCATION OF OAKLAND PMSA COUNTIES WITHIN THE SAN FRANCISCO CMSA

Source: Cushman & Wakefield Analytics

Oakland’s Northern California location along the San Francisco Bay provides for a fairly mild climate year-round. The topography of the area varies from bay waterfront to mountains, and provides for a myriad of microclimates and recreational venues. More importantly, as the geographic center of the Bay Area, Oakland is the hub of the Bay Area’s transportation system, boasting superior access to Interstate 80 heading east and Interstate 5 going north/south. Oakland is also a major west coast shipping port. Oakland’s cargo volume makes it the fourth busiest container port in the United States.

Demographic Profile

The Oakland PMSA is a highly sought-after and yet expensive place to live, and the average age of its population closely mirrors that of the U.S. Oakland’s labor pool is highly skilled and highly compensated with per capita incomes well above national averages. The PMSA’s median household income of $71,700 is 31 percent above that of the nation’s top 100 largest metropolitan areas (Top 100) and 51 percent above that of the U.S.

Oakland has a vastly higher percentage of households in the $100,000-plus annual income cohort – a 32 percent share versus 20 percent for the Top 100 and 16 percent for the U.S. At the lower end of the income strata, Oakland has a substantially smaller percentage of annual incomes under $50,000 – 34 versus 46 percent for the Top 100 and 53 percent for the U.S. overall.

The population breakdown by education follows a similar pattern to incomes. The San Francisco Bay Area has many of the nation’s most prestigious universities, including Stanford and University of California (UC) Berkeley and UC San Francisco. Over 29 percent of Oakland’s population has a Bachelor degree or better, compared to only 24 percent for the Top

VALUATION SERVICES	7	ADVISORY GROUP

OAKLAND REGIONAL ANALYSIS

100 and 21 percent for the U.S. Only 23 percent of the Oakland PMSA population has just a high school diploma, compared to 28 percent for the Top 100 and 30 percent for the U.S.

DEMOGRAPHIC CHARACTERISTICS
Oakland PMSA vs. Top 100 and U.S.
2002 Estimates

		Oakland			Top 100
Characteristic		PMSA			Metro Areas*			U.S.
Median Age (years)			35.5			35.1			35.6
Average Annual Household Income		$	91,400		$	72,700		$	64,300
Median Annual Household Income		$	71,700		$	54,700		$	47,500
Households by Annual Income Level:
	<$25,000		14.8	%		21.0	%		25.3	%
	$25,000 to $49,999		18.8	%		25.1	%		27.3	%
	$50,000 to $74,999		18.9	%		20.8	%		20.2	%
	$75,000 to $99,999		15.8	%		13.4	%		11.8	%
	$100,000 plus		31.7	%		19.7	%		15.5	%
Education Breakdown:
	< High School		16.8	%		21.8	%		24.1	%
	High School Graduate		22.8	%		27.8	%		29.8	%
	College < Bachelor Degree		31.0	%		26.5	%		25.4	%
	Bachelor Degree		18.9	%		15.5	%		13.5	%
	Advanced Degree		10.5	%		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.

Population

Between 1992 and 2002, the 1.3 percent average annual growth in the Oakland PMSA’s population, which now totals close to 2.5 million, matched that of the Top 100. The preponderance of the PMSA’s growth was in Contra Costa County, which grew at an average annual pace of 1.7 percent as its population has pushed eastward. Alameda County, the more densely developed of the two counties, grew at a slower 1.0 percent average annual pace between 1992 and 2002.

Notably, Oakland’s migration abruptly turned negative last year as laid-off workers and their families left the area. Given that this is the first year since 1995 to experience a net outflow of migrants, it signals how difficult the current economic environment is. International migration has held steady, but domestic migrants have fled for stronger labor markets.

Contra Costa County is anticipated to grow faster than national averages between 2002 and 2007 – 1.4 versus 1.0 percent for the Top 100. Again, population growth in Contra Costa County is expected to outpace that in Alameda County (at only 0.4 percent per year) due to the greater availability of developable land and lower land costs. As traffic congestion continues to lengthen drive times throughout the region, both counties will experience increasing sentiment to limit additional suburban development, to preserve open space, as well as to promote “smart growth” and development oriented towards mass-transit.

VALUATION SERVICES	8	ADVISORY GROUP

OAKLAND REGIONAL ANALYSIS

POPULATION GROWTH BY YEAR
Oakland PMSA 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.

ANNUALIZED POPULATION GROWTH BY COUNTY
Oakland PMSA vs. San Francisco CMSA Counties
1992 – 2007

											Annual			Annual
									2007		Growth			Growth
Population (000s)					1992		2002		Forecast		92-02			02-07
United States						256,943.8		288,659.5		301,310.2		1.2	%		0.9	%
	Top 100 MSAs					160,017.2		181,966.8		191,688.3		1.3	%		1.0	%
		San Francisco CMSA				6,449.8		7,126.5		7,393.7		1.0	%		0.7	%
				Santa Clara County		1,531.9		1,683.5		1,723.3		0.9	%		0.5	%
				San Mateo County		662.9		703.2		727.5		0.6	%		0.7	%
				San Francisco County		734.9		764.0		761.3		0.4	%		-0.1	%
				Sonoma County		405.2		468.4		506.1		1.5	%		1.6	%
				Solano County		359.9		411.1		450.1		1.3	%		1.8	%
				Santa Cruz County		232.9		253.8		258.0		0.9	%		0.3	%
				Marin County		235.8		247.6		255.5		0.5	%		0.6	%
				Napa County		114.3		130.3		145.3		1.3	%		2.2	%
			Oakland PMSA			2,172.0		2,464.7		2,559.9		1.3	%		0.8	%
				Alameda County		1,332.2		1,472.3		1,498.4		1.0	%		0.4	%
				Contra Costa County		839.8		992.4		1,062.7		1.7	%		1.4	%

Source: Economy.com, Cushman & Wakefield Analytics

VALUATION SERVICES	9	ADVISORY GROUP

OAKLAND REGIONAL ANALYSIS

Oakland’s highest population density is located west of the East Bay Hills, which run between and parallel to both Interstate 80 and Interstate 680. Cities within this area include (north to south) San Pablo, Richmond, El Cerrito, Albany, Berkeley, Emeryville, Oakland, Alameda, San Leandro, San Lorenzo, Hayward and Union City. The less dense concentrations of population are in the hilly and mountainous regions of Contra Costa County and Southern Alameda County. Within the metro area, the general direction of growth is pushing towards the northeast into Contra Costa County.

POPULATION PER SQUARE MILE BY ZIP CODE
Oakland PMSA
2002

Source: Claritas, Inc., Cushman & Wakefield Analytics

Households

Unlike its relatively strong population growth, the Oakland PMSA’s rate of household formation lagged that of the Top 100 over the past ten years. Between 1992 and 2002, led by average annual growth of 1.4 percent in Contra Costa County (compared to 0.7 percent for Alameda County), Oakland’s number of households increased by an average of 1.0 percent annually, below the 1.3 percent rate posted by the Top 100. Household formation growth for Oakland between 2002 and 2007 is forecast to increase to an average annual pace of 1.1 percent –

VALUATION SERVICES	10	ADVISORY GROUP

OAKLAND REGIONAL ANALYSIS

again led by Contra Costa County at 1.6 percent – but still lag that of the Top 100 at 1.3 percent.

HOUSEHOLD GROWTH BY YEAR
Oakland PMSA vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

Income

The median household income in the Oakland PMSA is $71,700, over 31 percent higher than the Top 100 median of $54,700 and nearly 51 percent higher than the U.S. median of $47,500. Over the past ten years, the PMSA’s 4.6 percent average annual growth in median household income solidly surpassed the Top 100 average pace of 3.7 percent. Given its highly educated workforce, which supports higher paying jobs, the Oakland PMSA, is better able to sustain higher growth rates in household incomes.

A current low and level rate of bankruptcy filing indicates that household balance sheets are in very good condition. Oakland’s relatively moderate economic downturn has combined with strong house price appreciation to support household finances. Rising home equity and low interest rates have been critical in allowing Oakland’s households to tap substantial equity balances during this period of slow economic growth. However, by the end of this year, the tap will be closed as interest rates rise and house prices level off. This will dampen the pace of consumer spending.

Through 2007, Oakland’s median household income growth is expected to slow markedly to an average of 3.1 percent annually, but still exceed the 2.7 percent pace that is forecast for the Top 100. Between 2002 and 2007, Alameda County, with average annual growth in median household income of 3.9 percent, is expected to strongly outpace Contra Costa County’s average of 1.9 percent growth in median household income.

Oakland’s most affluent areas are located primarily in Contra Costa County in the cities of Orinda, Moraga, Lafayette east of the Oakland Hills, and Alamo, Danville and San Ramon along the section of Interstate 680 north of Interstate 580. Within Southern Alameda County, the households within the cities of Pleasanton, Castro Valley, Fremont and Newark have the highest median income. Finally, in Western Alameda County, Bay Farm Island in Alameda and the northern parts of Berkeley, have the highest median household incomes. The less affluent sections of the Oakland PMSA are located in the cities of Oakland, Berkeley and Richmond.

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OAKLAND REGIONAL ANALYSIS

MEDIAN HOUSEHOLD INCOME DISTRIBUTION BY ZIP CODE
Oakland PMSA
2002

Source: Claritas, Inc., Cushman & Wakefield Analytics

Regional Economic Overview

Oakland’s economy is stable and is the best performing among the Bay Area’s three core metro areas. Its employment base fell by less than 3 percent peak to trough, well below the double-digit declines across the bay. Moreover, employment has edged up in Oakland from its trough of one year ago, although these gains are tenuous. Its jobless rate is flirting with highs last seen in 1992, and personal bankruptcy filings began to rise late last year.

Signs of recovery are evident. Construction payrolls are rising this year following an 18-month slump. While population growth has slowed considerably, it remains positive. Employment in retailing and business and professional services remains very steady, indicating some underlying stability in both consumer and business confidence in the area. Oakland also benefits from sizable employment in the education and health service industries. Both continue to expand robustly as they each face rising demand and a moderate ability to control prices.

While Oakland’s economy is quite diverse, the source of its current stability is narrowly based and so the near-term outlook remains fraught with risk. For example, financial services has been an important component of Oakland’s growth as back-office and service center operations for commercial banks and consumer lenders have grown along the I-680 corridor. Yet finance

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OAKLAND REGIONAL ANALYSIS

employment has fallen from its peak, as cost containment has closed some facilities. Similarly, Oakland’s exposure to state government employment is the highest among California’s major metro areas. A portion of this base is related to U.C. Berkeley and the university system, which does have the power to raise tuition and thus offset diminished state support. However, the state’s budget shortfall poses considerable risk to the downtown office markets should state payroll cuts go further than current modest plans.

Oakland’s vibrant international trade sector is also a source of risk. The weakening of the global economy is hindering exports and a moderate fall in the dollar is slowing imports. Similarly, wholesale trade and trucking has also faltered. Given the weak global outlook, Oakland’s economy is not likely to get any near-term boost from international trade.

Finally, Oakland’s diverse manufacturing economy presents a mixed outlook for the coming years. A total of 10,600 jobs were cut in 2002, a 9.4 percent decrease from 2001. Specifically, producers of data storage equipment, chips and semiconductor manufacturing equipment have cut 5,000 jobs over the past two years, and the outlook for a turnaround in 2003 is limited. The smaller computer equipment industry, however, has been stable over the past year and has some upside potential in the near term. Biotechnology continues to expand, supporting the economy in the environs of the university. Each of these industries continues to garner venture capital funding. Light manufacturing, related more to consumer products, is expanding and should continue to do so as long as current consumer spending trends persist.

Gross Product

In the latter half of the 1990s, the Oakland economy benefited from spillover effects of the unprecedented (and largely technology-driven) economic growth in the San Francisco and San Jose metro areas. Over the ten-year period from 1992 to 2002, Oakland’s Gross Metro Product (GMP) exhibited relatively strong growth – increasing at an average annual rate of 3.6 percent – trailing slightly the Top 100 rate of 3.8 percent.

REAL GROSS PRODUCT GROWTH BY YEAR
Oakland PMSA vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

Oakland’s economic growth decreased markedly during 2000 and 2001, but unlike many U.S markets, did not turn negative. In 2002, Oakland’s gross metro product (GMP) growth jumped to 4.9 percent and is forecast to remain consistent, with a 3.2 percent average annual growth

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OAKLAND REGIONAL ANALYSIS

rate between 2002 and 2007. Oakland is expected to slightly outpace the 3.0 percent that is forecast for the Top 100.

Employment Trends

Oakland is regarded as a highly diversified economy, which acts to limit the metro area’s economic volatility. Its employment distribution across the industry sectors is quite similar to that of the Top 100 and the U.S. overall. Compared to the Top 100, Oakland is more heavily weighted in the Government and Construction sectors and somewhat less weighted in the Financial Activities, Education/Health Services and Leisure/Hospitality sectors. Oakland’s office-using employment is also slightly below the Top 100 average.

EMPLOYMENT BY SECTOR
Oakland PMSA vs. Top 100
2002

Source: Economy.com, Cushman & Wakefield Analytics

The Oakland PMSA accounts for 31 percent of the San Francisco CMSA employment and is now the largest metro area in terms of employment within the CMSA. Between the Oakland PMSA’s two counties, Alameda County has the largest share of total employment – twice that of Contra Costa County. Within Alameda County, total employment is expected to grow by 1.5 percent annually between 2002 and 2007 and Contra Costa County is expected to grow by roughly 1.4 percent – both at rates greater than the 1.1 percent forecast for the San Francisco CMSA.

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OAKLAND REGIONAL ANALYSIS

TOTAL EMPLOYMENT BY COUNTY
San Francisco CMSA
2002

Source: Economy.com, Cushman & Wakefield Analytics

Between 1992 and 2002, Oakland’s total employment averaged 1.8 percent annual growth – just below the 1.9 percent of the Top 100. Given current economic conditions, Oakland’s short-term employment outlook is tempered. After its enviable employment gains between 1997 and 2000, Oakland’s total employment growth is projected to slow to a 1.5 percent average annual rate from 2003 through 2007 – slightly lagging the average 1.6 percent rate forecast for the Top 100.

TOTAL EMPLOYMENT GROWTH AND UNEMPLOYMENT RATE BY YEAR
Oakland PMSA vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

Given Oakland’s highly skilled and diversified labor force, its unemployment rate has generally trended with that of the Top 100. The unemployment rate for Oakland as of year-end 2002 was 5.9 percent, compared to the Top 100’s unemployment rate of 5.6 percent. Oakland’s unemployment rate is expected to peak at 6.4 percent in 2003, and then trend downward through 2007 to 5.4 percent, remaining roughly 0.4 percentage points higher than the Top 100 rate through 2007.

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OAKLAND REGIONAL ANALYSIS

Oakland is now home to six of the nation’s 2002 Fortune 500 corporations – ChevronTexaco (ranked as number 7), Safeway (41), Longs Drugs (367), Clorox (394), Golden West Financial (425) and Ross Stores (444). Below is a table of Oakland’s largest non-government employers with Fortune 500 companies indicated by boldface type.

Oakland’s industrial diversity is evident when examining its largest employers. Among the sectors represented by the PMSAs top employers are Medical, Telecommunications, Education, Research & Testing, Retail, Oil & Gas, Heavy Manufacturing, Banking, Software, Financial Services and Transportation.

TOP NON-GOVERNMENT EMPLOYERS
Oakland PMSA
2002

	Number of PMSA
Employer	Employees
University of California, Berkeley Kaiser		24,000
Kaiser Permanente		22,500
SBC Communications, Inc.		11,800
Lawrence Livermore National Laboratory		8,900
Safeway, Inc.		7,700
ChevronTexaco Corp.		6,300
New United Motor Manufacturing Inc.		5,300
Albertson’s Inc.		4,600
John Muir/Mt. Diablo Health System		4,600
Wells Fargo & Company		4,000
Lawrence Berkeley National Laboratory		4,000
Alta Bates Health Systems		3,800
Bay Area Rapid Transit		3,500
Longs Drug Stores, Inc.		3,200
Providian Financial Corporation		3,000
PeopleSoft, Inc.		3,000

Source: East Bay Business Times, December 2002, Economy.com 2003, Cushman & Wakefield Analytics

Oakland’s office-using employment growth lagged that of the Top 100 between 1992 and 1996 before surpassing the Top 100 in 1997 during the Bay Area’s high-tech boom. Comparing the trough to peak trends, from 1994 to 2001, office-using employment in Oakland grew at an annual rate of 2.8 percent, while the Top 100, from 1991 to 2001 grew on average at 2.9 percent per year.

While the Oakland PMSA has a smaller share of technology employment than the San Jose PMSA, the impact of high tech’s recent growth was felt throughout the Bay Area. The Oakland PMSA benefited from its proximity to the San Jose PMSA, the global capital of the high-tech industry. Oakland, especially southern Alameda County, generally served as a more affordable venue for back-office operations of many Silicon Valley firms.

Current economic conditions have had a similar effect on Oakland’s office-using employment as on that of the Top 100 overall. During the five-year forecast period between 2002 and 2007,

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OAKLAND REGIONAL ANALYSIS

growth in Oakland’s office-using employment is projected to average 2.3 percent annually, just above the Top 100 and the nation’s expected average growth of 2.1 percent.

TOTAL OFFICE-USING EMPLOYMENT GROWTH BY YEAR
Oakland PMSA vs. Top 100
1990 – 2007

Source: Economy.com, Cushman & Wakefield Analytics

Oakland’s most significant concentrations of office-using employment are located in several areas throughout the PMSA. Within Alameda County, the highest densities of office employment are in southern Richmond, Berkeley, Emeryville, Oakland, Alameda and San Leandro. Within Contra Costa County, the City of Walnut Creek at the intersection of Interstate 680 and Highway 24 has the highest office employment density. The intersection of Interstate 580 and 680 in Dublin/Pleasanton, characterized by campus-style office development, also has a high concentration of office workers.

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OAKLAND REGIONAL ANALYSIS

OFFICE-USING EMPLOYMENT PER SQUARE MILE BY ZIP CODE
Oakland PMSA
2002

Source: Cushman & Wakefield Analytics

Transportation Network

The Port of Oakland is the third busiest port on the west coast, behind of the Port of Los Angeles, the Port of Long Beach and just ahead of the Port of Seattle. Located on the mainland shore of San Francisco Bay, one of the great natural harbors of the world, Oakland was among the first ports globally to specialize in the intermodal container operations, which have revolutionized international trade and assisted with the emergence of the global economy.

The Oakland PMSA has a number of major freeways that have fostered development around them, and with that, seemingly inevitable traffic jams. Among them: Interstate 880, a major thoroughfare for both trucks and commuters traveling from southern Alameda County; Interstate 580, serving the communities east of the Oakland Hills in the Tri-Valley area (Dublin, Pleasanton, San Ramon) and further east (Livermore and the Central Valley); Interstate 680, which runs almost 70 miles from San Jose to Fairfield in Solano County through back-office and residential areas; Interstate 80, along the east shore of the San Francisco Bay through the communities of west Contra Costa County; and Highway 24, which passes under the east bay hills through the Caldecott Tunnel, and heavily traveled by commuters from Contra Costa County into San Francisco.

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OAKLAND REGIONAL ANALYSIS

These routes are all generally characterized by heavy traffic congestion during each morning and evening commute. Carpool lanes have been added to all of these routes except for Highway 24 and the stretch of Interstate 580 from Hayward to Emeryville, which bisects the residential neighborhoods of San Leandro and Oakland and is prohibited to trucks.

The Bay Area Rapid Transit system (BART) serves most of the East Bay and provides service to San Francisco and south of the city into the Peninsula market, where service to the San Francisco International Airport opened in June 2003. BART’s service extends to Richmond in the North, Pittsburg in east Contra Costa County, Pleasanton in east Alameda County, and Fremont in southern Alameda County. The hub of the system is in Downtown Oakland where all of the lines converge before heading into San Francisco. Furthermore, the Metropolitan Transportation Commission (MTC) has approved a $4.3 billion BART extension from Fremont to San Jose. In addition, a rail connection to the Oakland Airport is also planned to replace the existing bus shuttles, which would enhance its accessibility and long-term growth.

Bus service is provided by AC Transit in Alameda County (west of the hills) and West Contra Costa County, while County Connection serves East Contra Costa and “Wheels” serves Dublin/Pleasanton/Livermore in east Alameda County.

Quality of Life/Amenities

Major Attractions and Amenities

Oakland is located on the San Francisco Bay, and from atop its mountainous areas offers spectacular views of the bay, bridges, islands and downtowns. The East Bay has a generally warmer climate than San Francisco, and beyond the East Bay hills, it is warmer in the summer and cooler in the winter as the Pacific Ocean and San Francisco Bay has less climatic influence.

The East Bay Regional Parks has over 40,000 acres of accessible parklands that support hiking and riding trails, lakes and swimming beaches, fishing and boating and campgrounds. Mount Diablo State Park invites hiking, mountain biking and picnicking, as well as a sweeping view of Contra Costa County and the entire Bay Area from its 3,849-foot peak.

In general, the East Bay’s development is more residential and less commercial in nature than that of San Francisco, with venues for ice skating, sailing, rowing, and horseback riding to name a few. For the young, the Oakland Zoo and Children’s Fairyland are favored destinations. For older children, it is an hour drive to Great America Amusement Park in Santa Clara, Six Flags Marine World in Vallejo and Raging Waters in San Jose. For a more educational outing, there is the new Chabot Observatory in the Oakland Hills, the Lawrence Hall of Science in the Berkeley Hills and the Oakland Museum in Downtown Oakland.

Oakland is also home to three professional sports teams – the Oakland Raiders football team, the Golden State Warriors basketball team and the Oakland Athletics (A’s) baseball team. Both the Raiders and A’s play at Network Associates Coliseum, and the Warriors play at the Oakland Coliseum Arena. Both facilities were renovated when the Raiders moved back to Oakland from Los Angeles.

The Wine Country in Napa and Sonoma Counties are about an hour or so drive from the East Bay. Monterey, Carmel and Big Sur are less than two hours drive, and Lake Tahoe and Yosemite National Park are roughly three hours away.

Education

The San Francisco CMSA is home to numerous institutions of higher learning. The large number of world-class educational and research facilities – more than 35 colleges and

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OAKLAND REGIONAL ANALYSIS

universities – positively impacts the Bay Area economy. Total college enrollment within the Oakland PMSA was 188,900 in 2000, or 7.9 percent of the population.

Alameda County offers a highly developed system of higher education and research facilities including the University of California (UC) at Berkeley. Besides UC, Alameda County boasts a state university, two large private universities, seven community colleges, California College of the Arts and Crafts, and many other specialty schools. Contra Costa County offers seven major colleges including Diablo Valley College, Pleasant Hill; the Center for Higher Education, Walnut Creek; and St. Mary’s College, Moraga.

MAJOR COLLEGES/UNIVERSITIES
Oakland PMSA
Fall 2001

	Full/Part Time
College/University	Enrollment
University of California Berkeley		31,400
Diablo Valley College		21,700
Chabot College		14,500
California State University Hayward		13,240
Laney College		12,500
Ohlone College		11,800
Los Medanos College		10,300

Source: San Francisco Business Times, August 23, 2002; Cushman & Wakefield Analytics

Medical Facilities

The Oakland PMSA has a comprehensive healthcare network. Ranked by total patient days in 2001 they are: Alta Bates Medical Center (Berkeley), Alameda County Medical Center (Oakland), Summit Medical Center (Oakland), John Muir Medical Center (Walnut Creek), Kaiser Foundation Hospital (Oakland), Washington Hospital (Fremont), Kaiser Foundation Hospital (Hayward), Children’s Hospital (Oakland), Eden Medical Center (Castro Valley), Mt. Diablo Medical Center (Concord), Contra Costa Regional Med Center (Martinez) and Doctors Medical Center (San Pablo).

Regional Summary

Oakland’s economy is stable and performing better than the San Francisco and San Jose PMSAs, making it the best economy among the Bay Area’s three core metro regions. Due to its diversity, relatively smaller reliance on high tech and lower business costs, Oakland has been better able to weather the recent economic downturn. In addition, Oakland is less dependent than the rest of the Bay Area on rebounding business investment, particularly IT-related investment. Consequently, Oakland’s employment base fell by just over 1.2 percent peak to trough, well below the significant decline in the South Bay. While its total employment has increased from one year ago, Oakland’s jobless rate is flirting with highs last seen in 1992 and personal bankruptcy filings began to rise late in 2002.

Looking to the longer term, Oakland has the advantages of being an affordable alternative to both San Francisco and Silicon Valley, with the most affordable housing in the Bay Area (though the gap has narrowed), and having the best transportation linkages for its workforce. Oakland’s

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expanding biotech industry remains an engine of economic growth, fueled by rising R&D activity. Although Oakland’s international trade has declined in recent months, the significance of its ports on the local economy will cause Oakland to be the first among the Bay Area economies to once again expand as economic demand from the U.S. and international markets improves. Oakland’s near-term outlook is positive but is subject to numerous risks related to global trade, state fiscal conditions, business confidence and related travel and spending.

Oakland’s diverse economy is expected to generate average performance in both the near term and long term. The mix of traditional and high-tech industries helps balance the metro area’s growth, limiting the volatility usually seen elsewhere in the Bay Area. Moreover, its generally lower business and living costs compared to the region and availability of developable sites sustain the metro area’s regional competitive advantage.

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LOCAL AREA MAP

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LOCAL AREA ANALYSIS

Location

The subject is located in the north central part of Walnut Creek just south of Ygnacio Valley Road. This specific area is approximately two miles northwest of the downtown core area of Walnut Creek. The boundaries of the local area are considered to be Treat Boulevard to north, Walnut Avenue to the east, Walnut Boulevard to the south and west.

Access

The subject is located along Montego Drive, a neighborhood collector street that begins at Ygnacio Valley Road to the south and terminates La Casa Via at the John Muir Memorial Hospital. Ygnacio Valley Road extends northwest from I-680 and terminates in the eastern portion of Concord.

I-680 and Highway 24 are within two miles of the neighborhood and is accessed from Ygnacio Valley Road. As explained previously, Highway 24 is the primary freeway between San Francisco, while I-680 is the primary north-south freeway through the East Bay area. 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 office, residential and medical uses. The primary influence of development in the north part of the local area is from the John Muir Memorial Hospital with numerous medically related uses along Montego Drive and La Casa Via. South of the subject are several low-rise office buildings, while properties to the east are primarily higher density condominium residential uses. Residential prices for single-family/condominiums in the local area generally start at around $300,000. There are also three other elderly housing facilities in the immediate area, including the San Marco nursing facility the south, the Guardian of Ygnacio nursing facility to the northeast and the Casa Montego Satellite Senior Residences north near the hospital. Local area shopping is available along Ygnacio Valley Road south and north of the immediate local area.

The local area is considered to be in a mature stage of its life. Although there is some undeveloped land in the local area, most of it is considered undevelopable due to topography restraints. At present, the local area is considered to be approximately 95 percent developed.

Nearby and Adjacent Land Uses

West:
North:
East:
South: Office building
Medical office building
Condominium/townhouse development
San Marco nursing home

Proximity to Health Care

The primary medical facilities in Walnut Creek are the John Muir Memorial Hospital (one block north), and the Kaiser Foundation Hospital (two miles south). The travel time to these facilities is between 1 and 10 minutes. There are numerous medical office buildings between the subject and the hospital.

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LOCAL AREA ANALYSIS

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 local area that would impact the subject. There are three other senior facilities in the immediate area, the San Marco nursing facility, Guardian of Ygnacio nursing facility and the Casa Montego Satellite Senior Residences. Neither of these facilities actually competes with the subject and is believed to complement the facility. We are not aware of, at this time, of any other planned improvements or demolitions in the local area that would impact the subject.

Conclusion

The subject is located in an established residential area of Walnut Creek. The primary influence of the local area is medically related due to the proximity of the John Muir Memorial Hospital. The local area is in its mature stage of its life and there is limited developable land available for future construction. Services requisite to support a senior living complex such as the subject are within relatively close proximity. After reviewing the local area data, a positive effect on real estate values in the local area is anticipated for the foreseeable future. This positive effect also extends to the subject property.

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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.

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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

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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.

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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

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.

VALUATION SERVICES	28	ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

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.

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:

VALUATION SERVICES	29	ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

• 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.

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

VALUATION SERVICES	30	ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

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
3.	Administrative legal actions as follows:

• Denial of applications

• Compliance plans

• Probationary license

• Temporary suspension of license

• Revocation of license

VALUATION SERVICES	31	ADVISORY GROUP

SENIOR LIVING INDUSTRY OVERVIEW

• 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	32	ADVISORY GROUP

MANAGEMENT AND OPERATIONS OVERVIEW

Management Overview

The subject is managed by ARV Assisted Living, Inc. (ARV). Montego Heights Lodge was constructed in 1978. There have not been any recent major renovations to the facility over the past three years. Revenues have been sporadic over the last three years, while expenses have been increasing. The facility’s occupancy was 93 percent in 2000, 84 percent in 2001, 85 percent in 2002 and declined to 69 percent annualized for the first eight months of 2003. The current occupancy has increased slightly. The reasoning for the lower annual occupancy has been reportedly due to the older age of the property, its relatively large size and competition. It would also appear that marketing might not have been as aggressive as needed to maintain higher occupancy levels. Also, the facility has recently lost its marketing director. We believe that ARV is competent to manage the subject property.

Operations Overview

Services

Montego Heights Lodge 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 resident receives.

Regulations and Health Matters

The facility has a license for a capacity of 199 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.

VALUATION SERVICES	33	ADVISORY GROUP

MANAGEMENT AND OPERATIONS OVERVIEW

Admission Policies

Montego Heights Lodge 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 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.

Montego Heights Lodge 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

Montego Heights Lodge has historically maintained a full time marketing director. This position, however, was vacant at the time of inspection. There have been at least two different marketing directors at the property over the last 12 to 28 months. Marketing personnel, however, 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.

Given the history of the subject, it appears that marketing efforts have been of varied success. Occupancy of the facility was at 93 percent for 2000, 84 percent in 2001, 75 percent in 2002 and declined to an average annual occupancy of 69 percent for the first eight months of 2003. The declining occupancy at the facility is reportedly due to on-site management problems, as well as non-aggressive marketing. We believe that in order to again achieve stabilized occupancy conditions, very strong and aggressive marketing will be required.

VALUATION SERVICES	34	ADVISORY GROUP

MANAGEMENT AND OPERATIONS OVERVIEW

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 currently 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
Sunrise Walnut Creek	3.0 - 5.0 Miles		75	%
Chateau Lodge I & III	3.0 - 5.0 Miles		70	%
Diablo Lodge	3.0 - 5.0 Miles		70	%
Concord Royale	3.0 - 5.0 Miles		75	%
Valley View Lodge	3.0 - 5.0 Miles		75	%
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 Walnut Creek/San Jose area.

VALUATION SERVICES	36	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

MARKET AREA SUPPLY

	Total AL
Name	Units		PMA/SMA*
Sunrise Walnut Creek		60	PMA
Chateau Lodge I & III		131	PMA
Diablo Lodge		118	PMA
Concord Royale		53	PMA
Valley View Lodge		125	SMA
SUBJECT		163
Totals		650

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

In the Walnut Creek area, there are several facilities offering independent and assisted living services. These range from traditional independent living facilities up to those that cater exclusively to assisted living and dementia residents. Because of the subject’s older age, it does not compete directly with the newer assisted/dementia facilities. Inversely, it offers a level of services above the traditional independent living facility. From a review of the number of licensed residential care facilities in the primary market area, there are 46 facilities offering approximately 1,135 licensed beds. 35 of these properties are board and care type homes with 6 beds or less, while the remaining facilities (including the subject) range from 15 beds to 200 beds.

Proposed Units

Discussions with local providers and planning departments indicated that there are no other facilities planned at this time. The most recent construction was a Sunrise facility in 2001 that is located approximately one mile from the subject.

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 487 units and/or beds (excluding the subject) and the current available occupancy of those properties was from 93 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.

Montego Heights Lodge is noted as having been at 71 percent occupancy at the time of inspection. The subject appears to have an average reputation in the market based on the lower occupancy patterns. Marketing appears to have been less than favorable as there appears to adequate demand in the market area which is supported by the occupancy rates of the other properties. However, as the subject is older, in need of some upgrades and offers smaller unit sizes, the rate structure is such that the facility is attempting to account for these factors.

VALUATION SERVICES	37	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

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.

		Total AL
Name		Units		Occupancy Level
Sunrise Walnut Creek	*		60		92	%
Chateau Lodge I & III	*		131		94	%
Diablo Lodge	*		118		96	%
Concord Royale	*		53		89	%
Valley View Lodge			125		98	%
SUBJECT			163		72	%

* 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 Walnut Creek area begin at around $1,900 per month for a studio unit and go up to around $4,300 per month for a one-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 Sunrise that includes a higher base level of personal care services in the monthly rent.

Rent Increases

Most assisted living facilities in the Walnut Creek 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. Due to the age and positioning of the property, we believe that it may be difficult to achieve these type of rent increases annually going forward. The property would likely be able to witness increases at much lower growth rates.

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 Walnut Creek market area, no specific concessions were noted. At the time of inspection, the subject reportedly was

VALUATION SERVICES	38	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

offering rent concessions in the form of some reduced monthly rates. The property had also been using concessions in the latter part of 2002 and through the first half of 2003 in attempt to strengthen the relatively low occupancy. Due to the current occupancy situation at the subject, some type of concessions, along with very aggressive marketing will be required to lease the property to a higher level. Although concessions will not likely be seen consistently in the market going forward, newer product will likely use them to stimulate any unforeseen vacancies, while older properties like the subject will likely have to use concessions more frequently.

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.

Montego Heights Lodge opened in 1978 and has been successful from an occupancy basis. Occupancy at the facility was 93 percent in 2000, 84 percent in 2001, 75 percent in 2002 and year-to-date 2003 annualizes out to 69 percent. We note that the facility was at an occupancy of 71 percent at the time of our inspection. As such, the subject is not at a stabilized occupancy position at this time. Further, it has not been at a stabilized position since 2000. Aggressive marketing will be required to lease the property up to a stabilized position. We believe that due to the older age of the facility, as well as its relatively large size in relation to the other properties, a stabilized occupancy of around 80 percent would be considered achievable and reasonable for the subject. However, lower pricing may be required to achieve and maintain this level of occupancy due to the age, condition and market competition. To achieve this level of stabilization, the property could likely achieve an absorption of around three units per month. Based on the current occupancy situation, this would require approximately four to five months to achieve a stabilized position.

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.

VALUATION SERVICES	39	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Population/Growth Rates

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

Population Statistics

	PMA					SMA
	3.0 Miles					5.0 Miles
	Population		%			Population		%
2000
Total *		106,910					225,867
65+		16,036		15.0	%		35,894		15.9	%
75+		8,352		7.8	%		19,812		8.8	%
85+		2,561		2.4	%		5,818		2.6	%
2002	Estimate
Total *		108,801					229,610
65+		15,804		14.5	%		36,027		15.7	%
75+		8,542		7.9	%		20,232		8.8	%
85+		2,771		2.5	%		6,215		2.7	%
2007	Projection
Total *		113,953					239,919
65+		16,888		14.8	%		37,296		15.5	%
75+		8,932		7.8	%		20,846		8.7	%
85+		3,115		2.7	%		6,934		2.9	%

* Total population unadjusted for age

Source: Claritas, Inc.

Growth Rates

	PMA						SMA
	3.0 Miles						5.0 Miles
	Total			Annual			Total			Annual
2000-2007
Total *		6.6	%		0.9	%		6.2	%		0.9	%
65+		5.3	%		0.7	%		3.9	%		0.5	%
75+		6.9	%		1.0	%		5.2	%		0.7	%
85+		21.6	%		2.8	%		19.2	%		2.5	%
2000-2002
Total *		1.8	%		0.9	%		1.7	%		0.8	%
65+		-1.4	%		-0.7	%		0.4	%		0.2	%
75+		2.3	%		1.1	%		2.1	%		1.1	%
85+		8.2	%		4.0	%		6.8	%		3.4	%
2002-2007
Total *		4.7	%		0.9	%		4.5	%		0.9	%
65+		6.9	%		1.3	%		3.5	%		0.7	%
75+		4.6	%		0.9	%		3.0	%		0.6	%
85+		12.4	%		2.4	%		11.6	%		2.2	%

* 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 *		106,910					225,867
45 - 54		17,270		16.2	%		34,992		15.5	%
55 - 59		6,110		5.7	%		12,381		5.5	%
60 - 64		4,681		4.4	%		9,286		4.1	%
2002		2002
Total *		108,801					229,610
45 - 54		18,190		16.7	%		36,803		16.0	%
55 - 59		6,769		6.2	%		13,706		6.0	%
60 - 64		4,966		4.6	%		9,836		4.3	%
2007		2007
Total *		113,953					239,919
45 - 54		20,004		17.6	%		40,434		16.9	%
55 - 59		8,092		7.1	%		16,353		6.8	%
60 - 64		6,207		5.4	%		12,261		5.1	%

* Total population unadjusted for age

Source: Claritas, Inc.

Growth Rates - Adult Children

	PMA						SMA
	Total			Annual			Total			Annual
2000-2007
Total *		6.6	%		0.9	%		6.2	%		0.9	%
45 - 54		15.8	%		2.1	%		15.6	%		2.1	%
55 - 59		32.4	%		4.1	%		32.1	%		4.1	%
60 - 64		32.6	%		4.1	%		32.0	%		4.1	%
2000-2002
Total *		1.8	%		0.9	%		1.7	%		0.8	%
45 - 54		5.3	%		2.6	%		5.2	%		2.6	%
55 - 59		10.8	%		5.3	%		10.7	%		5.2	%
60 - 64		6.1	%		3.0	%		5.9	%		2.9	%
2002-2007
Total *		4.7	%		0.9	%		4.5	%		0.9	%
45 - 54		10.0	%		1.9	%		9.9	%		1.9	%
55 - 59		19.5	%		3.6	%		19.3	%		3.6	%
60 - 64		25.0	%		4.6	%		24.7	%		4.5	%

* 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 end of the range. To afford the various accommodations at the subject, it is estimated that an average annual income of $31,700 would be necessary. We have utilized the average projected revenue per resident of approximately $26,930 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 $26,930 by 85 percent we arrive at an average income of $31,700, rounded.

Assuming no child subsidy, it is estimated that most residents would require an annual income of $31,700 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 $200,000 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 $12,000 annually or a safe rate of return of 6.0 percent of the investment (6.0 percent x $200,000).

After accounting for this ($31,700 - $12,000 = $19,700), 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+		9,623		—			22,604		—
65+		7,287		75.7	%		16,506		73.0	%
75+		3,349		34.8	%		8,438		37.3	%
85+		830		8.6	%		2,464		10.9	%
2007
* Total 65+		9,977		—			23,142		—
65+		8,208		82.3	%		18,911		81.7	%
75+		3,913		39.2	%		10,181		44.0	%
85+		1,090		10.9	%		3,045		13.2	%

* 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+		3.7	%		0.7	%		2.4	%		0.5	%
65+		12.6	%		2.4	%		14.6	%		2.8	%
75+		16.8	%		3.2	%		20.7	%		3.8	%
85+		31.3	%		5.6	%		23.6	%		4.3	%

* 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 7,287 for the 65+ age group, 3,349 for the 75+ age group and 830 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 2.41 percent for age 65+ households, 3.16 percent per year for age 75+ and 5.60 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
Sunrise Walnut Creek		60		92	%		55
Chateau Lodge I & III		131		94	%		123
Diablo Lodge		118		96	%		113
Concord Royale		53		89	%		47
Valley View Lodge		125		98	%		123
SUBJECT		163		72	%		117
Totals		650		89	%		578

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
3.0 Miles

	2002			2007
65+ Income Qualified Households		7,287			8,208
Average Household Size*		1.64			1.69
Available Persons		11,968			13,894
Total Supply**		650			813
Required Resident % From PMA		75	%		75	%
Required Residents		488			609
Available Persons		11,968			13,894
Indicated Penetration Rate***		4.07	%		4.39	%

* 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 4.07 percent. The projected growth of 25 percent in the unit supply in the next five years indicates a penetration rate of 4.39 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 assisted living units 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 4.07 percent for the general population, there appears to be an adequate marketplace for assisted living units. Older, larger and dated properties like the subject, however, may be required to utilize concessions in order to maintain positive occupancy levels.

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
Sunrise Walnut Creek 2175 Ygnacio Road Walnut Creek, CA
Property Type:	ALF/ALZ
Verification:	Marketing Director
	07-Oct-03

No. Units	Unit Types	Occupancy
46	Assisted Living Units		92	%
14	Alzheimer Units/Beds		93	%
60	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	$	1,975	to	$	1,975		400	to	400		—	to		—		—	to	—
Studio	$	4,075	to	$	4,075		325	to	325	$	3,950	to	$	3,950		325	to	325
Studio Alcove	$	4,330	to	$	4,330		400	to	400		—	to		—		—	to	—
One-Bedroom		—	to		—		—	to	—		—	to		—		—	to	—
Two-Bedroom		—	to		—		—	to	—		—	to		—		—	to	—
Cottage/Villa		—	to		—		—	to	—		—	to		—		—	to	—
2nd Occcupant Rent	$	850	to	$	850						—	to		—
Additional Personal Care	$	780	to	$	1,110						—	to		—
Community Fee	$	2,000	to	$	2,000

Basic Service Care Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:	1.0
Utilities:	Water/Sewer	X	Additional Personal Care Charges	Levels/Points
	Electricity	X
	Cable TV	X
	Telephone	X	Incontinence Care:	Yes
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Bus		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	Secured
Nursing Staff:	RN

Improvement Description

Year Opened	1998	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
Building Area (Sq.Ft.)	N/A
Condition	Good	HVAC System	Central/Wall Units
Effective Age (Yrs):	N/A	Covered Parki	No

Remarks:

VALUATION SERVICES	46	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No.	2
Chateau Lodge I & III 2770 Pleasant Hill Road Pleasant Hill, CA
Property Type:	IL/AL
Verification:	Josi Joyce
	925-935-1001
	07-Oct-03

No. Units	Unit Types	Occupancy
112	Independent Living		94	%
131	Assisted Living		94	%
243	Total Units		94	%

Rent Schedule

	Independent Living					Unit Size				Assisted Living					Unit Size
Unit Description	Monthly Rent Range					Range				Monthly Rent Range					Range
Semi-Private		—	to		—		—	to	—		—	to		—		—	to	—
Studio	$	2,695	to	$	2,695		380	to	380	$	2,795	to	$	3,000		375	to	375
Studio Alcove		—	to		—		—	to	—		—	to		—		—	to	—
One-Bedroom	$	3,145	to	$	3,145		500	to	500	$	3,295	to	$	3,595		480	to	480
Two-Bedroom		—	to		—		—	to	—		—	to		—		—	to	—
Three-Bedroom		—	to		—		—	to	—		—	to		—		—	to	—
2nd Occcupant Rent		—	to		—					$	595	to	$	595
Community Fee		—	to		—					$	2,500	to	$	2,500
Personal Care										$	300	to	$	1,200

Basic Service Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:		0.5
Utilities:	Water/Sewer	X	Additional Personal Care Charges	Levels
	Electricity	X
	Cable TV	X
	Telephone	X	Incontinence Care:	Yes
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Van		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	None

Improvement Description

Year Opened	1997	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	Wood		Pvt Bath	X	Shared Bath
Roofing	Shingles		Kitchenettes	Yes
Building Area (Sq.Ft.)	N/A
Condition	Good	HVAC System	Central
Effective Age (Yrs):	N/A	Covered Parki	No

Remarks: Part of a locally owned congregate care facility. Has separate buildings for independent, assisted and dementia residents.

VALUATION SERVICES	47	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No.	3
Diablo Lodge
950 Diablo Road
Danville, CA
Property Type:	ALF
Verification:	Kathlinda Bettise, Mktng Dir.
	925-838-8300
	07/30/03

No. Units	Unit Types	Occupancy
0	Independent Living		0
118	Assisted Living		96	%
118	Total Units		96	%

Rent Schedule 

	Independent Living				Unit Size				Assisted Living					Unit Size
Unit Description	Monthly Rent Range				Range				Monthly Rent Range					Range
Semi-Private		—	to	—		—	to	—		—	to		—		—	to	—
Studio		—	to	—		—	to	—	$	2,705	to	$	3,325		360	to	360
Studio Alcove		—	to	—		—	to	—		—	to		—		—	to	—
One-Bedroom		—	to	—		—	to	—	$	3,359	to	$	3,955		490	to	490
Two-Bedroom		—	to	—		—	to	—	$	4,230	to	$	4,370		652	to	652
Cottage/Villa		—	to	—		—	to	—		—	to		—		—	to	—
2nd Occupant Rent		—	to	—					$	700	to	$	700
Community Fee		—	to	—					$	1,500	to	$	1,500
Additional Personal Care									$	430	to	$	3,300

Basic Service Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:		N/A
Utilities:	Water/Sewer	X	Additional Personal Care Charges	Levels
	Electricity	X
	Cable TV	X
	Telephone	X	Incontinence Care:	Yes
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Van		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	None
Nursing Staff	N/A

Improvement Description

Year Opened	1990	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
Roofing	Shingles		Kitchenettes	Yes
Building Area (Sq.Ft.)	N/A
Condition	Good	HVAC System	Central
Effective Age (Yrs):	10	Covered Parki	No
	N/A

      Remarks:

Privately owned and operated. They do not provided dementia care, but have hospice care. Report a waiting list. Shared units are only offered to couples. Unit mix includes 37 studio, 78 one-bedroom and three, two- bedroom units. Highest level of additional personal care is for post-op or rehab services.

VALUATION SERVICES	48	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No.	4
Concord Royale 4230 Clayton Road Concord, CA
Property Type:	IL/AL
Verification:	Marking Director 925-676-3410 08-Oct-03

No. Units	Unit Types	Occupancy
70	Independent Living		96	%
53	Assisted Living		89	%
123	Total Units		93	%

Rent Schedule

	Independent Living					Unit Size				Assisted Living					Unit Size
Unit Description	Monthly Rent Range					Range				Monthly Rent Range					Range
Semi-Private	$	1,100	to	$	1,100		338	to	338		—	to		—		—	to	—
Studio	$	1,600	to	$	2,400		282	to	338	$	2,675	to	$	2,675		282	to	282
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		—
Community Fee		—	to		—					$	950	to	$	950
Personal Care		—	to		—					$	500	to	$	1,250

Basic Service Package:			Additional Care:
Meals:	3		Care Hours Included in Base Rate:
Utilities:	Water/Sewer	X	Additional Personal Care Charges	Levels
	Electricity	X
	Cable TV	X
	Telephone	X	Incontinence Care:	Yes
Housekeeping:	Weekly		Dressing Assistance:	Yes
Activities:	Daily		Bathing Assistance:	Yes
Transportation:	Van		Medication Assistance:	Yes
Security (Hrs):	24		Alzheimer Dementia Area:	None

Improvement Description

Year Opened	1985	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.)	N/A
Condition	Average	HVAC System	Central
Effective Age (Yrs):	N/A	Covered Parki	No

       Remarks: Independent/assisted living facility located along arterial in Concord. Additional personal care based on levels beginning at $500 per month.

VALUATION SERVICES	49	ADVISORY GROUP

COMPETITIVE MARKET ANALYSIS

Senior Housing Rent No.	5
Valley View Lodge 1228 Rossmoor Parkway
Walnut Creek	½ California
Property Type:	ALF/ALZ
Verification:	Administrator 480-657-9000 01-May-03

No. Units	Unit Types	Occupancy
125	Assisted Living Units		98	%
0	Alzheimer Units/Beds		0	%
125	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	$	2,750	to	$	2,750		362	to	362		—	to	—		—	to	—
Studio Alcove	$	3,300	to	$	3,300		500	to	500		—	to	—		—	to	—
One-Bedroom	$	3,875	to	$	3,875		550	to	550		—	to	—		—	to	—
Two-Bedroom		—	to		—		—	to	—		—	to	—		—	to	—
Cottage/Villa		—	to		—		—	to	—		—	to	—		—	to	—
2nd Occcupant Rent	$	780	to	$	780						—	to	—
Community Fee	$	2,000	to	$	2,000
Additional Personal Care	$	425	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/Van/Limo		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	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.)	97,818
Condition	Good	HVAC System	Through-Wall Units
Effective Age (Yrs):	0	Covered Parki	No
Site Area (AC)	4.55

Remarks: Facility is located in Rossmoor area of Walnut Creek. Facility is in average condition. Has relatively limited competition in the Rossmoor area.

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	Superior
4	Similar
5	Similar

Rental Rate Analysis

The assisted living rates at Montego Heights Lodge 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
Sunrise Walnut Creek		325	-	325	$	4,075	-	$	4,075
Chateau Lodge I & III		375	-	375	$	2,795	-	$	3,000
Diablo Lodge		360	-	360	$	2,705	-	$	3,325
Concord Royale		282	-	282	$	2,675	-	$	2,675
Valley View Lodge		362	-	362	$	2,750	-	$	2,750
SUBJECT		192	-	192	$	1,924	-	$	1,924
Range (Excluding Subject)		282	-	375	$	2,675	-	$	4,075

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COMPETITIVE MARKET ANALYSIS

The comparables indicate a range of asking rates from $2,675 to $4,075 per month based on unit sizes from 282 to 375 square feet. The subject’ asking rates of $1,924 per month is seen as falling below the range from an absolute rent basis, while exhibiting a unit size smaller than the comparables. Sunrise sets the upper limit of pricing and this is due to the inclusion of a higher degree of personal care included in the monthly rent. The remaining comparables show a more typical range of pricing and all include a base level of personal care in the monthly rent, while the subject rate includes no personal care. Valley View Lodge, which is a sister project to the subject, includes no personal care in the monthly rent, however, its location in the more exclusive Rossmoor area allows for a higher rental rate. We note that the average in-place rent for the subject is $1,881 per month. Based on the data, as well as accounting for the subject’s smaller size, age and condition, we believe that a rent of $1,900 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
Sunrise Walnut Creek		400	-	400	$	4,330	-	$	4,330
Chateau Lodge I & III		375	-	375	$	2,795	-	$	2,695
Diablo Lodge		360	-	360	$	2,705	-	$	3,325
Concord Royale		282	-	282	$	2,675	-	$	2,675
Valley View Lodge		500	-	500	$	3,300	-	$	3,300
SUBJECT		224	-	224	$	2,416	-	$	2,416
Range (Excluding Subject)		282	-	500	$	2,675	-	$	4,330

The comparables indicate a range of asking rates from $2,675 to $4,330 per month based on unit sizes from 282 to 375 square feet. The subject’ asking rates of $2,416 per month is seen as falling below the range from an absolute rent basis, while exhibiting a unit size smaller than the comparables. Sunrise gain sets the upper limit of pricing and this is due to the inclusion of a higher degree of personal care included in the monthly rent. The remaining comparables show a more typical range of pricing and all include a base level of personal care in the monthly rent, while the subject rate includes no personal care. Valley View Lodge, which is a sister project to the subject, includes no personal care in the monthly rent, however, its location in the more exclusive Rossmoor area allows for a higher rental rate. We note that the average in-place rent for the subject is $2,162 per month. Based on the data, as well as accounting for the subject’s smaller size, age and condition, we believe that a rent of $2,200 per month is warranted for the subject’s large 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:

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COMPETITIVE MARKET ANALYSIS

One-Bedroom Units - AL

Facility Name	Unit Size (SF)				Rental Range
Sunrise Walnut Creek		—	-	—		—	-		—
Chateau Lodge I & III		480	-	480	$	3,295	-	$	3,595
Diablo Lodge		490	-	490	$	3,359	-	$	3,955
Concord Royale		—	-	—		—	-		—
Valley View Lodge		550	-	550	$	3,875	-	$	3,875
Senior Facility Six		—	-	—		—	-		—
SUBJECT		384	-	448	$	2,808	-	$	2,808
Range (Excluding Subject)		480	-	550	$	3,295	-	$	3,955

The comparables indicate a range of asking rates from $3,295 to $3,955 per month based on unit sizes from 480 to 550 square feet. The subject’ asking rates of $2,808 per month is seen as falling below the range from an absolute rent basis, while exhibiting a unit size smaller than the comparables. The comparables show a more typical range of pricing from $3,295 to $3,875 per month. Chateau Lodge and Diablo Lodge both include a base level of personal care in the monthly rent, while the subject rate includes no personal care. Valley View Lodge, which is a sister project to the subject, includes no personal care in the monthly rent, however, its location in the more exclusive Rossmoor area allows for a higher rental rate. We note that the average in-place rent for the subject is $2,721 per month. Based on the data, we believe that a rent of $2,800 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 facility’s occupancy has declined since 2000 after being at an average of 93 percent in 2000. Occupancy has shown some slight improvement as of recent, however, yet is still below 75 percent. The reasoning for the lower annual occupancy has been reportedly due to the on-site management and marketing, as well as the older age, condition and size of the property. The subject rates are at the lower end of the competition and based on the older age of the facility, they appear to be reflective of achievable market rates. Concessions are not prevalent in the marketplace, although the subject has been having to utilize them to attract new residents. The subject’s pricing structure and physical design are such that the facility will serve a lower niche of assisted living in its marketplace. Overall, it appears that there is an adequate marketplace for the subject, although its older age, condition and smaller unit sizes does limit its ability to market to a wider qualifying senior target base.

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SITE DESCRIPTION

Location:	1400 Montego Drive Walnut Creek, Contra Costa County, California 94598
	The site is situated on the north side of Montego Drive at Tampico Street.
Shape:	Irregular
Topography:	Sloping
Land Area:	4.8800 gross acres (4.8800 net acres) 215,573 gross square feet (215,573 net square feet)
Frontage, Access, Visibility:	The site has 382 feet of frontage along Montego Drive.
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 Walnut Creek
Sewer:	City of Walnut Creek
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. Review of the ALTA survey indicated that there appears to several typical utility easements across the property. 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 065070 0001D (10/04/02).
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.

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SITE DESCRIPTION

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.
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.

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IMPROVEMENTS DESCRIPTION

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

The facility was constructed in 1978 and contains 106,396 square feet of gross building area within one, four-story building. The facility has 163 units and a capacity of 163 beds. The unit mix for the development is as follows.

Montego Heights Lodge

	No.		No.		Unit		Total
Description	Units		Beds		Sq. Ft.		Sq. Ft.
Assisted Living
Studio Standard		52		52		192		9,984
Studio Large		73		73		224		16,352
One-Bedroom Standard		19		19		384		7,296
One-Bedroom Large		19		19		448		8,512
Totals		163		163				42,144

General Description

Year Built:	1978
Number of Buildings:	One
Number of Stories:	Four
Gross Building Area:	106,396 ± square feet
Number of Units:	163
Number of Beds:	163
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 upper floors.
Exterior Walls:	The exterior facade of the building consists of stucco with wood trim.

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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 three, 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 the 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.

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IMPROVEMENTS DESCRIPTION

Interior Detail

Layout:	The facility is designed with two “L” shaped wings radiating out from the central common area. The main floor common areas include a lobby/lounge, administrative offices, guest dining room, auditorium, card room, billiards room, activity room, beauty/barber shop, small store, four lounge areas, and a rear courtyard area. There is also two resident laundry rooms on the main floor. Common areas on the second floor include four lounge areas, as well as the main dining room. 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 192 square feet, the alcove units 224 square feet and the one-bedroom units range from 384 to 448 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. The one-bedroom units have small kitchenettes (refrigerator, sink and hot plate), while the studio units have no kitchenettes. All 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 38 open surface parking spaces located along the front and northwest portion of the facility, which equates to a ratio of 0.31 per unit. Overall, the parking appears to be adequate for the facility given that most residents do not have a vehicle.

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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 considered to be in average condition. The improvements, because of their age, however, are considered dated relative to most of the competing properties and 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 mostly 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, however, the units are small, the facility is dated and the corridors are narrower than newer competing facilities. The furnishings and fixtures appear to be of average quality. The living area of the facility equates to around 40 percent of the total area. This equates to around 60 percent of the facility being designated common area, similar to today’s design of around 40 percent to 60 percent common area.
Year Built:	1978, with all units having being renovated in 1998.
Effective Age:	30 years
Expected Economic Life:	50 years
Remaining Economic Life:	20 years

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.

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IMPROVEMENTS DESCRIPTION

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.

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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 Contra Costa County. The assessors’ parcel identification number is 140-250-024.

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	$	3,527,964
	Improvements		5,636,299
	Personal Property		423,793
	Assessor’s Market Value:	$	9,588,056
Equalization/Assessment Ratio			100.00	%
Assessed Value		$	9,588,056
Tax Rate ($/$1,000 AV)			12.5595
Total Property Taxes		$	120,420.72
Building Area			106,396
Property Taxes per Square Foot		$	1.13
No. of Units			163
Property Taxes per Unit		$	738.78

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 Walnut Creek 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 $9,588,056 is considered high based on our market value estimates determined herein and recommend contesting the assessment with the Contra Costa County assessor.

For the purposes of our Year 1 proforma, we have forecast an assessment of approximately $6,500,000 based on the value estimates determined herein. Based on the current tax liability of, this equates to a forecast tax liability of $81,637 or $82,000. The increased taxes will be reflected in our proforma model in the Income Capitalization Approach.

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ZONING

The property is zoned OC, Office Commercial District, by the City of Walnut Creek. According to the zoning regulation, the OC district is to provide areas for the integrated development of business and professional office uses, along with related business and institutional uses. The intent is to provide areas for business and offices that are convenient to residential areas, the central business district, and BART.

Permitted uses include adult day care homes; residential care homes, offices (business and medical), government offices, and public parking areas. Congregate living facilities such as the subject require a Conditional Use permit.

Development regulations include no maximum lot area; no minimum lot width, no maximum lot depth, and building heights are based on a review process. Parking provisions for a congregate living facility is 0.25 spaces per dwelling unit or 0.25 spaces per bedroom, whichever is greater. As discussed, the subject provides 0.57 spaces per dwelling unit, which is above the requirements.

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

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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 higher 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.

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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 considered average. The improvements are older and the unit sizes are smaller than the newer competitive properties in the marketplace. 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. 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.

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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

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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 all three typical approaches to value: the Cost Approach, the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that all approaches would be considered meaningful and applicable in developing a credible value conclusion.

The valuation process is concluded by analyzing each approach to value used in the appraisal. When more than one approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality of its data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a correlation of all the approaches used in the appraisal.

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LAND VALUATION

We used the Sales Comparison Approach to develop an opinion of land value. In this method, we analyzed prices buyers have recently paid for similar sites in this area, as well as examined current offerings. In making comparisons, we adjusted the sale prices for differences between this site and the comparable sites. We present on the following pages a summary of pertinent details of sites recently sold that we compared to the site appraised.

In the valuation of the subject’s fee simple interest, the Sales Comparison Approach has been used to establish prices being paid for comparably zoned land. The most widely used and market oriented unit of comparison for properties with characteristics similar to those of the subject is the sale price per square foot of land area. All transactions utilized in this analysis are computed on this basis.

Real estate developers make qualitative and quantitative judgments in the acquisition of a site with development potential such as the subject property. Subjectively, a developer considers the nature of surrounding land uses and proximity to complimentary services to a potential project. Objectively, the physical and functional attributes of the site, and the cost of preparing it for construction must be calculated. Lying between these two considerations are the many aesthetic and economic factors, which come to influence the final product.

The major elements of comparison for analysis of this type include the property rights conveyed, the financial terms incorporated into a particular transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its utility and the physical characteristics of the property.

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LAND VALUATION

LAND SALES MAP

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LAND VALUATION

SUMMARY OF LAND SALES

		Price		Site SqFt	Zoning			$/SqFt
						Public Utilities
No.	Location	Date		Site Acres	Utility*	Units		$/Unit		COMMENTS
1	4756 Clayton Road	$	4,400,000	210,438 SF	PD	Yes		$	20.91	Purchased for multi-family
	Concord, CA		7/02	4.8310 Ac	Good		146	$	30,137	development.
2	2611 Contra Costa Boulevard	$	2,200,000	125,801 SF	PUD	Yes		$	17.49	Purchased for hotel
	Pleasant Hill, CA		9/01	2.8880 Ac	Good		132	$	16,667	development.
3	4640 Pacheco Boulevard	$	3,500,000	427,759 SF	PD	Yes		$	8.18	Purchased for multi-family
	Martinez, CA		3/99	9.8200 Ac	Good		120	$	29,167	development.
4	100 Chilpancingo Parkway	$	1,574,000	174,936 SF	PUD	Yes		$	9.00	Purchased for low-income
	Pleasant Hill, CA		7/98	4.0160 Ac	Good		71	$	22,169	multi-family development.
5	NWC Crow Canyon Road and Porter	$	4,600,000	435,600 SF	R-M		Yes	$	10.56	Purchased for multi-family
	San Ramon, CA		4/98	10.0000 Ac	Good		85	$	54,118	development.

	Price		Site SqFt			Zoning				$/SqFt
								Utilities
	Date		Site Acres			Utility*		Units		$/Unit
Survey Low	$	1,574,000		125,801	SF		N/A		N/A	$	8.18
Survey High	$	4,600,000		435,600	SF		N/A		N/A	$	20.91
Average	$	3,254,800		274,907	SF		N/A		N/A	$	13.23
Survey Low		4/98		2.8880	Ac		N/A		71	$	16,667
Survey High		7/02		10.0000	Ac		N/A		146	$	54,118
Average		1/00		6.3110	Ac		N/A		111	$	30,451
Subject Property				212,573		OC		Yes			N/A
				4.8800		Good			163		N/A

*Utility includes shape, access, frontage and visibility.

VALUATION SERVICES	70	ADVISORY GROUP

LAND VALUATION

Adjustment Process

Property Rights Conveyed

All of the sales utilized in this analysis involved the transfer of the fee simple interest. No adjustments were required.

Financial Terms

To the best of our knowledge, all of the sales utilized in this analysis were accomplished with cash and/or cash and market-oriented financing. Therefore, no adjustment for financial terms is required for the comparables.

Conditions of Sale

Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale may significantly affect transaction prices. However, all sales used in this analysis are considered to be “arms-length” market transactions between both knowledgeable buyers and sellers on the open market. Therefore, no adjustments for conditions of sale are required for the comparables.

Market Conditions

The sales included in this analysis date between April 1, 1998 and July 3, 2002. The market has changed over this time period. The appropriate adjustment was made to each comparable.

Location

An adjustment for location is required when the locational characteristics of a comparable property are different from those of the subject property. A senior housing location is dependent on its visibility and access, as well as proximity to transportation and support services. The subject property is considered to exhibit a good location, but it has average access and visibility. We have made a negative adjustment to those comparables considered superior in location versus the subject. Conversely, a positive adjustment was made to those comparables considered inferior. Each comparable was adjusted accordingly.

Size

The size adjustment generally reflects the inverse relationship expressed between unit price and lot size. Smaller lots tend to sell for higher unit prices than larger lots, and vice versa. Hence, positive adjustments were made to larger land parcels, and negative adjustments were made to smaller land parcels. Each comparable was adjusted accordingly.

Public Utilities

All of the sales, like the subject, had full access to public utilities at the time of sale; therefore, no adjustments for this characteristic were required.

Utility

The subject property has good utility. The parcel is adequately shaped to accommodate a typical building, and it has average access, frontage and visibility. When a comparable is considered to have superior or inferior utility, an adjustment was made.

VALUATION SERVICES	71	ADVISORY GROUP

LAND VALUATION

Other

In some cases, other variables will impact the price of a transaction. Some examples would include soil or slope conditions, restrictive zoning, easements, wetlands or external influences. In our analysis of the comparables we found that no unusual conditions existed at the time of sale. As a result, no adjustments were required.

Discussion of Comparable Sales

Comparable Sale No. 1

This is the July 2002 sale of a multi-family site located in Concord, California. The parcel contains 4.831 acres. At the time of sale, this comparable was considered slightly inferior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have changed in the period since the sale. The comparable is of a similar size to the subject. The comparable has similar utility in relation to the subject. Negative adjustments were not warranted. Positive adjustments were warranted for market conditions and location.

Comparable Sale No. 2

This is the September 2001 sale of a commercial site located in Pleasant Hill, California. The parcel contains 2.888 acres. At the time of sale, this comparable was considered slightly inferior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have changed in the period since the sale. The comparable is of a similar size to the subject. The comparable has similar utility in relation to the subject. Negative adjustments were not warranted. Positive adjustments were warranted for market conditions and location.

Comparable Sale No. 3

This is the April 1999 sale of a multi-family site located in Martinez, California. The parcel contains 9.82 acres. At the time of sale, this comparable was considered inferior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have changed in the period since the sale. The comparable is of a similar size to the subject. The comparable has similar utility in relation to the subject. Negative adjustments were not warranted. Positive adjustments were warranted for market conditions, location and size.

Comparable Sale No. 4

This is the July 1998 sale of a multi-family site located in Pleasant Hill, California. The parcel contains 4.016 acres. At the time of sale, this comparable was considered inferior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have changed in the period since the sale. The comparable is of a similar size to the subject. The comparable has similar utility in relation to the subject. Negative adjustments were not warranted. Positive adjustments were warranted for market conditions and location.

Comparable Sale No. 5

This is the April 1998 sale of a multi-family site located in Pleasant Hill, California. The parcel contains 10.00 acres. At the time of sale, this comparable was considered inferior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have changed in the period since the sale. The comparable is of

VALUATION SERVICES	72	ADVISORY GROUP

LAND VALUATION

a similar size to the subject. The comparable has similar utility in relation to the subject. Negative adjustments were not warranted. Positive adjustments were warranted for market conditions, location and size.

A summary of our land sale adjustments is presented below.

LAND SALE ADJUSTMENT GRID

			Economic Adjustments (Cumulative)
			Property			Financing &
	$/SqFt		Rights			Conditions			Exp. After			Market*
No.	Date		Conveyed			of Sale			Purchase			Conditions			Subtotal
1	$	20.91	Fee Simple/Mkt.			Arms-Length			None			Similar			$	20.91
		7/02		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
2	$	17.49	Fee Simple/Mkt.			Arms-Length			None			Similar			$	17.49
		9/01		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
3	$	8.18	Fee Simple/Mkt.			Arms-Length			None			Similar			$	8.18
		3/99		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
4	$	9.00	Fee Simple/Mkt.			Arms-Length			None			Similar			$	9.00
		7/98		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
5	$	10.56	Fee Simple/Mkt.			Arms-Length			None			Similar			$	10.56
		4/98		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

[Additional columns below]

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

			Property Characteristic Adjustments (Additive)
	$/SqFt								Public									Adj.
No.	Date		Location			Size			Utilities			Utility**			Other			$/SqFt			Overall
1	$	20.91	Inferior			Similar			Similar			Similar			Similar			$	23.00		Inferior
		7/02		10.0	%		0.0	%		0.0	%		0.0	%		0.0	%		10.0	%
2	$	17.49	Inferior			Similar			Similar			Similar			Similar			$	19.24		Inferior
		9/01		10.0	%		0.0	%		0.0	%		0.0	%		0.0	%		10.0	%
3	$	8.18	Inferior			Similar			Similar			Similar			Similar			$	9.00		Inferior
		3/99		10.0	%		0.0	%		0.0	%		0.0	%		0.0	%		10.0	%
4	$	9.00	Inferior			Similar			Similar			Similar			Similar			$	9.90		Inferior
		7/98		10.0	%		0.0	%		0.0	%		0.0	%		0.0	%		10.0	%
5	$	10.56	Inferior			Similar			Similar			Similar			Similar			$	12.67		Inferior
		4/98		20.0	%		0.0	%		0.0	%		0.0	%		0.0	%		20.0	%

SUMMARY	Unadjusted				Adjusted
Price Range	$/SF Land		$/AC Land		$/SF Land		$/AC Land
Low	$	8.18	$	356,416	$	9.00	$	392,057
High	$	20.91	$	910,786	$	23.00	$	1,001,867
Average	$	13.23	$	576,182	$	14.76	$	643,000

Net Adjustment Range (Additive Property Characteristics)
Low	10.0	%
High	20.0	%
Average	12.0	%

* Market Conditions Adjustment

Compound annual change in market conditions): Contra Costa
Date of Value (for adjustment calculations):           Mar-03

**Utility includes shape, access, frontpage and visibility.

Summary of Sales and Opinion of Site Value

After considering the differences between each comparable and the subject, the adjusted sales price range is $9.00 to $23.00 per square foot of site area. We have elected to conclude within this range and our opinion of land value indicated by the Sales Comparison Approach is:

			$/Sq.Ft.
Sq.Ft.:			215,573
Opinion of Value:	X	$	18.00
Indicated Land Value:		$	3,826,310
Rounded Land Value:		$	3,850,000

VALUATION SERVICES	73	ADVISORY GROUP

COST APPROACH

Methodology

The Cost Approach is based on the principle of substitution, which states that no prudent person will pay more for a property than the cost of acquiring a site and constructing, without undue delay, an equally desirable and useful property. The steps have been outlined under the Valuation Process section of this report. We have previously developed an opinion of land value at $3,850,000.

Replacement Cost New (RCN)

In this section, we will estimate the replacement cost of the existing improvements. Generally, there are three methods of estimating replacement cost; 1) review of the actual/proposed costs of the subject, 2) review of construction costs of other similar type properties, and 3) estimating costs from published cost data sources. In the case of the subject, we were not not provided with actual construction costs for the improvements.

Marshall Valuation Service

As a check towards the above comparisons, we have estimated the replacement cost for the improvements from the Calculator Section in the Marshall Valuation Service, a nationally recognized publication containing construction costs for all types of improvements. Base costs in the Marshall Valuation Service are revised monthly and adjustment factors are provided to reflect regional and local cost variations.

Base Building Costs

The published costs include all direct costs for the base structure and tenant improvements, and the following indirect costs:

1.	Plans, specifications, and building permits, including engineer’s and architect’s fees;
2.	Interest on construction funds during the construction period;
3.	Sales taxes on materials; and
4.	Contractor’s overhead and profit, including worker’s compensation, fire and liability insurance, unemployment insurance, etc.

These base building costs, adjusted for any unique building characteristics and cost multipliers, are presented in the cost summary chart following this section.

Base Construction Costs

In referencing the Marshall Valuation Service cost manual, we have used base costs for an average quality Class D Multiple Residence – Elderly Assisted Living in Section 12/Page 16. The indicated base cost for the improvements is $56.84 per square foot. Adjustments include $2.00 per square foot for sprinklers. Multiplier adjustments include 1.04 for current conditions, 1.28 for location, 1.00 for story height and .93 for perimeter.

Personal Property (Furniture, Fixtures and Equipment)

Based on the Marshall Valuation Service cost manual, the cost of furnishings, fixtures and equipment is estimated to be $3,500 per unit/bed or $570,500 for the 163 units.

VALUATION SERVICES	74	ADVISORY GROUP

COST APPROACH

Site Improvement Costs

Site improvement costs are not included in our Base Building Cost opinion. These include landscaping, asphalt paving, walkways, etc. Site improvement costs are estimated to be $425,146.

Other Indirect Costs

Other indirect costs not included in the RCN of building and site improvements are developer overhead, property taxes, permanent loan fees, legal costs, developer fees, contingencies, and lease-up and marketing costs.

Research into these costs leads to the conclusion that an average property requires an allowance for other indirect costs of between 8.00 percent and 12.00 percent of RCN of building improvements plus site improvements. We have chosen to use 10 percent in our analysis.

Pre-Marketing/Stabilization Costs

Total costs to bring the property into production to a stabilized occupancy level include marketing and pre-marketing expenses, operating losses incurred during fill-up, promotional and public relations expenses, marketing consultants, and professional advertising through the various media. Based upon our knowledge of these expenses for similar facilities, and discussions with marketing specialists and consultants, we estimated the total costs to bring the property into production at stabilized occupancy to be approximately $896,500 or $$5,500 per unit. We note that this estimate presumes a healthy market and a competent marketing/management team.

Entrepreneurial Profit

Entrepreneurial profit represents the return to the developer for taking the construction and lease-up risk. Market conditions can influence entrepreneurial profit. Based upon our discussions with developers in the local market, this figure tends to range between 10.00 percent to 20.00 percent of total direct and indirect costs. We chose to use 15.00 percent.

VALUATION SERVICES	75	ADVISORY GROUP

COST APPROACH

Accrued Depreciation

There are three sources of accrued depreciation:

Physical Deterioration:	The subject improvements were built in 1978. We have used the economic age-life method to develop an opinion of physical deterioration. In the Improvements Description section of this report, we developed an opinion that the effective age of the subject to be 30 years and the economic life to be 50 years. This results in a physical deterioration of 60.00 percent (effective age divided by economic life).
	The furniture, fixtures and equipment (FF&E). We have concluded that the effective age of the FF&E to be 30 years and the economic life to be 10 years. This results in a physical deterioration of 80.00 percent (effective age divided by economic life).
Functional Obsolescence:	Due to the fact that our RCN opinion considers the construction of the subject improvements utilizing modern materials and current standards, design and layout, functional obsolescence is not applicable. Therefore, functional obsolescence is zero percent. We do acknowledge that the improvements are older, dated and that the unit sizes are smaller than newer, competitive properties in the marketplace.
External Obsolescence:	Based upon a review of the specific location of the subject as well as the local assisted living market, external obsolescence is zero percent.
Total Depreciation:	The sum of these elements of accrued depreciation is 60.00 percent for the improvements and 80.00 percent for the FF&E.

Conclusion

Please refer to the following page for our Cost Approach summary that concludes to a market value opinion as follows:

	Value
Cost Approach Conclusion	$	8,544,024
Rounded	$	8,500,000
Per Unit	$	52,147

VALUATION SERVICES	76	ADVISORY GROUP

COST APPROACH

COST APPROACH SUMMARY

												Total
REPLACEMENT COST NEW (RCN)		SqFt					$/SqFt			Total		Cost
Building Base Cost			106,396				$	56.84		$	6,047,549
	Sprinklers		106,396				$	2.00			212,792
	Subtotal (GBA)		106,396				$	58.84		$	6,260,341
Subtotal of Building Costs										$	6,260,341
Multipliers
	Current Cost							1.040
	Local Area							1.280
	Perimeter (approximate; blended)							0.927
	Building Height							1.000
	Product of Multipliers										x 1.234
Adjusted Base Cost										$	7,725,401
Furnishings, Fixtures & Equipment
	FF&E	$	3,500				$/Unit			$	570,500
Total Furnishings, Fixtures & Equipment										$	570,500
Site Improvements		$	2.00				$/SqFt			$	425,146
Total Direct Costs										$	8,721,046
	Plus: Indirect Costs (% of Direct Costs)		10.0	%						$	872,105
Subtotal Replacement Cost New ( RCN )												$	9,593,151
Pre-Marketing/Stabilization Costs		$	5,500				$/Unit			$	896,500
Subtotal												$	10,489,651
	Plus: Entrepreneurial Profit (% of RCN)		15.0	%									1,573,448
Total Replacement Cost New ( RCN )												$	12,063,098
	Per Square Foot											$	106,396.00
	Per Unit											$	74,007
ACCRUED DEPRECIATION
Physical Deterioration		Improvements					FF&E
	Effective Age (Years):	30 Years					8 Years
	Total Expected Economic Life	50 Years					10 Years
	Total Physical Depreciation:		60.0	%	$	6,844,214		80.0	%	$	524,860
Functional Obsolescence			0.0	%		0
External Obsolescence			0.0	%		0
Total			60.0	%	$	6,844,214		80.0	%	$	524,860	$	7,369,074
Depreciated Value of the Improvements												$	4,694,024
Per Square Foot GBA												$	91.16
Per Unit												$	108,746
Plus Land Value												$	3,850,000
Indicated Value												$	8,544,024
Rounded to nearest $100,000												$	8,500,000
Per Unit												$	52,147
Per Square Foot												$	79.89

Source: Marshall Valuation Service	Section: 12	Quality: Average
	Section: 16	Class: D
	Date: 8/02	Type: Multiple Residences - Elderly Assisted Living

VALUATION SERVICES	77	ADVISORY GROUP

SALES COMPARISON APPROACH

Methodology

In the Sales Comparison Approach, we developed an opinion of value by comparing this property with similar, recently sold properties in the surrounding or competing area. Inherent in this approach is the principle of substitution, which states that when a property is replaceable in the market, its value tends to be set at the cost of acquiring an equally desirable substitute property, assuming that no costly delay is encountered in making the substitution.

By analyzing sales that qualify as arm’s-length transactions between willing and knowledgeable buyers and sellers, we can identify value and price trends. The basic steps of this approach are:

1.	Research recent, relevant property sales and current offerings throughout the competitive area;
2.	Select and analyze properties that are similar to the property appraised, analyzing changes in economic conditions that may have occurred between the sale date and the date of value, and other physical, functional, or locational factors;
3.	Identify sales that include favorable financing and calculate the cash equivalent price;
4.	Reduce the sale prices to a common unit of comparison such as price per square foot, price per unit or effective gross income multiplier;
5.	Make appropriate comparative adjustments to the prices of the comparable properties to relate them to the property being appraised; and
6.	Interpret the adjusted sales data and draw a logical value conclusion.

The most widely used and market-oriented unit of comparison for properties such as the subject is the sales price per unit basis. All comparable sales were analyzed on this basis.

On the following pages we present a summary of the improved properties that we compared to the subject property, a map showing their locations, and an adjustment grid. Detail sheets describing these sales can be found in the Addenda.

Due to the nature of the subject property and the level of detail available for the comparable data, we have elected to analyze the comparables through application of:

• A cash flow multiplier (CFM) analysis

• An effective gross income multiplier (EGIM) analysis

• A traditional adjustment grid utilizing percentage adjustments

VALUATION SERVICES	78	ADVISORY GROUP

SALES COMPARISON APPROACH

SENIOR HOUSING SALES

						Average
				Sale Price		Unit SF		% Occ.
	Name	Property	Grantee
No.	Property	Type	Grantor	Date		Bldg SqFt		# Units
			625 Management Company
1	Carmel Village	IL/AL	LLC	$	23,125,000		623		97.0	%
	17077 San Mateo Street		Carmel Village Retirement
	Fountain Valley, CA		Residence LLC		1/03		117,666	189 units
			Healthcare Property
2	Emerald Hills	AL	Investors LLC	$	8,800,000		693		95.0	%
	11550 Education Street		ALCO IV LLC
	Auburn, CA				9/02		61,677	89 units
3	Mapleride of Laguna Creek		CNL Retirement Properties	$	8,055,600		601		95.0	%
	6727 Laguna Park Drive	AL	Marriott Senior Living
	Elk Grove, CA		Services		1/02		50,476	84 units
4	Woodmark at Summit Ridge		Emeritus Senior Living	$	8,500,000		842		95.0	%
	5165 Summit Ridge Court	AL/ALZ	Woodmart at Summit Ridge
	Reno, NV		LLC		2/02		77,445	92 units
5	Manor at Lakeside		Quilted Care Reno LLC	$	3,200,000		620		95.0	%
	855 Brinkby Avenue	IL/AL
	Reno, NV		WMFMT Real Estate LP		8/01		56,411	91 units
6	Atria Redding		AMI Senior Living	$	5,000,000		739		95.0	%
	101 Quartz Hill Road	AL
	Redding, CA		Atria Communities		7/01		44,328	60 units

[Additional columns below]

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

		Condition					Revenues		Expense
		& Quality	$/SqFt		Revenues		Per Unit		Ratio			CFM
	Name
No.	Property	Year Built	$/Unit		NOI		NOI/Unit		EGIM			OAR
1	Carmel Village	Good	$	196.53	$	5,450,000	$	28,836		52.8	%		8.98
	17077 San Mateo Street
	Fountain Valley, CA	1986	$	122,354	$	2,575,000	$	13,624		4.24			11.14	%
2	Emerald Hills	Good	$	142.68	$	2,475,000	$	27,809		60.2	%		8.93
	11550 Education Street
	Auburn, CA	1999	$	98,876	$	985,000	$	11,067		3.56			11.19	%
3	Mapleride of Laguna Creek	Good	$	159.59	$	2,550,000	$	30,357		66.7	%		9.48
	6727 Laguna Park Drive
	Elk Grove, CA	1999	$	95,900	$	850,000	$	10,119		3.16			10.55	%
4	Woodmark at Summit Ridge	Average	$	109.76	$	3,300,000	$	35,870		66.7	%		7.73
	5165 Summit Ridge Court
	Reno, NV	1998	$	92,391	$	1,100,000	$	11,957		2.58			12.94	%
5	Manor at Lakeside	Average	$	56.73	$	1,200,000	$	13,187		69.2	%		8.65
	855 Brinkby Avenue
	Reno, NV	1981	$	35,165	$	370,000	$	4,066		2.67			11.56	%
6	Atria Redding	Average	$	112.80	$	1,950,000	$	32,500		67.9	%		8.00
	101 Quartz Hill Road
	Redding, CA	2000	$	83,333	$	625,000	$	10,417		2.56			12.50	%

			Average					Condition						Revenues		Expense
	Sale Price		Unit SF		% Occ.			& Quality		$/SqFt		Revenues		Per Unit		Ratio			CFM
	Date		Bldg SqFt		# Units			Year Built		$/Unit		NOI		NOI/Unit		EGIM			OAR
Survey Minimum	$	3,200,000		601		95.0	%		N/A	$	56.73	$	1,200,000	$	13,187		53	%		7.73
Survey Maximum	$	23,125,000		842		97.0	%		N/A	$	196.53	$	5,450,000	$	35,870		69	%		9.48
Survey Average	$	9,446,767		686		95.3	%		N/A	$	129.68	$	2,820,833	$	28,093		64	%		8.63
Survey Minimum		7/01		44,328	60 units				1981	$	35,165	$	370,000	$	4,066		2.56			10.55	%
Survey Maximum		1/03		117,666	189 units				2000	$	122,354	$	2,575,000	$	13,624		4.24			12.94	%
Survey Average		2/02		68,001	101 units				1994	$	88,003	$	1,084,167	$	10,208		3.13			11.65	%
Subject Property		N/A		653		80	%	Average			N/A	$	4,036,240	$	24,762		83	%		N/A
		N/A		106,396		163			1978		N/A	$	704,378	$	4,321		N/A			N/A

VALUATION SERVICES	79	ADVISORY GROUP

SALES COMPARISON APPROACH

IMPROVED SALES COMPARABLE MAP

VALUATION SERVICES	80	ADVISORY GROUP

SALES COMPARISON APPROACH

Cash Flow Multiplier

The cash flow multiple (CFM) is considered a reliable indicator of value. This is because the CFM considers both the income and the expenses of a facility, whereas the EGIM and the price per unit do not. The CFMs of the comparables range from 7.73x to 9.48x cash flow, with an average of 8.63x. The properties are newer facilities in average to good condition. The financial indicators are all based on stabilized operating levels.

The subject is an assisted living facility of average quality that is located in a good senior demographic market area in California. We note that the forecast subject expense ratio, inclusive of management fees and replacement reserves, is 82.55 percent, which falls within the lower portion of the range of the comparables. In addition, the subject’s cash flow is moderate relative to the comparables. We have utilized a cash flow multiplier in the middle portion of the range of 9.00x, which when applied to the subject’s projected stabilized cash flow (net operating income) arrives at a market value for the subject as follows:

			Subject		Indicated
Range	CFM		NOI		Value		$/Unit
Low		7.73	$	704,378	$	5,442,921	$	33,392
High		9.48	$	704,378	$	6,675,515	$	40,954
Median		8.79	$	704,378	$	6,192,419	$	37,990
Average		8.63	$	704,378	$	6,077,337	$	37,284
Sample Si		6

CONCLUSIONS

Indicated CFM			9.00
Net Operating Income	x	$	704,378
Indicated Stabilized Value		$	6,339,402
Rounded to nearest $100,000		$	6,300,000
Per Unit		$	38,650
Per Square Foot		$	59.21

Therefore, the indicated value for the subject the CFM analysis is $6,300,000.

Effective Gross Income Multiplier

The effective gross income multiplier serves as an indicator of market value as expressed by the relationship between the sales price of a property and its effective gross income. This unit of comparison is commonly utilized by participants active in the real estate market. A significant strength of this analytical technique is that it represents a direct factor of income as reflected by the market and, therefore, requires no adjustment. Furthermore, the effective gross income is more easily verified and more reliable than net operating income since the figure is not distorted by management fees, capital costs or accounting conventions.

The effective gross income multipliers for the comparable sales indicate a range of 2.56x to 4.24x effective gross income with an average of 3.13x. In The Senior Care Acquisition Report, 2003, published by Irving Levin Associates, EGIMs for 2002 were analyzed. In general, the average EGIM for assisted living facilities in 2002 was 2.4x. This represented a strong decline over the EGIM of 3.2x reported in 2001. The decline was reported as being reflective of the excessive development in the 1990s, as well as several corporate bankruptcies during 2001.

VALUATION SERVICES	81	ADVISORY GROUP

SALES COMPARISON APPROACH

Furthermore, our findings are that multipliers decline as the age of the facility increases. We have utilized an EGIM of 1.50x for the subject, which falls below the range for the comparables. This rate, however, is considered reasonable for the subject given the subject’s projected expense ratio, age, condition and location. This is applied to the subject’s projected effective gross income as follows:

			Subject		Indicated
Range	EGIM		EGI		Value		$/Unit
Low		2.56	$	4,036,240	$	10,349,333	$	63,493
High		4.24	$	4,036,240	$	17,126,248	$	105,069
Median		2.91	$	4,036,240	$	11,757,013	$	72,129
Average		3.13	$	4,036,240	$	12,622,843	$	77,441
Sample Size		6

CONCLUSIONS

Indicated EGIM			1.50
Effective Gross Income	x	$	4,036,240
Indicated Stabilized Value		$	6,054,360
Rounded to nearest $100,000		$	6,100,000
Per Unit		$	37,423
Per Square Foot		$	57.33

Therefore, the indicated value for the subject by the EGIM analysis is $6,100,000.

Price Per Unit

The price per unit is the most frequently quoted unit of comparison. This is despite the fact he fact that the calculation ignores variations in rates or operating margins and, therefore, is indifferent to the income generating potential of an investment property. Nonetheless, the price per unit provides some indication of prices. Although our income estimates maybe based on a per resident basis due to the possible inclusion of shared units, the basis of the comparables has been analyzed on a per unit situation. We believe that comparing the subject on a per unit basis is the most reasonable method and would not provide a misleading value estimate for the property.

The following is a discussion of the sales that have been compared with the subject. Again, the sales have been analyzed on a price per unit basis with all necessary adjustments. Reference is made to sales summary shown previously.

Percentage Adjustment Method

Adjustment Process

The sales that we have utilized represent the best available information that could be compared to the subject property. The major elements of comparison for an analysis of this type include the property rights conveyed, the financial terms incorporated into a particular transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its physical traits and the economic characteristics of the property.

VALUATION SERVICES	82	ADVISORY GROUP

SALES COMPARISON APPROACH

The first adjustment made to the market data takes into account differences between the subject property and the comparable property sales with regard to the legal interest transferred. Advantageous financing terms or peculiar conditions of sale are then adjusted to reflect a normal market transaction. Next, changes in market condition must be accounted for, thereby creating a time adjusted normal unit of comparison. Lastly, adjustments for location, the physical traits and the economic characteristics of the market data are made in order to generate the final adjusted unit rate, which is appropriate for the subject property.

Property Rights Conveyed

All of the sales utilized in this analysis involved the transfer of the fee simple interest. Since we are appraising the fee simple interest of the subject property, no adjustments were required.

Financial Terms

To the best of our knowledge, all of the sales utilized in this analysis were accomplished with cash and/or cash and market-oriented financing. Therefore, no adjustment for financial terms is required for the comparables.

Conditions of Sale

Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale may significantly affect transaction prices. However, all sales used in this analysis are considered to be “arms-length” market transactions between both knowledgeable buyers and sellers on the open market. Therefore, no adjustments for conditions of sale are required for the comparables.

Market Conditions

The sales included in this analysis date between July 1, 2001 and January 1, 2003. The market has not changed over this time period. The appropriate adjustment was made to each comparable.

Location

An adjustment for location is required when the locational characteristics of a comparable property are different from those of the subject property. The subject property is considered to exhibit a good location and has average access and visibility. We have made a negative adjustment to those comparables considered superior in location versus the subject. Conversely, a positive adjustment was made to those comparables considered inferior. Each comparable was adjusted accordingly.

Physical Traits

Various physical factors were analyzed including size, age, condition, quality, amenities, unit mix, utility, etc. When an item was determined to be inferior to the subject, a positive adjustment was applied. When an item was determined to be superior to the subject, a negative adjustment was applied.

Economic Characteristics

This adjustment is used to reflect differences in rent levels, operating expense ratios, occupancy levels, and other items that would have an economic impact on the transaction. Each comparable was adjusted accordingly.

VALUATION SERVICES	83	ADVISORY GROUP

SALES COMPARISON APPROACH

Discussion of Comparable Sales

In our analysis of the market for comparable assisted living properties, we have compared the subject to assisted living properties from throughout the regional area. These are discussed below.

Comparable Sale No. 1

At the time of sale, this comparable was considered superior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have not changed in the period since the sale. The comparable is of a superior age and condition to the subject. The comparable has a similar payor mix as the subject. Revenue characteristics were superior. Negative adjustments were warranted for age and revenue characteristics. Positive adjustments were not warranted.

Comparable Sale No. 2

At the time of sale, this comparable was considered superior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have not changed in the period since the sale. The comparable exhibits an inferior location. The comparable is of a superior age and condition to the subject. The comparable has a similar payor mix as the subject. Revenue characteristics were superior. Negative adjustments were warranted for age and revenue characteristics. Positive adjustments were warranted for location.

Comparable Sale No. 3

At the time of sale, this comparable was considered superior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have not changed in the period since the sale. The comparable is of a superior age and condition to the subject. The comparable has a similar payor mix as the subject. Revenue characteristics were superior. Negative adjustments were warranted for age and revenue characteristics. Positive adjustments were not warranted.

Comparable Sale No. 4

At the time of sale, this comparable was considered superior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have not changed in the period since the sale. The comparable is of a superior age and condition to the subject. The comparable has a similar payor mix as the subject. The comparable exhibits an inferior location. Revenue characteristics were superior. Negative adjustments were warranted for age and revenue characteristics. Positive adjustments were warranted for location.

Comparable Sale No. 5

At the time of sale, this comparable was considered inferior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have not changed in the period since the sale. The comparable exhibits an inferior location. The comparable is of a similar age and condition to the subject. The comparable has a similar payor mix as the subject. Revenue characteristics were inferior. Negative adjustments were not warranted. Positive adjustments were warranted for location and revenue characteristics.

VALUATION SERVICES	84	ADVISORY GROUP

SALES COMPARISON APPROACH

Comparable Sale No. 6

At the time of sale, this comparable was considered superior to the subject. No adjustments for property rights conveyed, financing or conditions of sale were necessary. Market conditions have not changed in the period since the sale. The comparable exhibits an inferior location. The comparable is of a superior age and condition to the subject. The comparable has a similar payor mix as the subject. Revenue characteristics were superior. Negative adjustments were warranted for age and revenue characteristics. Positive adjustments were warranted for location.

A summary of our adjustments is shown in the following table.

IMPROVED COMPARABLE SALE ADJUSTMENT GRID

			ECONOMIC ADJUSTMENTS (CUMULATIVE)
			Property			Financing &
	$/Unit		Rights			Conditions			Exp. After			Market*
No.	Date		Conveyed			of Sale			Purchase			Conditions			Subtotal
1	$	122,354	Fee Simple/Mkt.			Arms-Length			None			Similar			$	122,354
		1/03		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
2	$	98,876	Fee Simple/Mkt.			Arms-Length			None			Similar			$	98,876
		9/02		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
3	$	95,900	Fee Simple/Mkt.			Arms-Length			None			Similar			$	95,900
		1/02		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
4	$	92,391	Fee Simple/Mkt.			Arms-Length			None			Similar			$	92,391
		2/02		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
5	$	35,165	Fee Simple/Mkt.			Arms-Length			None			Similar			$	35,165
		8/01		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
6	$	83,333	Fee Simple/Mkt.			Arms-Length			None			Similar			$	83,333
		7/01		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

[Additional columns below]

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

	PROPERTY CHARACTERISTIC ADJUSTMENTS (ADDITIVE)
				Age,
				Quality						Revenue			Payor						Adj.
No.	Location			Condition			Unit Mix			Characteristics			Mix			Other			$/Unit			Overall
1	Superior			Similar			Similar			Superior			Similar			Similar			$	36,706		Superior
	-10.0		%		0.0	%		0.0	%	-60.0		%		0.0	%		0.0	%		-70.0	%
2	Similar			Superior			Similar			Superior			Similar			Similar			$	44,494		Superior
		0.0	%		-5.0	%		0.0	%		-50.0	%		0.0	%		0.0	%		-55.0	%
3	Similar			Superior			Similar			Superior			Similar			Similar			$	43,155		Superior
		0.0	%		-5.0	%		0.0	%		-50.0	%		0.0	%		0.0	%		-55.0	%
4	Similar			Similar			Similar			Superior			Similar			Similar			$	46,196		Superior
		0.0	%		0.0	%		0.0	%		-50.0	%		0.0	%		0.0	%		-50.0	%
5	Similar			Superior			Similar			Similar			Similar			Similar			$	33,407		Superior
		0.0	%		-5.0	%		0.0	%		0.0	%		0.0	%		0.0	%		-5.0	%
6	Similar			Superior			Similar			Superior			Similar			Similar			$	37,500		Superior
		0.0	%		-5.0	%		0.0	%		-50.0	%		0.0	%		0.0	%		-55.0	%

SUMMARY

	Unadj. $/Unit			Adj. $/Unit
Price Range
Low	$	35,165		$	33,407
High	$	122,354		$	46,196
Average	$	88,003		$	40,243
Net Adjustment
Low		-70.0	%
High		-55.0	%
Average		-58.8	%

CONCLUSION

Indicated Value per Unit			$	38,000
Number of Units		x		163
Indicated Value			$	6,194,000
	Rounded to nearest $100,000		$	6,200,000
	Per Unit		$	38,037

* Market Conditions Adjustment
	Compound annual change in market conditions:	3.00	%
	Date of Value (for adjustment calculations):	03/31/2003

Summary of Price Per Unit Analysis

After adjusting each comparable sale for differences with the subject property, the adjusted sale price range is $33,407 to $46,196 per unit. Based on the data, we believe that due to the subject’s level of construction quality, resident targeting and location, a price per unit towards the middle portion of the adjusted range is warranted. From this, we have correlated to a price of $38,000 per unit.

Price Per Unit Conclusion

Number of Units		Price Per Unit			Indicated Value
163	X	$	38,000	=	$	6,194,000
		Rounded To:			$	6,200,000

VALUATION SERVICES	85	ADVISORY GROUP

SALES COMPARISON APPROACH

The Sales Comparison Approach results in a range of values for the subject property of $6,100,000 to $6,300,000.

These values, however, are reflective of the property under stabilized occupancy. To these values we must deduct the rent loss of $400,000, which was determined in the Income Capitalization Approach. This equates to a range of “as is” values of $5,700,000 to $5,900,000.

Based on our analysis of competitive transactions, we conclude that the indicated “as-is” value by the Sales Comparison Approach on October 7, 2003 was:

Units	Indicated Value
163	$	5,700,000

VALUATION SERVICES	86	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	87	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Montego Heights Lodge
INCOME AND OPERATING EXPENSE SUMMARY

		2000										2001
		(January - December)										(January - December)
		Amount			$/Resident		PRD		% of EGI			Amount			$/Resident		PRD		% of EGI
REVENUES
Rental Income		$	3,121,664		$	20,679	$	56.65		86.60	%	$	3,139,617		$	22,884	$	62.70		85.00	%
Rent Concessions		$	—		$	—	$	—		0.00	%	$	—		$	—	$	—		0.00	%
Additional Personal Care		$	434,453		$	2,878	$	7.88		12.05	%	$	502,421		$	3,662	$	10.03		13.60	%
Second Occupant		$	—		$	—	$	—		0.00	%	$	—		$	—	$	—		0.00	%
New Resident Fees		$	27,680		$	183	$	0.50		0.77	%	$	34,801		$	254	$	0.69		0.94	%
Other Income		$	20,888		$	138	$	0.38		0.58	%	$	16,650		$	121	$	0.33		0.45	%
GROSS POTENTIAL REV.		$	3,604,685		$	23,879	$	65.42		100.00	%	$	3,693,489		$	26,921	$	73.76		100.00	%
Vacancy/Collection Loss		Inc. Above										Inc. Above
TOTAL NET REVENUE		$	3,604,685		$	23,879	$	65.42		100.00	%	$	3,693,489		$	26,921	$	73.76		100.00	%
OPERATING EXPENSES
Departmental
	General/Administrative	$	51,497		$	341	$	0.93		1.43	%	$	477,488		$	3,480	$	9.54		12.93	%
	Payroll (Wages)	$	905,583		$	5,999	$	16.44		25.12	%	$	997,983		$	7,274	$	19.93		27.02	%
	Payroll Taxes & Benefits	$	425,695		$	2,820	$	7.73		11.81	%	$	299,384		$	2,182	$	5.98		8.11	%
	Resident Care	$	2,164		$	14	$	0.04		0.06	%	$	2,496		$	18	$	0.05		0.07	%
	Food Services	$	288,185		$	1,909	$	5.23		7.99	%	$	263,586		$	1,921	$	5.26		7.14	%
	Activities	$	17,629		$	117	$	0.32		0.49	%	$	28,926		$	211	$	0.58		0.78	%
	Housekeeping/Laundry	$	46,504		$	308	$	0.84		1.29	%	$	26,560		$	194	$	0.53		0.72	%
	Plant Operations	$	101,884		$	675	$	1.85		2.83	%	$	169,579		$	1,236	$	3.39		4.59	%
	Utilities	$	201,423		$	1,334	$	3.66		5.59	%	$	248,573		$	1,812	$	4.96		6.73	%
	Marketing/Promotions	$	57,745		$	383	$	1.05		1.60	%	$	50,246		$	366	$	1.00		1.36	%
Non-Departmental
	Real Estate Taxes	$	108,129		$	716	$	1.96		3.00	%	$	100,756		$	734	$	2.01		2.73	%
	Insurance	$	28,886		$	191	$	0.52		0.80	%	$	48,983		$	357	$	0.98		1.33	%
	Management Fees (5% of EGI)	$	180,234		$	1,194	$	3.27		5.00	%	$	184,674		$	1,346	$	3.69		5.00	%
	Replacement Reserves ($/Unit)	$	57,050		$	378	$	1.04		1.58	%	$	57,050		$	416	$	1.14		1.54	%
TOTAL ALL EXPENSES		$	2,472,608		$	16,379	$	44.88		68.59	%	$	2,956,284		$	21,548	$	59.03		80.04	%
EXPENSE RATIO			68.6	%									80.0	%
NET OPERATING INCOME		$	1,132,077		$	7,499	$	20.55		31.41	%	$	737,205		$	5,373	$	14.72		19.96	%
OCCUPANCY			92.6	%									84.2	%

[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		$	3,109,170		$	25,351		$	69.46			85.72	%	$	2,962,326		$	26,253		$	71.93			87.15	%
Rent Concessions		$	(32,177	)	$	(262	)	$	(0.72	)		-0.89	%	$	(129,987	)	$	(1,152	)	$	(3.16	)		-3.82	%
Additional Personal Care		$	478,281		$	3,900		$	10.68			13.19	%	$	463,008		$	4,103		$	11.24			13.62	%
Second Occupant		$	—		$	—		$	—			0.00	%	$	—		$	—		$	—			0.00	%
New Resident Fees		$	49,900		$	407		$	1.11			1.38	%	$	84,750		$	751		$	2.06			2.49	%
Other Income		$	22,053		$	180		$	0.49			0.61	%	$	19,196		$	170		$	0.47			0.56	%
GROSS POTENTIAL REV.		$	3,627,227		$	29,575		$	81.03			100.00	%	$	3,399,293		$	30,126		$	82.54			100.00	%
Vacancy/Collection Loss		Inc. Above												Inc. Above
TOTAL NET REVENUE		$	3,627,227		$	29,575		$	81.03			100.00	%	$	3,399,293		$	30,126		$	82.54			100.00	%
OPERATING EXPENSES
Departmental
	General/Administrative	$	93,471		$	762		$	2.09			2.58	%	$	83,886		$	743		$	2.04			2.47	%
	Payroll (Wages)	$	858,091		$	6,997		$	19.17			23.66	%	$	986,714		$	8,745		$	23.96			29.03	%
	Payroll Taxes & Benefits	$	457,799		$	3,733		$	10.23			12.62	%	$	383,450		$	3,398		$	9.31			11.28	%
	Resident Care	$	1,950		$	16		$	0.04			0.05	%	$	2,724		$	24		$	0.07			0.08	%
	Food Services	$	248,646		$	2,027		$	5.55			6.85	%	$	247,196		$	2,191		$	6.00			7.27	%
	Activities	$	20,730		$	169		$	0.46			0.57	%	$	20,441		$	181		$	0.50			0.60	%
	Housekeeping/Laundry	$	21,629		$	176		$	0.48			0.60	%	$	20,778		$	184		$	0.50			0.61	%
	Plant Operations	$	144,606		$	1,179		$	3.23			3.99	%	$	148,019		$	1,312		$	3.59			4.35	%
	Utilities	$	244,150		$	1,991		$	5.45			6.73	%	$	273,086		$	2,420		$	6.63			8.03	%
	Marketing/Promotions	$	61,767		$	504		$	1.38			1.70	%	$	72,284		$	641		$	1.76			2.13	%
Non-Departmental
	Real Estate Taxes	$	116,097		$	947		$	2.59			3.20	%	$	121,625		$	1,078		$	2.95			3.58	%
	Insurance	$	135,831		$	1,108		$	3.03			3.74	%	$	293,379		$	2,600		$	7.12			8.63	%
	Management Fees (5% of EGI)	$	181,361		$	1,479		$	4.05			5.00	%	$	169,965		$	1,506		$	4.13			5.00	%
	Replacement Reserves ($/Unit)	$	57,050		$	465		$	1.27			1.57	%	$	57,050		$	506		$	1.39			1.68	%
TOTAL ALL EXPENSES		$	2,643,178		$	21,552		$	59.05			72.87	%	$	2,880,593		$	25,529		$	69.94			84.74	%
EXPENSE RATIO			72.9	%											84.7	%
NET OPERATING INCOME		$	984,049		$	8,024		$	21.98			27.13	%	$	518,700		$	4,597		$	12.59			15.26	%
OCCUPANCY			75.2	%											69.2	%

[Additional columns below]

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

		C&W Forecast
		As If Stabilized Year 1
		Amount			$/Resident		PRD		% of EGI
REVENUES
Rental Income		$	4,389,600		$	26,930	$	92.23
Rent Concessions		$	—		$	—	$	—
Additional Personal Care		$	586,800		$	3,600	$	12.33
Second Occupant		$	—		$	—	$	—
New Resident Fees		$	48,900		$	300	$	1.03
Other Income		$	20,000		$	123	$	0.42
GROSS POTENTIAL REV.		$	5,045,300		$	30,953	$	122.50
Vacancy/Collection Loss		$	(1,009,060	)
TOTAL NET REVENUE		$	4,036,240		$	30,953	$	84.80
OPERATING EXPENSES
Departmental
	General/Administrative	$	120,000		$	920	$	2.52		2.97	%
	Payroll (Wages)	$	1,300,000		$	9,969	$	27.31		32.21	%
	Payroll Taxes & Benefits	$	500,000		$	3,834	$	10.51		12.39	%
	Resident Care	$	36,000		$	276	$	0.76		0.89	%
	Food Services	$	300,000		$	2,301	$	6.30		7.43	%
	Activities	$	30,000		$	230	$	0.63		0.74	%
	Housekeeping/Laundry	$	30,000		$	230	$	0.63		0.74	%
	Plant Operations	$	180,000		$	1,380	$	3.78		4.46	%
	Utilities	$	260,000		$	1,994	$	5.46		6.44	%
	Marketing/Promotions	$	100,000		$	767	$	2.10		2.48	%
Non-Departmental
	Real Estate Taxes	$	82,000		$	629	$	1.72		2.03	%
	Insurance	$	135,000		$	1,035	$	2.84		3.34	%
	Management Fees (5% of EGI)	$	201,812		$	1,548	$	4.24		5.00	%
	Replacement Reserves ($/Unit)	$	57,050		$	438	$	1.20		1.41	%
TOTAL ALL EXPENSES		$	3,331,862		$	25,551	$	70.00		82.55	%
EXPENSE RATIO			82.5	%
NET OPERATING INCOME		$	704,378		$	5,402	$	14.80		17.45	%
OCCUPANCY			80.0	%

VALUATION SERVICES	88	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Assisted Living Rate Analysis

The subject has an effective capacity of 163 residents and/or beds. The facility is of average quality construction with a layout and design typical of its age, 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. We note that the subject units are small in relation to the marketplace, but have 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.

Montego Heights Lodge

							In House Rents				Asking Rents
			No.		Occ.		Monthly		$/Unit		Monthly		$/Unit
Unit			Units		Units		Revenue		Per Mo.		Revenue		Per Mo.
Assisted Living
Studio Standard				52		10	$	18,805	$	1,881	$	100,048	$	1,924
Studio Large				73		50	$	108,085	$	2,162	$	176,368	$	2,416
		Total - Studio		125		60	$	126,890	$	2,115	$	276,416	$	2,211
One-Bedroom				38		34	$	92,510	$	2,721	$	106,704	$	2,808
	Total - One-Bedroom			38		34	$	92,510	$	2,721	$	106,704	$	2,808
Assisted Totals				163		94	$	219,400	$	2,334	$	383,120	$	2,350
Totals				163		94	$	219,400	$	2,334	$	383,120	$	2,350

It appears that the current in-house average rates generally fall above most of the asking rates at the subject. This is reportedly due to recent rent increases. Overall, the average rate is $2,334 per month, which is similar to the average asking rate of $2,350 per month. We do not feel an slight increase for the in-house rates is reasonable, noting that a rate increase was just recently instigated in October 2003.

VALUATION SERVICES	89	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.

Montego Heights Lodge
Reconciled Market Rental Rates

	Resident	No.		No.		Market
Unit Type	Type	Units		Beds		Rent
Studio Standard	AL		52		52	$	1,900
Studio Large	AL		73		73	$	2,200
One-Bedroom	AL		38		38	$	2,800
Totals			163		163

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	$	434,453	$	2,878	$	7.88
2001	$	502,421	$	3,662	$	10.03
2002	$	478,281	$	3,900	$	10.68
2003 Annualized	$	463,008	$	4,103	$	11.24
C&W Forecast	$	586,800	$	3,600	$	12.33

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, 48 residents (51 percent of existing total) were paying for personal care services. The average charge equated to $861.25 per

VALUATION SERVICES	90	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

month, which would indicate an average Level 3 care level. Based on the data, we have forecast that 40 percent of the resident mix will pay an average of $750 per month for personal care services. This equates to a stabilized Year 1 revenue of $586,800. This figure is noted as falling above the recent historical levels, however, the property was not operating at stabilized occupancy over the last two years. Also, our percentage of residents falls below the ratio currently paying for personal care services, however, this percentage was based on the current census which is below a stabilized level. We believe that our forecast is reasonable and achievable based on forecast stabilized occupancy.

New Resident Fees

New resident fees at the subject are $2,000 per resident, which falls within the upper portion of the range of the comparables from $950 to $2,500. This amount is considered high given the subject’s location and occupancy rate. We believe that a rate of $1,000 per new resident would be more achievable based on the subject’s physical characteristics.

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	$	27,680	$	183
2001	$	34,801	$	254
2002	$	49,900	$	407
2003 Annualized	$	84,750	$	751
C&W Forecast	$	48,900	$	300

Based on the data, we have forecast Year 1 new resident fees at $48,900. Our forecast falls above the recent historical revenue trends, but is based on a stabilized occupancy position which the subject has not achieved over the last two years. We believe that our forecast revenue is reasonable and achievable under stabilized conditions.

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	91	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Year	Total		$/Resident		PRD
2000	$	20,888	$	138	$	0.38
2001	$	16,650	$	121	$	0.33
2002	$	22,053	$	180	$	0.49
2003 Annualized	$	19,196	$	170	$	0.47
C&W Forecast	$	20,000	$	123	$	1.03

Based on the data, we have forecast Year 1 revenue from this source at $20,000. This is seen as being consistent with the historic revenue for the subject.

Concessions/Rental Allowances

At the time of inspection, the subject reportedly was not offering any rent concessions. However, the property had been using concessions in the latter part of 2002 and into 2003 in attempt to strengthen the relatively low occupancy. Due to the current occupancy situation at the subject, some type of concessions, along with very aggressive marketing will be required to lease the property to a stabilized condition. Although concessions will not likely be seen consistently in the market going forward, newer product will likely use them to stimulate any unforeseen vacancies, while older properties like the subject may use concessions more frequently. Nonetheless, no allowance for rent concessions will be applied to the subject as we have accounted for this potential through a lower occupancy rate and rental rate forecast.

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 71 percent occupied. This is lower than current average occupancy levels for the market area overall. Rent comparable occupancies range from 92 to 98 percent. Occupancy at the subject was 93 percent in 2000, 84 percent in 2001, 75 percent in 2002 and year-to-date 2003 annualizes out to 69 percent. The declining occupancy at the facility is reportedly due to the older age and condition of the property, high turnover of marketing directors and less aggressive marketing. We believe that in order to again achieve a level of positive occupancy conditions, very strong and aggressive marketing will be required.

In consideration of the above, as well as the general market conditions and forecast market positioning of the subject, we have forecasted a stabilized vacancy and collection loss of 20.00 percent for the subject. We note that this rate is below that current seen by the other properties in the market. We believe, however, this is a reasonable rate based on the subject’s older age, condition, smaller unit sizes and generally large facility size in relation to the marketplace.

VALUATION SERVICES	92	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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.

Montego Heights Lodge
STABILIZED OPERATING INCOME

												PER
	RESIDENT	NO.		NO.			MONTHLY					ACTUAL
UNIT TYPE	TYPE	UNITS		BEDS			RATE		INCOME			RESIDENT
Studio Standard	AL		52		52		$	1,900	$	1,185,600
Studio Large	AL		73		73		$	2,200	$	1,927,200
One-Bedroom Large	AL		38		38		$	2,800	$	1,276,800
Total			163		163				$	4,389,600		$	26,930
Additional Personal Care					40	%	$	750	$	586,800		$	3,600
Second Person					0	%	$	—	$	—		$	—
New Resident Fees					30	%	$	1 ,000	$	48,900		$	300
Other									$	20,000		$	123
TOTAL POTENTIAL GROSS INCOME									$	5,045,300		$	30,953
LESS: VACANCY @					20.0	%			$	(1,009,060	)
EFFECTIVE GROSS INCOME									$	4,036,240		$	30,953

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	93	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

SUMMARY OF COMPARABLE OPERATING EXPENSES
ASSISTED LIVING FACILITIES

Facility	Confidential			Confidential
Reporting Period		2002			2002
Year Built		1999			2001
No. of IL Units		0			42
No. of AL Units		89			72
No. of ALZ Units		13			0
Total Units		102			114
Occupancy		83	%		85	%
Resident Days		30,901			35,493

		Per					% of			Per					% of
		Resident			$/RD		EGI			Resident			$/RD		EGI
TOTAL NET REVENUES		$	37,505		$	102.75				$	25,443		$	69.71
EXPENSES
	General & Administrative	$	756		$	2.07		2.02	%	$	1,110		$	3.04		3.25	%
	Payroll (Wages/Salaries)	$	11,593		$	31.76		30.91	%	$	8,553		$	23.43		23.52	%
	Payroll Taxes & Benefits	$	3,815		$	10.45		10.17	%	$	2,144		$	5.88		8.62	%
	Resident Care	$	219		$	0.60		0.59	%	$	609		$	1.67		0.82	%
	Food Services	$	1,786		$	4.89		4.76	%	$	1,207		$	3.31		6.32	%
	Activities	$	58		$	0.16		0.16	%	$	58		$	0.16		0.53	%
	Housekeeping	$	119		$	0.32		0.32	%	$	101		$	0.28		0.86	%
	Plant Operations	$	644		$	1.77		1.72	%	$	510		$	1.40		4.05	%
	Utilities	$	1,536		$	4.21		4.09	%	$	1,180		$	3.23		5.19	%
	Marketing/Promotions	$	527		$	1.44		1.41	%	$	439		$	1.20		1.57	%
	Real Estate Taxes	$	705		$	1.93		1.88	%	$	520		$	1.43		3.62	%
	Insurance	$	611		$	1.67		1.63	%	$	400		$	1.10		3.32	%
ADJUSTED OPERATING EXPENSES		$	22,369		$	73.84		59.64	%	$	16,832		$	55.56		61.66	%
Management Fee		$	1,875		$	5.14		5.00	%	$	1,272		$	3.49		5.00	%
Expense Ratio Before Reserves			65	%							71	%
Reserves			—			—		—			—			—		—

[Additional columns below]

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

				ASHA				ASHA
				Lower		ASHA		Upper
Facility	Confidential			Quartile		Median		Quartile
Reporting Period		2002			2002		2002		2002
Year Built		1990			N/A		N/A		N/A
No. of IL Units		176			N/A		N/A		N/A
No. of AL Units		11			N/A		N/A		N/A
No. of ALZ Units		0			N/A		N/A		N/A
Total Units		187			N/A		N/A		N/A
Occupancy		98	%		N/A		N/A		N/A
Resident Days		66,890

		Per					% of
		Resident			$/RD		EGI
TOTAL NET REVENUES		$	34,768		$	95.26				$	29,046		$	34,264		$	38,878
EXPENSES
	General & Administrative	$	1,129		$	3.09		3.25	%	$	1,115		$	1,433		$	1,889
	Payroll (Wages/Salaries)	$	8,179		$	22.41		23.52	%		N/A			N/A			N/A
	Payroll Taxes & Benefits	$	2,996		$	8.21		8.62	%	$	1,575		$	2,068		$	3,003
	Resident Care	$	286		$	0.78		0.82	%	$	4,253		$	6,123		$	7,259
	Food Services	$	2,196		$	6.02		6.32	%	$	2,704		$	3,529		$	4,892
	Activities	$	184		$	0.50		0.53	%		N/A			N/A			N/A
	Housekeeping	$	299		$	0.82		0.86	%	$	532		$	815		$	1,130
	Plant Operations	$	1,409		$	3.86		4.05	%	$	580		$	916		$	1,356
	Utilities	$	1,805		$	4.94		5.19	%	$	1,086		$	1,306		$	1,526
	Marketing/Promotions	$	546		$	1.49		1.57	%	$	858		$	1,349		$	2,008
	Real Estate Taxes	$	1,257		$	3.45		3.62	%	$	648		$	1,011		$	1,597
	Insurance	$	1,154		$	3.16		3.32	%	$	278		$	463		$	726
ADJUSTED OPERATING EXPENSES		$	21,439		$	70.77		61.66	%	$	20,959		$	24,058		$	29,438
Management Fee		$	1,738		$	0.00		5.00	%	$	1,249		$	1,713		$	2,082
Expense Ratio Before Reserves			67	%							76	%		75	%		81	%
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	94	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	$	51,497	$	341	$	0.93		1.43	%
2001	$	477,488	$	3,480	$	9.54		12.93	%
2002	$	93,471	$	762	$	2.09		2.58	%
2003 Annualized	$	83,886	$	743	$	2.04		2.47	%
C&W Forecast	$	120,000	$	920	$	2.52		2.97	%

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 high expense amount in 2001 was due to extraordinary legal costs of $371,269. Eliminating this would have shown a cost of $106,219 which is more consistent with the historic costs. Overall, 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 $120,000 or $ 920 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	$	905,583	$	5,999	$	16.44		25.12	%
2001	$	997,983	$	7,274	$	19.93		27.02	%
2002	$	858,091	$	6,997	$	19.17		23.66	%
2003 Annualized	$	986,714	$	8,745	$	23.96		29.03	%
C&W Forecast	$	1,300,000	$	9,969	$	27.31		32.21	%

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 higher cost would be reasonable under stabilized conditions. We have forecast stabilized Year 1 wages and salary costs at $1,300,000 or $9,969 per resident.

VALUATION SERVICES	95	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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	$	425,695	$	2,820	$	7.73		11.81	%
2001	$	299,384	$	2,182	$	5.98		8.11	%
2002	$	457,799	$	3,733	$	10.23		12.62	%
2003 Annualized	$	383,450	$	3,398	$	9.31		11.28	%
C&W Forecast	$	500,000	$	3,834	$	10.51		12.39	%

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 within the middle portion of the range by the comparable properties. We note that most of these expenses are reflective of non-stabilized conditions. We have forecast stabilized Year 1 payroll taxes and benefits costs at $500,000 or $3,834 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	$	2,164	$	14	$	0.04		0.06	%
2001	$	2,496	$	18	$	0.05		0.07	%
2002	$	1,950	$	16	$	0.04		0.05	%
2003 Annualized	$	2,724	$	24	$	0.07		0.08	%
C&W Forecast	$	36,000	$	276	$	0.76		0.89	%

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

VALUATION SERVICES	96	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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 paying for additional resident or personal care. Based on this, we have forecast stabilized Year 1 resident care costs at $36,000 or $ 276 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	$	288,185	$	1,909	$	5.23		7.99	%
2001	$	263,586	$	1,921	$	5.26		7.14	%
2002	$	248,646	$	2,027	$	5.55		6.85	%
2003 Annualized	$	247,196	$	2,191	$	6.00		7.27	%
C&W Forecast	$	300,000	$	2,301	$	6.30		7.43	%

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 stabilized Year 1 food services costs at $300,000 or $2,301 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	$	17,629	$	117	$	0.32		0.49	%
2001	$	28,926	$	211	$	0.58		0.78	%
2002	$	20,730	$	176	$	0.48		0.60	%
2003 Annualized	$	20,441	$	181	$	0.50		0.60	%
C&W Forecast	$	30,000	$	230	$	0.63		0.74	%

VALUATION SERVICES	97	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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 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 $30,000 or $ 230 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	$	46,504	$	308	$	0.84		1.29	%
2001	$	26,560	$	194	$	0.53		0.72	%
2002	$	21,629	$	176	$	0.48		0.60	%
2003 Annualized	$	20,778	$	184	$	0.50		0.61	%
C&W Forecast	$	30,000	$	230	$	0.63		0.74	%

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 stabilized Year 1 housekeeping costs at $30,000 or $ 230 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.

VALUATION SERVICES	98	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Year	Total		$/Resident		PRD		% of EGI
2000	$	101,884	$	675	$	1.85		2.83	%
2001	$	169,579	$	1,236	$	3.39		4.59	%
2002	$	144,606	$	1,179	$	3.23		3.99	%
2003 Annualized	$	148,019	$	1,312	$	3.59		4.35	%
C&W Forecast	$	180,000	$	1,380	$	3.78		4.46	%

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 $180,000 or $1,380 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	$	201,423	$	1,334	$	3.66		5.59	%
2001	$	248,573	$	1,812	$	4.96		6.73	%
2002	$	244,150	$	1,991	$	5.45		6.73	%
2003 Annualized	$	273,086	$	2,420	$	6.63		8.03	%
C&W Forecast	$	260,000	$	1,994	$	5.46		6.44	%

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 $260,000 or $1,994 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

VALUATION SERVICES	99	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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	$	57,745	$	383	$	1.05		1.60	%
2001	$	50,246	$	366	$	1.00		1.36	%
2002	$	61,767	$	504	$	1.38		1.70	%
2003 Annualized	$	72,284	$	641	$	1.76		2.13	%
C&W Forecast	$	100,000	$	767	$	2.10		2.48	%

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. Based on the competitive positioning of the subject, we have increased marketing cost. We have forecast Year 1 marketing costs at $100,000 or $ 767 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	$	108,129	$	716	$	1.96		3.00	%
2001	$	100,756	$	734	$	2.01		2.73	%
2002	$	116,097	$	947	$	2.59		3.20	%
2003 Annualized	$	121,625	$	1,078	$	2.95		3.58	%
C&W Forecast	$	82,000	$	629	$	1.72		2.03	%

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 $82,000 or $ 629 per resident and which is based on a market value premise.

VALUATION SERVICES	100	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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	$	28,886	$	191	$	0.52		0.80	%
2001	$	48,983	$	357	$	0.98		1.33	%
2002	$	135,831	$	1,108	$	3.03		3.74	%
2003 Annualized	$	293,379	$	2,600	$	7.12		8.63	%
C&W Forecast	$	135,000	$	1,035	$	2.84		3.34	%

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. The 2003 annualized amount is very excessive and we were not able to ascertain what was actually included in the year-to-date figures. As such, we have not placed any reliance on this figure. We have forecast Year 1 insurance costs at $135,000 or $1,035 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 $201,812 or $1,548 per resident in our analysis.

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 $350 per unit and which equates to a total cost of $57,050 or $ 438 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 $3,331,862 ($25,551 per resident) and 82.55 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).

VALUATION SERVICES	101	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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 $5,402, 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.

Montego Heights Lodge
STABILIZED OPERATING STATEMENT

							Total		PR		PRD		% of EGI
EFFECTIVE GROSS INCOME							$	4,036,240	$	30,953	$	84.80
EXPENSES
	General/Administrative						$	120,000	$	920	$	2.52		2.97	%
	Payroll (Wages)						$	1,300,000	$	9,969	$	27.31		32.21	%
	Payroll Taxes & Benefits						$	500,000	$	3,834	$	10.51		12.39	%
	Resident Care						$	36,000	$	276	$	0.76		0.89	%
	Food Services						$	300,000	$	2,301	$	6.30		7.43	%
	Activities						$	30,000	$	230	$	0.63		0.74	%
	Housekeeping/Laundry						$	30,000	$	230	$	0.63		0.74	%
	Plant Operations						$	180,000	$	1,380	$	3.78		4.46	%
	Utilities						$	260,000	$	1,994	$	5.46		6.44	%
	Marketing/Promotions						$	100,000	$	767	$	2.10		2.48	%
	Real Estate Taxes						$	82,000	$	629	$	1.72		2.03	%
	Insurance						$	135,000	$	1,035	$	2.84		3.34	%
TOTAL OPERATING EXPENSES					76.1	%	$	3,073,000	$	23,566	$	64.56		76.14	%
	Management Fees		5.0	%			$	201,812	$	1,548	$	4.24		5.00	%
	Replacement Reserves	$	350				$	57,050	$	438	$	1.20		1.41	%
TOTAL EXPENSES							$	3,331,862	$	25,551	$	70.00		82.55	%
NET OPERATING INCOME							$	704,378	$	5,402	$	14.80		17.45	%

(*) Per Actual Resident

VALUATION SERVICES	102	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Direct Capitalization Rate Analysis

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 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 overall capitalization rates derived from the assisted living facility sales used in the Sales Comparison Approach are summarized below:

VALUATION SERVICES	103	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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	%
	1	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.

VALUATION SERVICES	104	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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 2001					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.

VALUATION SERVICES	105	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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 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:

VALUATION SERVICES	106	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

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%

Direct Capitalization Method Conclusion

We estimated a capitalization rate of 10.55 to 12.94 percent through our direct comparison analysis, while the band-of-investment technique correlated to 10.74 percent. Utilizing both methods to develop a capitalization rate, tempered with investor criteria and the specific attributes of the subject, we feel a rate of 11.50 percent is warranted for the property. We note that this rate is applied after reserves. Our conclusion via the Direct Capitalization Method is as follows:

DIRECT CAPITALIZATION METHOD

Net Operating Income $ 704,378

Sensitivity Analysis (0.25% OAR Spread)	Value		$/Unit
Based on Low-Range of 11.25%	$	6,261,138	$	38,412
Based on Most Probable Range of 11.50%	$	6,125,026	$	37,577
Based on High-Range of 11.75%	$	5,994,706	$	36,777
Reconciled Value	$	6,125,026	$	37,577
Rounded to nearest $100,000	$	6,100,000	$	37,423
Value Conclusion – As Stabilized:	$	6,100,000

As Is Analysis

As has been noted, the subject is not operating at a stabilized occupancy position. In order to estimate the “as-is” value of the property, we have analyzed the property through the discounted cash flow analysis as this is the most typical analysis performed by investors when evaluating newly opened facilities because it incorporates a projected rate of absorption of units as well as anticipated inflationary assumptions during the projection period. Given the history of the ownership and management of the property, it has not attained stabilized occupancy and is at an occupancy of 116 residents or 71 percent. The following is a summary of our assumptions utilized when calculating a value estimate for the subject. We note that we initially value the facility at inspection. We have forecasted that a stabilized occupancy will be 80 percent. We have also forecast that the property would take nine months to reach stabilized occupancy. Based on the current occupancy and forecast occupancy, the subject would need to lease 14 beds or residents to achieve stabilized occupancy. This equates to an absorption rate of approximately 3.00 residents per month for the next five months. To reflect the inherent risk in leasing up the asset, we have inflated the discount rate upward by 100 basis points in our “as is” discounted cash flow.

VALUATION SERVICES	107	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Absorption

The subject’s estimated absorption period is projected to be seven months. The lease-up projection is based on market absorption rates discussed in the Competitive Market Analysis. Our projected lease-up analysis can be found on the following chart.

Montego Heights Lodge
Projected Lease-Up Analysis - Year 1

		# of Months				1			2			3			4			5			6
		Total Residents				115			118			121			124			127			130
		New Residents				3			3			3			3			3			0
		% Occupied				71	%		72	%		74	%		76	%		78	%		80	%
		Units:		163
						Month:
						1			2			3			4			5			6
Income
Effective Gross Income					$	296,631		$	304,369		$	312,107		$	319,845		$	327,583		$	335,322
Expenses			Type (1)
General & Administrative				F	$	10,000		$	10,000		$	10,000		$	10,000		$	10,000		$	10,000
Payroll (Wages)				V	$	80,000		$	85,000		$	90,000		$	95,000		$	100,000		$	105,000
Payroll Taxes & Benefits				V	$	32,000		$	34,000		$	36,000		$	38,000		$	40,000		$	41,000
Resident Care				V	$	2,000		$	2,100		$	2,200		$	2,300		$	2,400		$	2,500
Food Services				V	$	20,000		$	21,000		$	22,000		$	23,000		$	24,000		$	25,000
Activities				F	$	2,500		$	2,500		$	2,500		$	2,500		$	2,500		$	2,500
Housekeeping/Laundry				F	$	2,500		$	2,500		$	2,500		$	2,500		$	2,500		$	2,500
Plant Operations				F	$	15,000		$	15,000		$	15,000		$	15,000		$	15,000		$	15,000
Utilities				F	$	21,667		$	21,667		$	21,667		$	21,667		$	21,667		$	21,667
Marketing				F	$	10,000		$	10,000		$	10,000		$	10,000		$	10,000		$	10,000
Real Estate Taxes				F	$	6,833		$	6,833		$	6,833		$	6,833		$	6,833		$	6,833
Insurance				F	$	11,250		$	11,250		$	11,250		$	11,250		$	11,250		$	11,250
	Total Operating Expenses				$	213,750		$	221,850		$	229,950		$	238,050		$	246,150		$	253,250
Reserves				F	$	4,754		$	4,754		$	4,754		$	4,754		$	4,754		$	4,754
Management Fees				V		14,832			15,218			15,605			15,992			16,379			16,766
	Total Expenses				$	233,336		$	241,823		$	250,310		$	258,796		$	267,283		$	274,770
Net Income					$	63,295		$	62,546		$	61,797		$	61,049		$	60,300		$	60,551

[Additional columns below]

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

		# of Months		7			8			9			10			11			12
		Total Residents		130			130			130			130			130			130
		New Residents		0			0			0			0			0			0
		% Occupied		80	%		80	%		80	%		80	%		80	%		80	%
		Units:
																						12 MONTH
				7			8			9			10			11			12			CUMULATIVE
Income
Effective Gross Income			$	335,322		$	335,322		$	335,322		$	335,322		$	335,322		$	335,322		$	3,907,786
Expenses
General & Administrative			$	10,000		$	10,000		$	10,000		$	10,000		$	10,000		$	10,000		$	120,000
Payroll (Wages)			$	108,333		$	108,333		$	108,333		$	108,333		$	108,333		$	108,333		$	1,204,998
Payroll Taxes & Benefits			$	41,667		$	41,667		$	41,667		$	41,667		$	41,667		$	41,667		$	471,002
Resident Care			$	2,600		$	2,700		$	2,800		$	2,900		$	3,000		$	3,100		$	30,600
Food Services			$	25,000		$	25,000		$	25,000		$	25,000		$	25,000		$	25,000		$	285,000
Activities			$	2,500		$	2,500		$	2,500		$	2,500		$	2,500		$	2,500		$	30,000
Housekeeping/Laundry			$	2,500		$	2,500		$	2,500		$	2,500		$	2,500		$	2,500		$	30,000
Plant Operations			$	15,000		$	15,000		$	15,000		$	15,000		$	15,000		$	15,000		$	180,000
Utilities			$	21,667		$	21,667		$	21,667		$	21,667		$	21,667		$	21,667		$	260,000
Marketing			$	10,000		$	10,000		$	10,000		$	8,333		$	8,333		$	8,333		$	115,000
Real Estate Taxes			$	6,833		$	6,833		$	6,833		$	6,833		$	6,833		$	6,833		$	82,000
Insurance			$	11,250		$	11,250		$	11,250		$	11,250		$	11,250		$	11,250		$	135,000
	Total Operating Expenses		$	257,350		$	257,450		$	257,550		$	255,983		$	256,083		$	256,183		$	2,943,600
Reserves			$	4,754		$	4,754		$	4,754		$	4,754		$	4,754		$	4,754		$	57,050
Management Fees				16,766			16,766			16,766			16,766			16,766			16,766		$	195,389
	Total Expenses		$	278,870		$	278,970		$	279,070		$	277,504		$	277,604		$	277,704		$	3,196,039
Net Income			$	56,451		$	56,351		$	56,251		$	57,818		$	57,718		$	57,618		$	711,747

(1) Variable (V) or Fixed (F) Expenses

The indicated value of the subject property “as-is” and based on the above assumptions, is shown below.

VALUATION SERVICES	108	ADVISORY GROUP

INCOME CAPITALIZATION APPROACH

Montego Heights Lodge
DISCOUNTED CASH-FLOW ANALYSIS AS IS

ASSUMPTIONS

INFLATION (INCOME)		3.5	%
OPERATING EXPENSE RATIO (YEARS 3 - 5)		76.1	%
RESERVES	$	300
MANAGEMENT FEE		5.0	%
TERMINAL CAPITALIZATION RATE		12.00	%
COSTS OF SALE		3.00	%
DISCOUNT RATE		15.50	%

FINANCIAL FORECAST

PERIODS				Year 1		Year 2		Year 3		Year 4		Year 5		Year 6
												$	6,533,677	(Reversion)
EFFECTIVE GROSS INCOME				$	3,907,786	$	4,036,240	$	4,177,508	$	4,323,721	$	4,475,051	$	4,631,678
LESS: OPERATING EXPENSES				$	2,943,600	$	3,073,000	$	3,180,555	$	3,291,874	$	3,407,090	$	3,526,338
LESS: MANAGEMENT FEE		5	%	$	195,389	$	201,812	$	208,875	$	216,186	$	223,753	$	231,584
LESS: RESERVES	$	300		$	57,050	$	57,050	$	59,047	$	61,113	$	63,252	$	65,466
CASH FLOW				$	711,747	$	704,378	$	729,031	$	754,547	$	7,314,634	$	808,290
															12.00	%
														$	6,735,750
NET PRESENT VALUE	$	5,600,013												($	202,072	)
	$	5,600,000	(ROUNDED)											$	6,533,677

The indicated value of the subject, “as-is”, has been calculated at $5,600,000. The indicated value of the subject property as if stabilized has also been calculated. This analysis is based on the same assumptions as our previous analysis. However, it assumes stabilized occupancy as of October 7, 2003. The value estimate “as if currently stabilized” is $6,000,000 (shown below). When comparing this value to the “as is” value, the indicated rent loss deduction is $400,000 ($6,000,000 - $5,600,000). A rent loss deduction of $400,000 must be applied to the value indication in the Sales Comparison Approach to determine an “as is” market value estimate.

Montego Heights Lodge
DISCOUNTED CASH-FLOW ANALYSIS AS IF CURRENTLY STABILIZED

ASSUMPTIONS

INFLATION (INCOME)		3.5	%
OPERATING EXPENSE RATIO		76.1	%
RESERVES	$	300
MANAGEMENT FEE		5.0	%
CAPITALIZATION RATE		12.00	%
COSTS OF SALE		3.00	%
DISCOUNT RATE		14.50	%

FINANCIAL FORECAST

PERIODS				Year 1		Year 2		Year 3		Year 4		Year 5		Year 6
												$	6,762,356	(Reversion)
EFFECTIVE GROSS INCOME				$	4,036,240	$	4,177,508	$	4,323,721	$	4,475,051	$	4,631,678	$	4,793,787
LESS: OPERATING EXPENSES				$	3,073,000	$	3,180,555	$	3,291,874	$	3,407,090	$	3,526,338	$	3,649,760
LESS: MANAGEMENT FEE		5.0	%	$	201,812	$	208,875	$	216,186	$	223,753	$	231,584	$	239,689
LESS: RESERVES	$	300		$	57,050	$	59,047	$	61,113	$	63,252	$	65,466	$	67,758
CASH FLOW				$	704,378	$	729,031	$	754,547	$	780,956	$	7,570,646	$	836,580
															12.00	%
														$	6,971,501
NET PRESENT VALUE	$	5,975,127												($	209,145	)
	$	6,000,000	(ROUNDED)											$	6,762,356

VALUATION SERVICES	109	ADVISORY GROUP

RECONCILIATION AND FINAL VALUE OPINION

Valuation Methodology Review and Reconciliation

This Appraisal employs all three typical approaches to value: the Cost Approach, the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that all approaches would be considered meaningful and applicable in developing a credible value conclusion.

The approaches indicated the following values:

	As-Is		As-Stabilized
Cost Approach	$	8,500,000		N/A
Sales Comparison Approach:	$	5,700,000		N/A
Income Capitalization Approach:	$	5,600,000	$	6,100,000

Due to the fact that the subject is an income producing property, investors are primarily concerned with their return on equity. Therefore, the Income Capitalization Approach was given most weight in our final value conclusion. The Sales Comparison and Cost Approaches provide a reasonable check on the value derived via the Income Capitalization Approach.

The Cost Approach provides a reliable estimate of value for proposed or newly constructed improvements. However, as the property ages and obsolescence occurs, it is increasingly difficult to quantify the resultant depreciation. As the subject represents older construction, the degree of depreciation was moderate, yet believed reasonable based on the market data. This approach, however, falls above the indications provided by the Sales Comparison and Income Capitalization Approaches with the difference related to potentially some degree of external obsolescence from the older age of the property and inability to achieve rents consistent with newer properties in the marketplace. As such, this approach has been given only limited support for our findings via the other two approaches to value.

The Sales Comparison Approach reflects an estimate of value as indicated by the actual sales of assisted living facilities. In this approach, we searched the state for transactions of similar property types. Given that these types of properties are typically purchased based on their income producing capabilities, this approach was useful in providing support for our findings in the Income Capitalization Approach.

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 ownership were converted into a value estimate. Within the Income Capitalization Approach, direct capitalization was used as it is the most common method used by investors and purchasers in acquiring existing and stabilized properties of this nature.

VALUATION SERVICES	110	ADVISORY GROUP

RECONCILIATION AND FINAL VALUE OPINION

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 fee simple 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 7, 2003 was:

FIVE MILLION SIX HUNDRED THOUSAND DOLLARS
$5,600,000

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 fee simple estate of the referenced property, subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions, “as-stabilized” on April 1, 2004 is:

SIX MILLION ONE HUNDRED THOUSAND DOLLARS

$6,100,000

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. Based on previous analysis of the subject, we estimated the value of the FF&E as new to be $656,075, including a 15 percent factor for entrepreneurial profit.

Physical deterioration (depreciation) must be deducted for the FF&E. The subject opened in 1978. Based on our physical inspection of the property, we are of the opinion that the 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.

Furniture, Fixtures and Equipment

Total Value of FF&E As New	$	656,075
Physical Life (Yrs)		10
Effective Age (Yrs)		8
Percent Depreciated (%)		80
Percent Value Remaining (%)		20
Depreciated Value	$	131,215
Rounded	$	130,000

The contributing value of the FF&E is believed to be the cost of the FF&E less its accrued depreciation. This equates to $130,000 rounded.

VALUATION SERVICES	111	ADVISORY GROUP

RECONCILIATION AND FINAL VALUE OPINION

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.

In our analysis, we have determined the value of the real estate in the Cost Approach to be $8,500,000. As the value of the going concern (Income Capitalization and Sales Comparison Approaches) was determined to be $6,100,000 (which includes the $130,000 in FF&E), this indicates that there is $0 in business value.

VALUATION SERVICES	112	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	113	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	114	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	115	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	116	ADVISORY GROUP

ADDENDA

Addenda Contents
ADDENDUM A:	Letter of Engagement
ADDENDUM B:	Legal Description
ADDENDUM C:	Demographics
ADDENDUM D:	Property Exhibits
ADDENDUM E:	Historical Operating Statements
ADDENDUM F:	Comparable Land Sale Data Sheets
ADDENDUM G:	Comparable Improved Sale Data Sheets
ADDENDUM H:	Qualifications of the Appraisers

VALUATION SERVICES	117	ADVISORY GROUP

ADDENDA

ADDENDUM A: Letter of Engagement

Cushman & Wakefield of Georgia, Inc.
3300 One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309
404-853-5351 Tel
404-874-8046 Fax
Norman_LeZott@Cushwake.com

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 a 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 ASSIGNMENT: 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

All Policy Forms

SCHEDULE  C

The land referred to in this policy is situated in the State of California, County of Contra Costa, City of Walnut Creek, and is described as follows:

Parcel B, as shown on the Parcel Map filed November 25, 1980, in Book 91 of Parcel Maps, Page 13, Contra Costa County Records.

A.P.  No.: 140-250-024

FIRST AMERICAN TITLE

ADDENDA

ADDENDUM C: Demographics

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		2000					2002					2007
Population by Age		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Population			106,910					108,801					113,953
	Age 45 - 54		17,270		16.15	%		18,190		16.72	%		20,004		17.55	%
	Age 55 - 59		6,110		5.72	%		6,769		6.22	%		8,092		7.10	%
	Age 60 - 64		4,681		4.38	%		4,966		4.56	%		6,207		5.45	%
	Age 65 - 69		3,971		3.71	%		3,953		3.63	%		4,453		3.91	%
	Age 70 - 74		3,713		3.47	%		3,609		3.32	%		3,503		3.07	%
	Age 75 - 79		3,458		3.23	%		3,351		3.08	%		3,304		2.90	%
	Age 80 - 84		2,333		2.18	%		2,420		2.22	%		2,513		2.21	%
	Age 85 and over		2,561		2.40	%		2,771		2.55	%		3,115		2.73	%
Age 55 and over			26,827		25.09	%		27,840		25.59	%		31,187		27.37	%
Age 65 and over			16,036		15.00	%		16,105		14.80	%		16,889		14.82	%
Total Population, Male			51,639					52,499					54,907
	Age 45 - 54		8,239		15.95	%		8,660		16.49	%		9,540		17.37	%
	Age 55 - 59		2,922		5.66	%		3,250		6.19	%		3,875		7.06	%
	Age 60 - 64		2,181		4.22	%		2,297		4.38	%		2,882		5.25	%
	Age 65 - 69		1,863		3.61	%		1,857		3.54	%		2,092		3.81	%
	Age 70 - 74		1,632		3.16	%		1,590		3.03	%		1,552		2.83	%
	Age 75 - 79		1,440		2.79	%		1,408		2.68	%		1,385		2.52	%
	Age 80 - 84		877		1.70	%		913		1.74	%		943		1.72	%
	Age 85 and over		672		1.30	%		691		1.32	%		786		1.43	%
Age 55 and over			11,586		22.44	%		12,008		22.87	%		13,514		24.61	%
Age 65 and over			6,484		12.56	%		6,460		12.31	%		6,757		12.31	%
Total Population, Female			55,271					56,302					59,046
	Age 45 - 54		9,031		16.34	%		9,530		16.93	%		10,464		17.72	%
	Age 55 - 59		3,188		5.77	%		3,518		6.25	%		4,217		7.14	%
	Age 60 - 64		2,500		4.52	%		2,669		4.74	%		3,325		5.63	%
	Age 65 - 69		2,108		3.81	%		2,096		3.72	%		2,362		4.00	%
	Age 70 - 74		2,081		3.77	%		2,019		3.59	%		1,952		3.31	%
	Age 75 - 79		2,017		3.65	%		1,943		3.45	%		1,920		3.25	%
	Age 80 - 84		1,456		2.63	%		1,507		2.68	%		1,570		2.66	%
	Age 85 and over		1,889		3.42	%		2,080		3.69	%		2,329		3.94	%

Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

	2000					2002					2007
Population by Age	Census		Pct.			Estimate		Pct.			Projection		Pct.
Age 55 and over		15,241		27.57	%		15,832		28.12	%		17,674		29.93	%
Age 65 and over		9,552		17.28	%		9,645		17.13	%		17.13		17.16	%

Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		2000					2002					2007
Population by Single Race Classification		Census		Pct.			Estimate		Pct.			Projection		Pct.
White Alone			86,705					87,171					88,603
	Age 65 and over		14,688		16.94	%		14,693		16.86	%		15,229		17.19	%
Black or African American Alone			1,530					1,627					1,850
	Age 65 and over		104		6.78	%		114		7.01	%		131		7.08	%
American Indian and Alaska Native Alone			411					434					515
	Age 65 and over		15		3.57	%		15		3.38	%		16		3.09	%
Asian Alone			10,323					11,061					12,830
	Age 65 and over		903		8.75	%		934		8.45	%		1,076		8.39	%
Native Hawaiian and Other Pacific Islander Alone			210					218					251
	Age 65 and over		5		2.54	%		6		2.94	%		7		2.95	%
Some Other Race Alone			3,424					3,765					4,555
	Age 65 and over		115		3.37	%		128		3.40	%		168		3.69	%
Two or More Races			4,306					4,525					5,349
	Age 65 and over		206		4.79	%		214		4.74	%		261		4.88	%

		2000					2002					2007
Population by Hispanic or Latino		Census		Pct.			Estimate		Pct.			Projection		Pct.
Hispanic or Latino			9,361					9,955					11,538
	Age 65 and over		532		5.68	%		550		5.53	%		634		5.50	%
Not Hispanic or Latino			97,549					98,846					102,415
	Age 65 and over		15,504		15.89	%		15,555		15.74	%		16,254		15.87	%

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 55 - 64			5,737					6,921					8,321
	Income less than $15,000		361		6.29	%		189		2.73	%		151		1.82	%
	Income $15,000 - $24,999		537		9.37	%		274		3.96	%		213		2.57	%
	Income $25,000 - $34,999		623		10.86	%		434		6.27	%		412		4.95	%
	Income $35,000 - $49,999		1,036		18.05	%		710		10.26	%		680		8.18	%
	Income $50,000 - $74,999		1,546		26.94	%		1,242		17.95	%		1,301		15.63	%
	Income $75,000 - $99,999		826		14.39	%		1,134		16.39	%		1,252		15.04	%
	Income $100,000 - $149,999		637		11.11	%		1,520		21.96	%		1,921		23.08	%
	Income $150,000 - $249,999		172		3.00	%		1,158		16.73	%		1,522		18.30	%
	Income $250,000 - $499,999		44		0.77	%		211		3.05	%		734		8.83	%
	Income $500,000 and more		8		0.14	%		49		0.71	%		134		1.61	%
Median Household Income			55,458					88,458					103,956

Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

Prepared on: October 15, 2003 10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 65 - 69			2,777					2,382					2,658
	Income less than $15,000		350		12.60	%		125		5.26	%		94		3.54	%
	Income $15,000 - $24,999		442		15.93	%		201		8.42	%		165		6.22	%
	Income $25,000 - $34,999		437		15.74	%		240		10.06	%		222		8.34	%
	Income $35,000 - $49,999		546		19.66	%		350		14.67	%		331		12.47	%
	Income $50,000 - $74,999		488		17.58	%		574		24.10	%		552		20.75	%
	Income $75,000 - $99,999		245		8.83	%		373		15.64	%		468		17.61	%
	Income $100,000 - $149,999		101		3.64	%		312		13.10	%		456		17.16	%
	Income $150,000 - $249,999		32		1.15	%		179		7.49	%		256		9.62	%
	Income $250,000 - $499,999		7		0.24	%		27		1.12	%		101		3.81	%
	Income $500,000 and more		0		0.00	%		3		0.13	%		13		0.48	%
Median Household Income			37,591					62,022					73,392
Householder Age 70 - 74			2,010					2,193					2,100
	Income less than $15,000		341		16.96	%		115		5.23	%		71		3.40	%
	Income $15,000 - $24,999		391		19.44	%		200		9.11	%		133		6.31	%
	Income $25,000 - $34,999		338		16.81	%		228		10.38	%		185		8.83	%
	Income $35,000 - $49,999		402		20.01	%		318		14.51	%		263		12.52	%
	Income $50,000 - $74,999		353		17.57	%		522		23.78	%		435		20.71	%
	Income $75,000 - $99,999		171		8.49	%		330		15.03	%		360		17.15	%
	Income $100,000 - $149,999		81		4.05	%		280		12.77	%		358		17.02	%
	Income $150,000 - $249,999		29		1.45	%		159		7.25	%		193		9.19	%
	Income $250,000 - $499,999		11		0.55	%		31		1.40	%		82		3.89	%
	Income $500,000 and more		1		0.05	%		12		0.53	%		20		0.98	%
Median Household Income			34,675					61,327					72,845
Householder Age 75 - 79			1,324					2,165					2,116
	Income less than $15,000		479		36.15	%		333		15.40	%		216		10.21	%
	Income $15,000 - $24,999		262		19.81	%		344		15.89	%		278		13.13	%
	Income $25,000 - $34,999		210		15.85	%		228		10.52	%		273		12.91	%
	Income $35,000 - $49,999		184		13.93	%		353		16.32	%		281		13.28	%
	Income $50,000 - $74,999		113		8.53	%		399		18.44	%		394		18.63	%
	Income $75,000 - $99,999		60		4.53	%		218		10.06	%		266		12.59	%
	Income $100,000 - $149,999		32		2.42	%		175		8.10	%		226		10.69	%
	Income $150,000 - $249,999		8		0.60	%		101		4.66	%		136		6.43	%
	Income $250,000 - $499,999		1		0.07	%		11		0.52	%		42		1.96	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
	Income $500,000 and more		0		0.00	%		2		0.09	%		3		0.16	%
Median Household Income			22,414					42,479					50,665

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 80 - 84			886					1,549					1,594
	Income less than $15,000		376		42.45	%		264		17.04	%		174		10.91	%
	Income $15,000 -$24,999		171		19.35	%		253		16.36	%		218		13.69	%
	Income $25,000 - $34,999		134		15.13	%		178		11.46	%		223		14.02	%
	Income $35,000 - $49,999		120		13.51	%		236		15.24	%		201		12.62	%
	Income $50,000 - $74,999		62		7.04	%		275		17.75	%		287		17.97	%
	Income $75,000 - $99,999		35		4.00	%		131		8.43	%		190		11.95	%
	Income $100,000 - $149,999		21		2.36	%		111		7.19	%		151		9.45	%
	Income $150,000 - $249,999		6		0.68	%		87		5.62	%		101		6.31	%
	Income $250,000 - $499,999		0		0.01	%		13		0.85	%		44		2.75	%
	Income $500,000 and more		0		0.00	%		1		0.07	%		5		0.32	%
Median Household Income			20,000					40,053					48,441
Householder Age 85 and over			824					1,334					1,509
	Income less than $15,000		331		40.15	%		280		20.99	%		202		13.40	%
	Income $15,000 -$24,999		164		19.95	%		226		16.91	%		219		14.50	%
	Income $25,000 - $34,999		99		12.05	%		176		13.16	%		220		14.55	%
	Income $35,000 - $49,999		91		11.07	%		213		15.94	%		212		14.02	%
	Income $50,000 - $74,999		37		4.51	%		212		15.91	%		265		17.56	%
	Income $75,000 - $99,999		20		2.47	%		107		8.03	%		173		11.44	%
	Income $100,000 -$149,999		13		1.58	%		79		5.91	%		137		9.06	%
	Income $150,000 -$249,999		1		0.13	%		38		2.83	%		60		3.96	%
	Income $250,000 - $499,999		0		0.01	%		3		0.19	%		19		1.26	%
	Income $500,000 and more		0		0.00	%		2		0.13	%		4		0.26	%
Median Household Income			17,909					34,091					42,995

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Households by Household Income		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Households			41,700					46,248					48,353
	Income less than $15,000		4,014		9.63	%		2,137		4.62	%		1,534		3.17	%
	Income $15,000 -$24,999		4,572		10.96	%		2,456		5.31	%		1,970		4.07	%
	Income $25,000 - $34,999		5,675		13.61	%		3,186		6.89	%		2,749		5.68	%
	Income $35,000 - $49,999		7,755		18.60	%		5,645		12.21	%		4,497		9.30	%
	Income $50,000 - $74,999		9,588		22.99	%		9,591		20.74	%		8,634		17.86	%
	Income $75,000 - $99,999		5,183		12.43	%		7,560		16.35	%		7,768		16.07	%
	Income $100,000 - $149,999		3,589		8.61	%		8,289		17.92	%		10,108		20.91	%
	Income $150,000 - $249,999		995		2.39	%		6,082		13.15	%		7,120		14.73	%
	Income $250,000 - $499,999		268		0.64	%		1,036		2.24	%		3,354		6.94	%
	Income $500,000 and more		60		0.14	%		265		0.57	%		618		1.28	%
Average Household Income		$	56,569				$	92,070				$	110,025
Median Household Income		$	47,743				$	75,360				$	90,423
Per Capita Income		$	23,960				$	39,569				$	47,043

		1990*					2002					2007
Specified Owner-Occupied Housing Unit Values		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Specified Owner-Occupied Housing Unit Values			22,230					24,379					25,361
	Value less than $25,000		37		0.17	%		19		0.08	%		12		0.05	%
	Value $25,000 - $49,999		59		0.27	%		49		0.20	%		38		0.15	%
	Value $50,000 - $74,999		103		0.46	%		39		0.16	%		44		0.17	%
	Value $75,000 - $99,999		240		1.08	%		80		0.33	%		42		0.17	%
	Value $100,000 - $149,999		1,039		4.67	%		359		1.47	%		211		0.83	%
	Value $150,000 -$199,999		2,908		13.08	%		789		3.24	%		439		1.73	%
	Value $200,000 - $299,999		8,848		39.80	%		4,455		18.27	%		2,520		9.94	%
	Value $300,000 - $399,999		5,949		26.76	%		6,764		27.74	%		5,153		20.32	%
	Value $400,000 - $499,999		1,889		8.50	%		5,246		21.52	%		5,462		21.54	%
	Value $500,000 Or More		1,158		5.21	%		6,579		26.99	%		11,440		45.11	%
Median Specified Owner-Occupied Housing Unit Value			276,054					394,626					477,307

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		2000					2002					2007
Group Quarters by Population Type		Census		Pct.			Estimate		Pct.			Projection		Pct.
Institutionalized:			890					893					897
	Correctional Institutions		0		0.00	%		0		0.00	%		0		0.00	%
	Nursing Homes		890		100.00	%		893		100.00	%		897		100.00	%
	Other Institutions		0		0.00	%		0		0.00	%		0		0.00	%
Noninstitutionalized			642					643					644

	2000		2002		2007
Tenure of Occupied Housing Units	Census		Estimate		Projection
Owner Occupied		28,030		28,496		29,653
Renter Occupied		17,376		17,752		18,700

			Pop 65
1990* Census Household Type and Relationship			and Over		Pct.
Total				12,989
In Family Households				8,159		62.82	%
	Householder			4,255		32.76	%
	Spouse			3,195		24.60	%
	Other relative			639		4.92	%
	Non-Relative			70		0.54	%
In Group Quarters				1,177		9.06	%
	Institutionalized			1,177		9.06	%
	Other			0		0.00	%
In Non-Family Households				3,653		28.12	%
	Male Householder			679		5.23	%
		Living Alone		591		4.55	%
		Not Living Alone		88		0.68	%
	Female Householder			2,852		21.96	%
		Living Alone		2,765		21.29	%
		Not Living Alone		87		0.67	%
	Non-Relative			122		0.94	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

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			22,510					4,951
	Less than 20%		10,531		46.78	%		3,625		73.22	%
	20 to 24%		2,807		12.47	%		328		6.62	%
	25 to 29%		2,517		11.18	%		255		5.14	%
	30 to 34%		1,959		8.70	%		163		3.29	%
	35% or more		4,637		20.60	%		557		11.26	%
	Not Computed		59		0.26	%		24		0.48	%

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			15,839					2,353
	Less than 20%		3,994		25.22	%		237		10.07	%
	20 to 24%		2,594		16.38	%		152		6.45	%
	25 to 29%		2,183		13.78	%		154		6.55	%
	30 to 34%		1,670		10.54	%		245		10.42	%
	35% or more		5,180		32.70	%		1,481		62.91	%
	Not Computed		219		1.38	%		85		3.60	%

						65 Yrs
1990* Census Occupied Housing Units	Total Units		Pct.			and Over		Pct.
Owner Occupied Units		25,860		61.97	%		5,693		70.76	%
Renter Occupied Units		15,867		38.03	%		2,352		29.24	%
Complete Plumbing Facilities		41,666		99.85	%		8,036		99.88	%
Lacking Plumbing Facilities		61		0.15	%		0		0.00	%
With Telephone		41,527		99.52	%		8,028		99.79	%
No Telephone		201		0.48	%		12		0.15	%
One or more Vehicles		39,653		95.03	%		6,777		84.23	%
No Vehicles Available		2,075		4.97	%		1,262		15.68	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

1990* Census Poverty Status													75 Yrs
By Household Type By Age of Householder			Total		Pct.			Age 65 - 74		Pct.			and Over		Pct.
Total Households				41,699					4,760					3,036
Married Couple Family				21,909		52.54	%		2,737		57.49	%		1,051		34.60	%
Other Family				4,447		10.66	%		261		5.48	%		210		6.91	%
	Male Householder			1,217		2.92	%		75		1.57	%		34		1.13	%
	Female Householder			3,230		7.74	%		186		3.90	%		176		5.78	%
Non-Family				15,343		36.79	%		1,763		37.03	%		1,776		58.49	%
	Householder Living Alone			11,765		28.21	%		1,630		34.25	%		1,729		56.96	%
	Householder not Living Alone			3,578		8.58	%		132		2.78	%		46		1.53	%
Above Poverty				40,073		96.10	%		4,620		97.05	%		2,770		91.23	%
	Married Couple Family			21,546		51.67	%		2,710		56.92	%		968		31.89	%
	Other Family			4,110		9.86	%		261		5.48	%		205		6.74	%
		Male Householder		1,155		2.77	%		75		1.57	%		34		1.13	%
		Female Householder		2,955		7.09	%		186		3.90	%		171		5.62	%
Non-Family				14,417		34.57	%		1,650		34.66	%		1,597		52.60	%
		Householder Living Alone		11,078		26.57	%		1,530		32.15	%		1,557		51.28	%
		Householder not Living Alone		3,339		8.01	%		119		2.51	%		40		1.32	%
Below Poverty				1,625		3.90	%		140		2.95	%		266		8.77	%
	Married Couple Family			363		0.87	%		27		0.57	%		82		2.71	%
	Other Family			337		0.81	%		0		0.00	%		5		0.16	%
		Male Householder		62		0.15	%		0		0.00	%		0		0.00	%
		Female Householder		275		0.66	%		0		0.00	%		5		2.79	%
Non-Family				926		2.22	%		113		2.37	%		179		5.89	%
		Householder Living Alone		687		1.65	%		100		2.10	%		173		5.68	%
		Householder not Living Alone		239		0.57	%		13		0.27	%		6		0.21	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 3.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

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				79,937					11,881					4,364
With Mblty or Care Lmts				3,620		4.53	%		1,842		15.50	%		1,170		26.81	%
	Mobility Limits Only			1,266		1.58	%		811		6.82	%		601		13.77	%
	Self Care Limits Only			1,326		1.66	%		376		3.16	%		151		3.46	%
	Both Limits			1,028		1.29	%		655		5.51	%		418		9.58	%
No Mblty or Care Limits				76,317		95.47	%		10,039		84.50	%		3,194		73.19	%
With a Work Disability				6,907		8.64	%		3,085		25.97	%
	In Labor Force			2,037		2.55	%		168		1.42	%
		Employed		1,862		2.33	%		158		1.33	%
		Unemployed		175		0.22	%		11		0.09	%
	Not in Labor Force			4,870		6.09	%		2,917		24.55	%
		Prevented from Working		3,835		4.80	%		2,372		19.96	%
		Not Prevented from Wrk		1,035		1.29	%		545		4.59	%
No Work Disability				73,031		91.36	%		8,801		74.07	%
	In Labor Force			55,468		69.39	%		1,610		13.55	%
		Employed		53,699		67.18	%		1,569		13.21	%
		Unemployed		1,769		2.21	%		40		0.34	%
	Not in Labor Force			17,562		21.97	%		7,191		60.52	%

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

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		2000					2002					2007
Population by Age		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Population			225,867					229,610					239,919
	Age 45 - 54		34,992		15.49	%		36,803		16.03	%		40,434		16.85	%
	Age 55 - 59		12,381		5.48	%		13,706		5.97	%		16,353		6.82	%
	Age 60 - 64		9,286		4.11	%		9,836		4.28	%		12,261		5.11	%
	Age 65 - 69		8,015		3.55	%		7,959		3.47	%		8,908		3.71	%
	Age 70 - 74		8,067		3.57	%		7,836		3.41	%		7,542		3.14	%
	Age 75 - 79		8,135		3.60	%		7,911		3.45	%		7,677		3.20	%
	Age 80 - 84		5,859		2.59	%		6,106		2.66	%		6,235		2.60	%
	Age 85 and over		5,818		2.58	%		6,215		2.71	%		6,934		2.89	%
Age 55 and over			57,562		25.48	%		59,569		25.94	%		65,911		27.47	%
Age 65 and over			35,895		15.89	%		36,027		15.69	%		37,297		15.55	%
Total Population, Male			109,079					110,828					115,804
	Age 45 - 54		16,852		15.45	%		17,698		15.97	%		19,465		16.81	%
	Age 55 - 59		5,967		5.47	%		6,628		5.98	%		7,898		6.82	%
	Age 60 - 64		4,400		4.03	%		4,635		4.18	%		5,832		5.04	%
	Age 65 - 69		3,614		3.31	%		3,594		3.24	%		4,021		3.47	%
	Age 70 - 74		3,386		3.10	%		3,304		2.98	%		3,189		2.75	%
	Age 75 - 79		3,255		2.98	%		3,184		2.87	%		3,089		2.67	%
	Age 80 - 84		2,152		1.97	%		2,240		2.02	%		2,282		1.97	%
	Age 85 and over		1,621		1.49	%		1,662		1.50	%		1,870		1.61	%
Age 55 and over			24,396		22.37	%		25,247		22.78	%		28,182		24.34	%
Age 65 and over			14,028		12.86	%		13,984		12.62	%		14,452		12.48	%
Total Population, Female			116,788					118,782					124,115
	Age 45 - 54		18,141		15.53	%		19,105		16.08	%		20,969		16.89	%
	Age 55 - 59		6,414		5.49	%		7,078		5.96	%		8,454		6.81	%
	Age 60 - 64		4,886		4.18	%		5,201		4.38	%		6,429		5.18	%
	Age 65 - 69		4,401		3.77	%		4,364		3.67	%		4,887		3.94	%
	Age 70 - 74		4,681		4.01	%		4,532		3.82	%		4,353		3.51	%
	Age 75 - 79		4,879		4.18	%		4,727		3.98	%		4,588		3.70	%
	Age 80 - 84		3,708		3.17	%		3,866		3.25	%		3,953		3.19	%
	Age 85 and over		4,197		3.59	%		4,553		3.83	%		5,064		4.08	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

	2000					2002					2007
Population by Age	Census		Pct.			Estimate		Pct.			Projection		Pct.
Age 55 and over		33,166		28.40	%		34,321		28.89	%		37,729		30.40	%
Age 65 and over		21,866		18.72	%		22,043		18.56	%		18.56		18.41	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		2000					2002					2007
Population by Single Race Classification		Census		Pct.			Estimate		Pct.			Projection		Pct.
White Alone			178,071					178,528					180,543
	Age 65 and over		32,817		18.43	%		32,788		18.37	%		33,476		18.54	%
Black or African American Alone			4,061					4,288					4,790
	Age 65 and over		261		6.43	%		284		6.61	%		323		6.75	%
American Indian and Alaska Native Alone			1,051					1,105					1,291
	Age 65 and over		48		4.61	%		48		4.38	%		58		4.49	%
Asian Alone			21,210					22,555					25,710
	Age 65 and over		1,979		9.33	%		2,064		9.15	%		2,377		9.25	%
Native Hawaiian and Other Pacific Islander Alone			607					634					715
	Age 65 and over		26		4.23	%		29		4.52	%		35		4.85	%
Some Other Race Alone			11,244					12,397					15,062
	Age 65 and over		329		2.92	%		355		2.87	%		470		3.12	%
Two or More Races			9,624					10,102					11,808
	Age 65 and over		435		4.52	%		458		4.54	%		559		4.73	%

		2000					2002					2007
Population by Hispanic or Latino		Census		Pct.			Estimate		Pct.			Projection		Pct.
Hispanic or Latino			27,623					29,734					34,974
	Age 65 and over		1,240		4.49	%		1,298		4.36	%		1,531		4.38	%
Not Hispanic or Latino			198,244					199,876					204,944
	Age 65 and over		34,655		17.48	%		34,729		17.38	%		35,766		17.45	%

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 55 - 64			11,095					13,816					16,552
	Income less than $15,000		915		8.25	%		544		3.94	%		446		2.70	%
	Income $15,000 - $24,999		1,065		9.60	%		604		4.37	%		536		3.24	%
	Income $25,000 - $34,999		1,185		10.68	%		866		6.27	%		837		5.05	%
	Income $35,000 - $49,999		1,983		17.87	%		1,352		9.78	%		1,375		8.31	%
	Income $50,000 - $74,999		2,733		24.63	%		2,455		17.77	%		2,437		14.72	%
	Income $75,000 - $99,999		1,622		14.62	%		2,179		15.77	%		2,420		14.62	%
	Income $100,000 - $149,999		1,036		9.34	%		2,955		21.39	%		3,640		21.99	%
	Income $150,000 - $249,999		332		2.99	%		2,198		15.91	%		2,983		18.02	%
	Income $250,000 - $499,999		131		1.18	%		460		3.33	%		1,475		8.91	%
	Income $500,000 and more		71		0.64	%		204		1.47	%		404		2.44	%
Median Household Income			53,549					87,494					103,104

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 65 - 69			5,802					4,845					5,353
	Income less than $15,000		876		15.09	%		343		7.08	%		252		4.71	%
	Income $15,000 - $24,999		1,037		17.87	%		451		9.30	%		404		7.54	%
	Income $25,000 - $34,999		924		15.93	%		557		11.50	%		509		9.51	%
	Income $35,000 - $49,999		1,037		17.88	%		760		15.69	%		736		13.75	%
	Income $50,000 - $74,999		914		15.76	%		1,054		21.76	%		1,043		19.48	%
	Income $75,000 - $99,999		454		7.82	%		666		13.75	%		850		15.88	%
	Income $100,000 -$149,999		224		3.86	%		557		11.49	%		808		15.10	%
	Income $150,000 - $249,999		80		1.38	%		348		7.19	%		470		8.77	%
	Income $250,000 - $499,999		28		0.48	%		76		1.57	%		221		4.12	%
	Income $500,000 and more		12		0.21	%		32		0.67	%		60		1.13	%
Median Household Income			34,503					57,382					68,588
Householder Age 70 - 74			4,621					4,844					4,605
	Income less than $15,000		854		18.49	%		347		7.17	%		219		4.76	%
	Income $15,000 - $24,999		931		20.15	%		480		9.92	%		352		7.65	%
	Income $25,000 - $34,999		773		16.73	%		577		11.90	%		459		9.96	%
	Income $35,000 - $49,999		890		19.25	%		761		15.71	%		654		14.20	%
	Income $50,000 - $74,999		743		16.08	%		1,063		21.94	%		901		19.56	%
	Income $75,000 - $99,999		367		7.95	%		637		13.14	%		731		15.88	%
	Income $100,000 -$149,999		197		4.26	%		545		11.25	%		677		14.71	%
	Income $150,000 - $249,999		64		1.40	%		324		6.69	%		382		8.30	%
	Income $250,000 - $499,999		25		0.55	%		76		1.58	%		175		3.80	%
	Income $500,000 and more		14		0.30	%		35		0.71	%		54		1.18	%
Median Household Income			33,307					56,032					67,161
Householder Age 75 - 79			3,771					5,238					5,041
	Income less than $15,000		1,103		29.25	%		761		14.53	%		491		9.74	%
	Income $15,000 - $24,999		749		19.85	%		748		14.27	%		623		12.36	%
	Income $25,000 - $34,999		587		15.57	%		665		12.69	%		641		12.72	%
	Income $35,000 - $49,999		581		15.41	%		898		17.15	%		774		15.35	%
	Income $50,000 - $74,999		373		9.89	%		973		18.57	%		932		18.48	%
	Income $75,000 - $99,999		136		3.61	%		519		9.91	%		629		12.48	%
	Income $100,000 - $149,999		94		2.49	%		369		7.04	%		514		10.21	%
	Income $150,000 - $249,999		33		0.87	%		210		4.00	%		277		5.49	%
	Income $250,000 - $499,999		15		0.40	%		53		1.02	%		106		2.10	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
	Income $500,000 and more		9		0.25	%		42		0.81	%		54		1.06	%
Median Household Income			24,826					42,425					49,797

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Household Income by Age of Householder		Census		Pct.			Estimate		Pct.			Projection		Pct.
Householder Age 80 - 84			2,731					4,079					4,135
	Income less than $15,000		885		32.39	%		621		15.22	%		416		10.05	%
	Income $15,000 - $24,999		539		19.75	%		585		14.34	%		511		12.35	%
	Income $25,000 - $34,999		450		16.49	%		550		13.48	%		556		13.44	%
	Income $35,000 - $49,999		413		15.11	%		699		17.13	%		654		15.81	%
	Income $50,000 - $74,999		278		10.19	%		737		18.06	%		744		18.00	%
	Income $75,000 - $99,999		96		3.51	%		373		9.14	%		502		12.14	%
	Income $100,000 - $149,999		78		2.84	%		268		6.56	%		397		9.61	%
	Income $150,000 - $249,999		28		1.03	%		178		4.36	%		216		5.23	%
	Income $250,000 - $499,999		11		0.40	%		46		1.13	%		100		2.42	%
	Income $500,000 and more		6		0.21	%		24		0.58	%		40		0.96	%
Median Household Income			24,361					41,094					48,440
Householder Age 85 and over			2,226					3,598					4,008
	Income less than $15,000		693		31.15	%		609		16.92	%		460		11.48	%
	Income $15,000 - $24,999		439		19.71	%		525		14.60	%		503		12.56	%
	Income $25,000 - $34,999		331		14.88	%		509		14.14	%		547		13.64	%
	Income $35,000 - $49,999		304		13.68	%		634		17.62	%		662		16.51	%
	Income $50,000 - $74,999		183		8.21	%		639		17.76	%		729		18.19	%
	Income $75,000 - $99,999		61		2.72	%		318		8.85	%		478		11.92	%
	Income $100,000 - $149,999		46		2.07	%		219		6.08	%		377		9.41	%
	Income $150,000 - $249,999		12		0.52	%		99		2.76	%		158		3.95	%
	Income $250,000 - $499,999		10		0.45	%		23		0.63	%		63		1.56	%
	Income $500,000 and more		5		0.22	%		23		0.63	%		31		0.78	%
Median Household Income			22,904					38,685					46,171

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		1990*					2002					2007
Households by Household Income		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Households			85,730					93,914					97,689
	Income less than $15,000		9,360		10.92	%		5,048		5.38	%		3,612		3.70	%
	Income $15,000 - $24,999		9,887		11.53	%		5,576		5.94	%		4,718		4.83	%
	Income $25,000 - $34,999		11,326		13.21	%		7,015		7.47	%		6,073		6.22	%
	Income $35,000 - $49,999		15,383		17.94	%		11,337		12.07	%		9,726		9.96	%
	Income $50,000 - $74,999		19,070		22.24	%		18,376		19.57	%		16,219		16.60	%
	Income $75,000 - $99,999		10,647		12.42	%		14,734		15.69	%		14,936		15.29	%
	Income $100,000 - $149,999		6,862		8.00	%		16,290		17.35	%		19,465		19.93	%
	Income $150,000 - $249,999		2,155		2.51	%		12,024		12.80	%		14,057		14.39	%
	Income $250,000 - $499,999		797		0.93	%		2,485		2.65	%		6,993		7.16	%
	Income $500,000 and more		359		0.42	%		1,028		1.10	%		1,889		1.93	%
Average Household Income		$	57,676				$	95,458				$	114,408
Median Household Income		$	47,041				$	74,463				$	89,221
Per Capita Income		$	23,968				$	39,387				$	46,839

		1990*					2002					2007
Specified Owner-Occupied Housing Unit Values		Census		Pct.			Estimate		Pct.			Projection		Pct.
Total Specified Owner-Occupied Housing Unit Values			44,862					49,142					50,970
	Value less than $25,000		80		0.18	%		35		0.07	%		26		0.05	%
	Value $25,000 - $49,999		132		0.29	%		108		0.22	%		92		0.18	%
	Value $50,000 - $74,999		362		0.81	%		119		0.24	%		102		0.20	%
	Value $75,000 - $99,999		713		1.59	%		309		0.63	%		188		0.37	%
	Value $100,000 - $149,999		2,827		6.30	%		1,076		2.19	%		736		1.44	%
	Value $150,000 - $199,999		7,032		15.67	%		2,078		4.23	%		1,278		2.51	%
	Value $200,000 - $299,999		16,150		36.00	%		10,110		20.57	%		6,108		11.98	%
	Value $300,000 - $399,999		9,974		22.23	%		12,116		24.65	%		10,220		20.05	%
	Value $400,000 - $499,999		3,884		8.66	%		9,068		18.45	%		9,593		18.82	%
	Value $500,000 Or More		3,709		8.27	%		14,123		28.74	%		22,626		44.39	%
Median Specified Owner-Occupied Housing Unit Value			269,889					388,610					470,226

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

		2000					2002					2007
Group Quarters by Population Type		Census		Pct.			Estimate		Pct.			Projection		Pct.
Institutionalized:			1,506					1,510					1,517
	Correctional Institutions		0		0.00	%		0		0.00	%		0		0.00	%
	Nursing Homes		1,488		98.80	%		1,492		98.81	%		1,499		98.81	%
	Other Institutions		18		1.20	%		18		1.19	%		18		1.19	%
Noninstitutionalized			1,315					1,316					1,319

	2000		2002		2007
Tenure of Occupied Housing Units	Census		Estimate		Projection
Owner Occupied		60,374		61,223		63,368
Renter Occupied		32,086		32,691		34,320

			Pop 65
1990* Census Household Type and Relationship			and Over		Pct.
Total				29,981
In Family Households				18,508		61.73	%
	Householder			9,623		32.10	%
	Spouse			7,338		24.47	%
	Other relative			1,416		4.72	%
	Non-Relative			131		0.44	%
In Group Quarters				1,804		6.02	%
	Institutionalized			1,804		6.02	%
	Other			0		0.00	%
In Non-Family Households				9,669		32.25	%
	Male Householder			1,662		5.54	%
		Living Alone		1,485		4.95	%
		Not Living Alone		177		0.59	%
	Female Householder			7,698		25.68	%
		Living Alone		7,473		24.92	%
		Not Living Alone		226		0.75	%
	Non-Relative			309		1.03	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

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			45,519					9,842
	Less than 20%		20,163		44.30	%		6,785		68.93	%
	20 to 24%		5,995		13.17	%		809		8.22	%
	25 to 29%		5,257		11.55	%		531		5.39	%
	30 to 34%		4,394		9.65	%		436		4.43	%
	35% or more		9,560		21.00	%		1,231		12.50	%
	Not Computed		151		0.33	%		52		0.53	%

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			29,811					4,192
	Less than 20%		7,142		23.96	%		455		10.85	%
	20 to 24%		4,791		16.07	%		438		10.44	%
	25 to 29%		4,125		13.84	%		354		8.46	%
	30 to 34%		3,170		10.63	%		449		10.72	%
	35% or more		9,961		33.41	%		2,301		54.89	%
	Not Computed		622		2.09	%		195		4.64	%

						65 Yrs
1990* Census Occupied Housing Units	Total Units		Pct.			and Over		Pct.
Owner Occupied Units		55,834		65.14	%		15,006		78.16	%
Renter Occupied Units		29,876		34.86	%		4,193		21.84	%
Complete Plumbing Facilities		85,599		99.87	%		19,191		99.95	%
Lacking Plumbing Facilities		111		0.13	%		0		0.00	%
With Telephone		85,041		99.22	%		19,148		99.73	%
No Telephone		674		0.79	%		52		0.27	%
One or more Vehicles		80,735		94.20	%		16,208		84.42	%
No Vehicles Available		4,975		5.80	%		2,983		15.54	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

1990* Census Poverty Status													75 Yrs
By Household Type By Age of Householder			Total		Pct.			Age 65 - 74		Pct.			and Over		Pct.
Total Households				85,846					10,436					8,552
Married Couple Family				46,174		53.79	%		5,703		54.64	%		2,878		33.65	%
Other Family				9,252		10.78	%		589		5.64	%		453		5.30	%
	Male Householder			2,594		3.02	%		148		1.42	%		113		1.32	%
	Female Householder			6,658		7.76	%		441		4.22	%		340		3.98	%
Non-Family				30,420		35.44	%		4,145		39.72	%		5,221		61.05	%
	Householder Living Alone			23,709		27.62	%		3,855		36.93	%		5,104		59.68	%
	Householder not Living Alone			6,711		7.82	%		290		2.78	%		117		1.37	%
Above Poverty				82,115		95.65	%		10,046		96.26	%		7,946		92.91	%
	Married Couple Family			45,361		52.84	%		5,641		54.05	%		2,787		32.58	%
	Other Family			8,315		9.69	%		588		5.64	%		431		5.04	%
		Male Householder		2,505		2.92	%		148		1.41	%		113		1.32	%
		Female Householder		5,809		6.77	%		441		4.22	%		318		3.72	%
	Non-Family			28,439		33.13	%		3,817		36.57	%		4,728		55.29	%
		Householder Living Alone		22,173		25.83	%		3,568		34.19	%		4,625		54.08	%
		Householder not Living Alone		6,266		7.30	%		249		2.38	%		103		1.21	%
Below Poverty				3,731		4.35	%		390		3.74	%		606		7.09	%
	Married Couple Family			813		0.95	%		62		0.59	%		91		1.07	%
	Other Family			937		1.09	%		1		0.00	%		22		0.26	%
		Male Householder		88		0.10	%		1		0.00	%		0		0.00	%
		Female Householder		849		0.99	%		0		0.00	%		22		4.46	%
	Non-Family			1,982		2.31	%		328		3.14	%		493		5.76	%
		Householder Living Alone		1,536		1.79	%		286		2.74	%		479		5.60	%
		Householder not Living Alone		445		0.52	%		42		0.40	%		14		0.16	%

  Prepared on: October 15, 2003  10:22 AM

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

Senior Life Report
Area(s): Radius 5.0

1400 MONTEGO	Latitude:	37.910406
WALNUT CREEK, CA 94598-2950	Longitude:	-122.043706

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				165,866					28,151					11,610
With Mblty or Care Lmts				8,091		4.88	%		4,098		14.56	%		2,709		23.33	%
	Mobility Limits Only			2,709		1.63	%		1,696		6.02	%		1,213		10.45	%
	Self Care Limits Only			2,955		1.78	%		905		3.22	%		470		4.05	%
	Both Limits			2,427		1.46	%		1,497		5.32	%		1,025		8.83	%
No Mblty or Care Limits				157,775		95.12	%		24,053		85.44	%		8,902		76.67	%
With a Work Disability				15,092		9.10	%		6,869		24.40	%
	In Labor Force			4,446		2.68	%		303		1.08	%
		Employed		3,986		2.40	%		281		1.00	%
		Unemployed		460		0.28	%		21		0.08	%
	Not in Labor Force			10,645		6.42	%		6,566		23.32	%
		Prevented from Working		8,683		5.24	%		5,430		19.29	%
		Not Prevented from Wrk		1,962		1.18	%		1,137		4.04	%
No Work Disability				150,774		90.90	%		21,290		75.63	%
	In Labor Force			111,327		67.12	%		3,482		12.37	%
		Employed		107,711		64.94	%		3,349		11.90	%
		Unemployed		3,617		2.18	%		133		0.47	%
	Not in Labor Force			39,447		23.78	%		17,808		63.26	%

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

  Prepared on: October 15, 2003  10:22 AM

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

ADDENDA

ADDENDUM D: Property Exhibits

ADDENDA

ADDENDUM E: Historical Operating Statements

PII - ITEM A-6

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2003
	Version	AA
	Community	Total Department
	Department	R.I. of Montego
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY
40005 Revenue-Rental		250,515			235,896			235,368			178,999			303,286
40010 Revenue-Rent Refunds/Proration		—			—			(1,056	)		(679	)		(2,237	)
Total Rental Revenue		250,515			235,896			234,312			178,320			301,050
40110 Revenue-AL Level 1		6,323			6,975			7,310			5,348			8,708
40115 Revenue-AL Level 2		5,112			4,821			4,375			3,987			8,446
40120 Revenue-AL Level 3		5,750			6,575			5,775			5,060			9,285
40125 Revenue-AL Level 4		5,681			4,100			8,200			3,469			7,206
40130 Revenue-AL Level 5		3,650			3,475			7,152			2,781			6,427
40135 Revenue-AL Level 6		6,375			5,525			2,650			939			1,853
40140 Revenue-AL Level 7		5,005			4,615			4,615			3,646			6,245
40170 Revenue-Alzh Lev 1		—			—			—			(316	)		(96	)
Total AL Services Revenue		37,897			36,086			40,077			24,913			48,074
40515 Revenue-Other		1,801			2,136			1,669			755			2,571
40525 Revenue-Processing/App Fees		6,000			5,500			3,000			—			20,000
Total Other Revenue		7,801			7,636			4,669			755			22,571
40575 Rev-Process Fee Concessions		—			—			(3,000	)		—			(20,000	)
40015 Rev-Rent Concessions		(1,373	)		(2,898	)		(2,616	)		(2,389	)		(9,533	)
40215 Rev-A/L Concessions		(1,163	)		—			—			—			(625	)
Total Concessions		(2,536	)		(2,898	)		(5,616	)		(2,389	)		(30,158	)
Total Revenue		293,677			276,720			273,442			201,599			341,536
50005 Payroll Expense-Regular		83,639			71,614			74,395			67,229			105,965
50405 Payroll Expense-Overtime		1,619			1,312			1,132			697			1,720
50705 Payroll Expense-Doubletime		58			149			79			44			77
51005 Bonuses		3,717			3,069			3,615			3,559			6,744
51505 Vacation, Sick, Holiday		5,119			6,492			6,448			6,903			9,564
51805 Employee Recognition		—			—			—			127			—
52005 Payroll Taxes		10,598			8,534			7,360			7,003			9,950
52505 401K/401A		176			256			95			167			175
52805 Group Insurance		6,501			6,195			6,340			7,057			6,743
53005 Worker’s Comp Insurance		3,590			3,590			3,626			23,223			3,687
Total Payroll Expenses		115,017			101,211			103,089			116,009			144,625
53305 Outside Service  - Medical		—			—			300			—			—
53505 Temporary Services		—			—			—			—			—
53510 Temporary Services  - AL		—			—			—			—			—
54005 Payroll Service		281			661			283			2			395
55005 Outside Service Other		—			—			—			—			—
Total Purchase Services		281			661			583			2			395
Total Payroll Related		115,298			101,873			103,673			116,011			145,020
Total Payroll Related % Total Revenue		39	%		37	%		38	%		58	%		42	%
56505 Food		19,576			14,275			20,328			13,140			17,576
57005 Housekeeping		783			326			1,524			485			1,625
57505 Kitchen Supplies		4,143			(311	)		2,673			1,477			2,169
58005 Assisted Living Supplies		83			—			165			82			114
59005 Laundry & Linen/Uniforms		—			—			1,323			1,633			—
59010 Laun/Lin/Unif Kitchen		238			373			259			(376	)		421
59015 Laund/Lin/Unif Housekeeping		1,123			380			805			(373	)		201
59505 Actlvities-Asst Lving		3,203			(429	)		722			683			1,154
59510 Banquet Expense		500			500			500			383			617
59555 NMS-Foodservices		—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—
Total Variable Expense		29,648			15,113			28,299			17,134			23,875
60005 Office Supplies		3,934			604			1,285			579			249
61005 Repairs and Maint  - Building		—			—			—			—			—
61010 Repairs  -  Phone System		—			—			—			—			—
61015 Repairs  -  Electrical		—			—			—			—			—
61020 Repairs  -  Plumbing		—			—			1,005			—			—
61025 Repairs  -  Fire Systems		1,003			—			—			—			—
61030 Repairs  -  HVAC		—			158			214			—			—
61035 Repairs  -  Gen. Supplies		370			421			738			604			712
61040 Repairs  -  Equipment		948			105			745			57			30
61045 Repairs  -  Other Interior		1,483			—			339			37			(50	)
61055 Repairs  -  Other Exterior		300			—			157			—			—
61100 Loss on Early Retierment Asset		—			—			—			943			—
Total Repair & Maintenance		4,104			684			3,199			1,641			692
61505 Contracts  -  Elevator		557			598			1,114			391			676
61510 Contracts  -  Floor Maint		853			853			853			654			1,052
61515 Contracts  -  Alarm/Fire		660			390			158			10			463
61520 Contracts  -  HVAC		336			971			653			501			853
61525 Contracts  -  Pest Control		279			279			622			—			527
61535 Contracts  -  Other		369			(271	)		49			125			(64	)
Total Service Contracts		3,053			2,820			3,449			1,680			3,507
62005 Land Maintenance		1,750			1,850			1,750			1,553			2,158
Total Land Maintenance		1,750			1,850			1,750			1,553			2,158
62505 Rental/Lease  -  Cable		2,912			3,318			3,318			2,543			4,092
62510 Rental/Lease  -  Security		—			—			—			—			—
62525 Rental/Lease  -  Furniture		—			—			—			—			—
62535 Rental/Lease  -  Equipment		433			279			403			287			355
62540 Rental/Lease  -  Auto		1,628			1,628			1,628			1,248			2,008
62555 Rental/Lease  -  Other		—			—			—			—			—
Total Rental and Leases		4,973			5,225			5,349			4,079			6,455
63010 Utilities  -  Electricity		9,955			8,276			11,313			6,954			18,855
63015 Utilities  -  Water		39			1,323			1,882			1,487			3,245

[Additional columns below]

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

	JUN			JUL			AUG			AUG YTD
40005 Revenue-Rental		255,523			269,873			258,367			1,987,827
40010 Revenue-Rent Refunds/Proration		(3,364	)		(3,090	)		(2,517	)		(12,943	)
Total Rental Revenue		252,158			266,783			255,850			1,974,884
40110 Revenue-AL Level 1		7,653			7,200			6,775			56,292
40115 Revenue-AL Level 2		7,575			7,500			8,125			49,942
40120 Revenue-AL Level 3		8,105			8,295			11,150			59,995
40125 Revenue-AL Level 4		8,200			6,150			7,175			50,181
40130 Revenue-AL Level 5		2,912			3,275			2,450			32,122
40135 Revenue-AL Level 6		2,850			2,650			2,850			25,693
40140 Revenue-AL Level 7		4,755			2,990			2,990			34,860
40170 Revenue-Alzh Lev 1		—			—			—			(413	)
Total AL Services Revenue		42,050			38,060			41,515			308,672
40515 Revenue-Other		1,141			1,325			1,399			12,797
40525 Revenue-Processing/App Fees		8,000			10,000			4,000			56,500
Total Other Revenue		9,141			11,325			5,399			69,297
40575 Rev-Process Fee Concessions		(6,000	)		(9,000	)		(1,000	)		(39,000	)
40015 Rev-Rent Concessions		(14,179	)		(6,116	)		(6,766	)		(45,870	)
40215 Rev-A/L Concessions		—			—			—			(1,788	)
Total Concessions		(20,179	)		(15,116	)		(7,766	)		(86,658	)
Total Revenue		283,170			301,052			294,998			2,266,194
50005 Payroll Expense-Regular		76,893			86,469			78,750			644,953
50405 Payroll Expense-Overtime		2,097			2,329			1,282			12,188
50705 Payroll Expense-Doubletime		16			234			12			668
51005 Bonuses		(1,912	)		(1,256	)		(1,815	)		15,721
51505 Vacation, Sick, Holiday		9,974			7,229			6,109			57,838
51805 Employee Recognition		152			389			—			669
52005 Payroll Taxes		7,851			7,529			6,699			65,525
52505 401K/401A		226			182			293			1,572
52805 Group Insurance		6,185			6,585			7,552			53,158
53005 Worker’s Comp Insurance		6,723			8,979			5,191			58,608
Total Payroll Expenses		108,206			118,668			104,073			910,899
53305 Outside Service  - Medical		(300	)		—			—			—
53505 Temporary Services		—			—			—			—
53510 Temporary Services  - AL		—			—			—			—
54005 Payroll Service		367			242			310			2,543
55005 Outside Service Other		—			—			—			—
Total Purchase Services		67			242			310			2,543
Total Payroll Related		108,273			118,911			104,383			913,442
Total Payroll Related % Total Revenue		38	%		39	%		35	%		40	%
56505 Food		21,189			19,356			19,084			144,525
57005 Housekeeping		877			1,558			962			8,139
57505 Kitchen Supplies		1,734			2,620			2,150			16,654
58005 Assisted Living Supplies		300			765			307			1,816
59005 Laundry & Linen/Uniforms		9			—			(10	)		2,954
59010 Laun/Lin/Unif Kitchen		1,224			838			641			3,618
59015 Laund/Lin/Unif Housekeeping		122			120			382			2,759
59505 Actlvities-Asst Lving		1,415			1,502			1,377			9,627
59510 Banquet Expense		500			500			500			4,000
59555 NMS-Foodservices		—			—			—			—
59560 NMS-Housekeeping		—			—			—			—
Total Variable Expense		27,371			27,260			25,392			194,092
60005 Office Supplies		1,376			435			772			9,233
61005 Repairs and Maint  - Building		—			—			—			—
61010 Repairs  -  Phone System		—			—			—			—
61015 Repairs  -  Electrical		—			—			478			478
61020 Repairs  -  Plumbing		—			—			424			1,430
61025 Repairs  -  Fire Systems		—			—			490			1,493
61030 Repairs  -  HVAC		—			602			301			1,276
61035 Repairs  -  Gen. Supplies		246			601			901			4,594
61040 Repairs  -  Equipment		97			596			886			3,464
61045 Repairs  -  Other Interior		496			—			331			2,636
61055 Repairs  -  Other Exterior		—			—			—			457
61100 Loss on Early Retierment Asset		—			—			—			943
Total Repair & Maintenance		839			1,800			3,811			16,769
61505 Contracts  -  Elevator		557			557			557			5,008
61510 Contracts  -  Floor Maint		853			853			853			6,821
61515 Contracts  -  Alarm/Fire		158			232			509			2,578
61520 Contracts  -  HVAC		653			336			1,000			5,304
61525 Contracts  -  Pest Control		524			530			263			3,025
61535 Contracts  -  Other		52			502			52			813
Total Service Contracts		2,797			3,009			3,234			23,549
62005 Land Maintenance		2,389			1,750			2,208			15,408
Total Land Maintenance		2,389			1,750			2,208			15,408
62505 Rental/Lease  -  Cable		3,318			3,318			3,318			26,135
62510 Rental/Lease  -  Security		—			—			467			467
62525 Rental/Lease  -  Furniture		355			155			—			510
62535 Rental/Lease  -  Equipment		271			433			271			2,732
62540 Rental/Lease  -  Auto		1,604			1,604			1,604			12,953
62555 Rental/Lease  -  Other		—			—			155			155
Total Rental and Leases		5,547			5,510			5,815			42,953
63010 Utilities  -  Electricity		19,675			21,277			19,946			116,251
63015 Utilities  -  Water		1,545			2,373			2,629			14,522

PII - ITEM A-6

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2003
	Version	AA
	Community	Total Department
	Department	R.I. of Montego
	Month	Along Columns
	GLAccount	Along Rows

OLAP Table

	JAN			FEB			MAR			APR			MAY
63020 Utilities - Gas		6,368			4,727			5,519			3,001			5,154
63025 Utilities - Telephone		757			749			736			658			1,050
63030 Utilities - Trash		891			931			931			1,010			1,202
Total Utilities		18,009			16,007			20,380			13,109			29,506
63505 Marketing and Advertising		4,134			215			326			189			419
63510 Printed Materials		1,475			206			490			606			112
63515 Special Events		140			1,598			3,440			809			737
63520 Yellow Pages		466			466			466			357			575
63525 Newspaper and Magazine		78			78			78			3,939			2,687
63530 Advertising		27			27			(54	)		—			—
64005 Referral Fees - Residents		(500	)		—			—			2,074			2,651
Total Marketing and Advertising		5,820			2,590			4,746			7,974			7,180
60510 Delivery		—			—			—			—			—
64505 Computers/Peripherals/Software		—			—			—			—			—
65005 Gas		190			171			209			190			372
65010 Auto Service And Repair		—			612			363			—			—
65015 Other Automobile		—			—			5			—			—
65505 Travel & Lodging		152			805			—			79			478
66005 Mileage		331			—			145			82			67
66505 Meals & Entertainment		24			267			311			19			102
67005 License and Fingerprints		905			574			1,182			88			571
68005 Dues and Subscriptions		82			79			599			—			79
68505 Seminars and Training		20			—			—			(190	)		410
69005 Employee Recruiting		—			—			698			—			1,439
69505 Other		—			125			(13	)		315			99
69605 Discounts Lost		—			—			29			—			—
69610 Discounts Taken		—			—			(144	)		(192	)		(173	)
69525 Sales & Use Tax Due		—			—			—			—			—
Total Misc. Expenses		1,704			2,632			3,385			391			3,442
Total Operating Expense		188,295			149,397			175,513			164,150			222,086
Gross Margin		105,382			127,323			97,929			37,449			119,451
Gross Margin Percent		36	%		46	%		36	%		19	%		35	%
69705 Casualty Loss		—			—			—			—			(1,440	)
69805 Bad Debt Expense		1,360			—			—			(1,916	)		—
70005 Corporate Allocation		—			—			—			—			—
72305 Property Taxes		10,035			10,035			10,035			7,694			12,377
72405 Insurance-Liability & Hazard		9,520			7,752			76,336			102,476			9,823
Total Other Fees		20,915			17,787			86,371			108,254			20,760
72505 Accounting		796			796			796			1,413			366
73005 Legal		511			9,135			(8,071	)		(7	)		433
73510 Donations & Contributions		—			—			—			—			89
74005 Consulting Fees		—			—			—			340			251
74015 Professional Fees - Other		—			—			—			—			500
75005 Property Management Fees		14,684			13,836			13,672			10,080			17,077
75105 Partnership Admin Fees		—			1,274			(1,273	)		(2	)		—
75510 Other Penalties/Fin. Fee		—			—			—			—			47
75515 Licenses & Fees Legal		—			324			—			—			—
75505 Bank Charges		—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			800			—
75525 Collection Fees		—			—			—			383			—
Total Professional Fees		15,991			25,365			5,124			13,007			18,762
EBITDAR		68,476			84,171			6,434			(83,812	)		79,929
EBITDAR Percent		23	%		30	%		2	%		-42	%		23	%
77005 Operating Lease		—			—			—			—			—
77010 Add’l Lease		—			—			—			—			—
Total Leases		—			—			—			—			—
80005 Interest Income		(266	)		(169	)		(150	)		(165	)		(229	)
80505 Other Non-Operating Income		—			—			—			—			—
87010 Extraordinary Items -Net Tax		—			—			—			—			—
Total Non-Operating Income/Expense		(266	)		(169	)		(150	)		(165	)		(229	)
83005 Interest Expense		51,620			51,594			51,620			39,340			63,533
83025 Int Exp MIP		3,208			3,208			3,169			2,444			3,932
Total Interest Expense		54,827			54,801			54,788			41,784			67,465
EBTDA		13,915			29,539			(48,205	)		(125,431	)		12,693
EBTDA Percent		5	%		11	%		-18	%		-62	%		4	%
77505 Depreciation		28,795			29,110			28,905			22,200			35,532
78005 Amortization		389			389			389			298			480
78015 Amortization - Start Up		—			—			—			—			—
Total Depreciation & Amortization		29,184			29,499			29,294			22,499			36,011
Net Income (Loss)		(15,269	)		40			(77,499	)		(147,929	)		(23,319	)

[Additional columns below]

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

	JUN			JUL			AUG			AUG YTD
63020 Utilities - Gas		3,943			3,602			3,694			36,007
63025 Utilities - Telephone		1,001			1,600			967			7,518
63030 Utilities - Trash		931			931			931			7,759
Total Utilities		27,095			29,783			28,168			182,057
63505 Marketing and Advertising		502			303			291			6,380
63510 Printed Materials		656			233			452			4,230
63515 Special Events		725			1,476			939			9,865
63520 Yellow Pages		466			466			466			3,730
63525 Newspaper and Magazine		78			85			78			7,098
63530 Advertising		—			—			—			—
64005 Referral Fees - Residents		2,213			6,000			4,450			16,887
Total Marketing and Advertising		4,639			8,564			6,676			48,189
60510 Delivery		—			23			—			23
64505 Computers/Peripherals/Software		83			—			—			83
65005 Gas		190			237			475			2,036
65010 Auto Service And Repair		—			—			61			1,036
65015 Other Automobile		—			6			—			11
65505 Travel & Lodging		478			204			579			2,774
66005 Mileage		46			164			—			834
66505 Meals & Entertainment		—			95			—			818
67005 License and Fingerprints		626			156			1,228			5,329
68005 Dues and Subscriptions		79			97			142			1,156
68505 Seminars and Training		—			—			180			420
69005 Employee Recruiting		75			—			865			3,077
69505 Other		298			178			326			1,327
69605 Discounts Lost		—			—			4			34
69610 Discounts Taken		(184	)		(105	)		(159	)		(957	)
69525 Sales & Use Tax Due		—			—			—			—
Total Misc. Expenses		1,692			1,054			3,700			18,001
Total Operating Expense		182,017			198,075			184,159			1,463,692
Gross Margin		101,153			102,977			110,839			802,502
Gross Margin Percent		36	%		34	%		38	%		35	%
69705 Casualty Loss		—			24,797			—			23,357
69805 Bad Debt Expense		—			—			—			(556	)
70005 Corporate Allocation		—			—			—			—
72305 Property Taxes		10,035			10,436			10,436			81,083
72405 Insurance-Liability & Hazard		69,844			4,941			12,687			293,379
Total Other Fees		79,880			40,174			23,124			397,264
72505 Accounting		2,013			983			1,051			8,213
73005 Legal		507			664			1,190			4,362
73510 Donations & Contributions		—			—			—			89
74005 Consulting Fees		130			—			—			720
74015 Professional Fees - Other		—			128			295			922
75005 Property Management Fees		14,158			15,053			14,750			113,310
75105 Partnership Admin Fees		—			—			—			(0	)
75510 Other Penalties/Fin. Fee		42			—			20			109
75515 Licenses & Fees Legal		—			—			—			324
75505 Bank Charges		—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			800
75525 Collection Fees		—			—			—			383
Total Professional Fees		16,850			16,827			17,305			129,232
EBITDAR		4,423			45,975			70,410			276,006
EBITDAR Percent		2	%		15	%		24	%		12	%
77005 Operating Lease		—			—			—			—
77010 Add’l Lease		—			—			—			—
Total Leases		—			—			—			—
80005 Interest Income		—			(442	)		(216	)		(1,636	)
80505 Other Non-Operating Income		—			—			—			—
87010 Extraordinary Items -Net Tax		—			—			—			—
Total Non-Operating Income/Expense		—			(442	)		(216	)		(1,636	)
83005 Interest Expense		50,472			51,407			51,380			410,964
83025 Int Exp MIP		3,188			3,188			3,188			25,524
Total Interest Expense		53,660			54,595			54,568			436,489
EBTDA		(49,237	)		(8,178	)		16,058			(158,846	)
EBTDA Percent		-17	%		-3	%		5	%		-7	%
77505 Depreciation		28,808			28,212			28,079			229,641
78005 Amortization		389			389			389			3,112
78015 Amortization - Start Up		—			—			—			—
Total Depreciation & Amortization		29,197			28,601			28,468			232,753
Net Income (Loss)		(78,433	)		(36,779	)		(12,410	)		(391,599	)

PII - ITEM A-5

Database:	Polapsvr
Cube:	Financial Data
Page:	Year	2002
	Version	AA
	Community	Montego Heights
	Department	Total Department
	Month	Along Columns
	GLAccount	Along Rows

OLAP Table

	JAN			FEB			MAR			APR			MAY			JUN			JUL
40005 Revenue-Rental		254,171			263,648			266,264			276,006			270,927			266,046			276,305
40010 Revenue-Rent Refunds/Proration		(2,166	)		(900	)		(267	)		(1,400	)		(719	)		—			(1,135	)
Tolal Rental Revenue		252,005			262,748			265,997			274,606			270,209			266,046			275,170
40110 Revenue-AL Level 1		6,555			6,722			7,000			8,226			8,400			9,051			8,025
40115 Revenue-AL Level 2		4,444			5,756			5,150			4,631			5,450			3,815			3,000
40120 Revenue-AL Level 3		2,427			5,800			5,774			5,600			5,600			6,200			6,400
40125 Revenue-AL Level 4		11,276			11,547			8,175			9,375			7,775			8,408			8,175
40130 Revenue-AL Level 5		1,725			300			1,200			2,400			2,400			2,400			2,400
40135 Revenue-AL Level 6		2,843			4,375			6,600			4,200			3,600			2,800			4,125
40140 Revenue-AL Level 7		8,651			5,065			8,710			8,710			8,710			7,220			7,220
40170 Revenue-Alzh Lev 1		—			—			—			—			—			—			—
Total AL Services Revenue		37,920			39,565			42,609			43,142			41,935			39,894			39,345
40515 Revenue-Other		3,179			1,082			2,016			1,983			1,788			449			1,468
40525 Revenue-Processing/App Fees		7,100			4,110			5,110			5,710			1,110			4,110			7,610
Total Other Revenue		10,279			5,192			7,126			7,693			2,898			4,559			9,078
40575 Rev-Process Fee Concessions		—			—			—			—			—			—			—
40015 Rev-Rent Concessions		—			—			(3,799	)		(3,799	)		(6,299	)		(2,666	)		(2,501	)
40215 Rev-A/L Concessions		—			—			—			—			—			—			—
Total Concessions		—			—			(3,799	)		(3,799	)		(6,299	)		(2,666	)		(2,501	)
Total Revenue		300,204			307,505			311,933			321,642			308,743			307,833			321,092
50005 Payroll Expense-Regular		75,954			65,939			70,044			71,394			73,845			66,688			83,212
50405 Payroll Expense-Overtime		2,612			6,016			6,181			7,733			7,204			9,077			6,793
50705 Payroll Expense-Doubletime		229			305			448			505			289			1,464			1,086
51005 Bonuses		2,942			5,392			26,389			3,142			3,442			2,192			3,792
51505 Vacation, Sick, Holiday		6,537			5,183			5,087			6,457			5,735			8,044			6,074
51805 Employee Recognition		200			123			200			—			—			66			73
52005 Payroll Taxes		10,043			8,322			8,595			8,117			7,520			7,451			7,763
52505 401K/401A		268			306			166			131			290			255			213
52805 Group Insurance		4,681			5,097			5,043			4,341			4,475			4,923			5,307
53005 Worker’s Comp Insurance		8,478			7,088			11,843			6,181			6,617			6,890			7,182
Total Payroll Expenses		111,946			103,771			133,997			108,003			109,418			107,050			121,496
53305 Outside Service - Medical		—			—			—			—			—			—			—
53505 Temporary Services		—			—			—			—			—			—			—
53510 Temporary Services - AL		—			—			—			—			—			—			—
54005 Payroll Service		287			246			614			318			261			166			249
55005 Outside Service Other		—			36			122			—			65			—			87
Total Purchase Services		287			282			736			318			326			166			336
Total Payroll Related		112,233			104,053			134,732			108,322			109,745			107,216			121,831
Total Payroll Related % Total Revenue		37	%		34	%		43	%		34	%		36	%		35	%		38	%
56505 Food		15,487			17,084			21,177			21,897			19,354			21,101			17,145
57005 Housekeeping		1,085			557			779			1,702			1,538			—			1,636
57505 Kitchen Supplies		1,653			1,291			1,864			3,361			1,944			1,119			1,224
58005 Assisted Living Supplies		164			414			(32	)		209			214			116			82
59005 Laundry & Linen/Uniforms		—			—			—			—			81			16			6
59010 Laun/Lin/Unif Kitchen		419			304			350			242			241			304			238
59015 Laund/Lin/Unif Housekeeping		415			1,103			320			1,091			837			762			922
59505 Activities-Asst Lving		1,522			467			1,612			887			710			933			1,295
59510 Banquet Expense		500			500			500			500			500			500			500
59555 NMS-Foodservices		—			—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—			—
Total Variable Expense		21,246			21,720			26,571			29,890			25,420			24,851			23,047
60005 Office Supplies		394			2,629			3,909			4,135			920			930			2,341
61005 Repairs and Maint - Building		—			—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—			—
61015 Repairs - Electrical		—			—			—			566			—			—			—
61020 Repairs - Plumbing		—			—			—			79			262			—			554
61025 Repairs - Fire Systems		379			463			(463	)		480			—			—			270
61030 Repairs - HVAC		1,263			—			—			823			—			741			2,178
61035 Repairs - Gen. Supplies		788			1,273			364			1,748			865			56			1,185
61040 Repairs - Equipment		3,103			2,348			30			1,122			225			1,953			—
61045 Repairs - Other Interior		107			—			150			(150	)		135			—			53
61055 Repairs - Other Exterior		—			10			157			(157	)		—			—			—
61100 Loss on Early Retierment Asset		—			—			—			—			—			—			—
Total Repair & Maintenance		5,639			4,094			239			4,511			1,487			2,750			4,240
61505 Contracts - Elevator		557			557			557			557			557			557			557
61510 Contracts - Floor Maint		853			—			853			1,228			1,128			1,393			1,793
61515 Contracts- Alarm/Fire		504			622			935			932			315			315			547
61520 Contracts-HVAC		306			306			907			—			306			306			306
61525 Contracts - Pest Control		311			311			311			311			322			322			350
61535 Contracts - Other		—			—			—			94			710			(3	)		206
Total Service Contracts		2,530			1,795			3,563			3,121			3,337			2,889			3,759
62005 Land Maintenance		1,350			1,350			1,350			1,350			1,429			1,350			1,384
Total Land Maintenance		1,350			1,350			1,350			1,350			1,429			1,350			1,384
62505 Rental/Lease - Cable		2,800			2,912			2,912			2,912			2,912			2,912			2,912
62510 Rental/Lease - Security		—			—			—			—			500			—			—
62525 Rental/Lease - Furniture		—			—			—			—			—			—			—
62535 Rental/Lease - Equipment		2,171			(1,671	)		1,115			(945	)		280			292			290
62540 Rental/Lease - Auto		1,150			1,039			2,008			1,046			74			1,829			1,626
62555 Rental/Lease - Other		—			—			—			—			—			—			—
Total Rental and Leases		6,121			2,280			6,035			3,013			3,767			5,032			4,828
63010 Utilities - Electricity		8,639			7,403			11,650			12,031			10,396			24,327			20,648
63015 Utilities - Water		370			1,508			1,311			2,421			1,604			2,028			2,495
63020 Utilities - Gas		5,847			3,818			2,917			3,005			3,645			2,407			2,732
63025 Utilities - Telephone		812			428			656			630			911			742			772
63030 Utilities - Trash		870			843			873			23			1,010			860			860
Total Utilities		16,537			14,000			17,406			18,110			17,566			30,364			27,507
63505 Marketing and Advertising		258			3,306			270			330			417			449			717
63510 Printed Materials		178			130			1,348			3,091			11			287			—
63515 Special Events		1,014			1,654			275			104			284			750			(540	)
63520 Yellow Pages		524			841			231			262			1,728			395			179
63525 Newspaper and Magazine		1,274			1,013			359			885			622			713			478
63530 Advertising		—			—			290			290			—			—			—
64005 Referral Fees - Residents		950			4,650			1,100			1,975			4,245			1,750			855
Total Marketing and Advertising		4,198			11,595			3,873			6,937			7,308			4,344			1,688
60510 Delivery		—			—			—			—			—			—			—
64505 Computers/Peripherals/Software		—			—			—			—			—			—			—
65005 Gas		214			232			—			—			847			234			167
65010 Auto Service And Repair		—			—			—			133			—			—			—
65015 Other Automobile		—			—			—			—			—			—			—
65505 Travel & Lodging		178			314			550			2,108			1,643			463			1,273
66005 Mileage		—			—			139			131			—			—			55
66505 Meals & Entertainment		10			121			—			45			—			36			125
67005 License and Fingerprints		571			318			458			752			507			248			1,309
68005 Dues and Subscriptions		81			81			81			81			727			79			79

[Additional columns below]

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

	AUG			SEP			OCT			NOV			DEC			DEC YTD
40005 Revenue-Rental		258,777			243,851			244,208			253,436			245,270			3,118,911
40010 Revenue-Rent Refunds/Proration		(694	)		—			—			(1,900	)		(560	)		(9,741	)
Total Rental Revenue		258,083			243,851			244,208			251,536			244,710			3,109,170
40110 Revenue-AL Level 1		8,411			8,525			6,875			8,806			6,575			93,171
40115 Revenue-AL Level 2		4,002			3,439			4,418			5,550			5,550			55,205
40120 Revenue-AL Level 3		6,225			4,450			5,700			4,875			5,100			64,151
40125 Revenue-AL Level 4		7,175			8,250			8,225			6,907			5,775			101,063
40130 Revenue-AL Level 5		4,650			3,625			2,400			5,050			7,500			36,050
40135 Revenue-AL Level 6		2,800			2,625			2,625			5,143			2,650			44,385
40140 Revenue-AL Level 7		7,220			5,780			6,085			5,780			5,105			84,256
40170 Revenue-Alzh Lev 1		—			—			—			—			—			—
Total AL Services Revenue		40,483			36,694			36,328			42,111			38,255			478,281
40515 Revenue-Other		2,277			1,876			2,084			2,520			1,333			22,053
40525 Revenue-Processing/App Fees		(1,390	)		110			8,110			4,110			4,100			49,900
Total Other Revenue		887			1,986			10,194			6,630			5,433			71,953
40575 Rev-Process Fee Concessions		—			—			—			—			—			—
40015 Rev-Rent Concessions		(3,149	)		(2,431	)		(2,511	)		(2,431	)		(2,591	)		(32,177	)
40215 Rev-A/L Concessions		—			—			—			—			—			—
Total Concessions		(3,149	)		(2,431	)		(2,511	)		(2,431	)		(2,591	)		(32,177	)
Total Revenue		296,304			280,100			288,219			297,846			285,807			3,627,227
50005 Payroll Expense-Regular		79,672			80,213			87,435			79,134			80,407			913,938
50405 Payroll Expense-Overtime		5,146			3,552			2,960			2,595			1,389			61,258
50705 Payroll Expense-Doubletime		271			189			5			254			10			5,057
51005 Bonuses		(6,808	)		(4,360	)		(3,285	)		(3,133	)		(10,614	)		19,093
51505 Vacation, Sick, Holiday		3,190			6,358			6,959			6,944			6,295			72,864
51805 Employee Recognition		—			—			100			—			155			917
52005 Payroll Taxes		7,126			7,067			7,438			6,759			7,023			93,224
52505 401K/401A		212			237			168			131			130			2,507
52805 Group Insurance		6,246			6,868			3,667			6,808			6,642			64,100
53005 Worker’s Comp Insurance		7,213			3,078			6,179			6,008			5,822			82,579
Total Payroll Expenses		102,267			103,202			111,626			105,501			97,260			1,315,536
53305 Outside Service-Medical		—			—			—			—			316			316
53505 Temporary Services		—			—			—			—			—			—
53510 Temporary Services-AL		—			—			—			—			—			—
54005 Payroll Service		291			194			331			323			38			3,318
55005 Outside Service Other		32			—			64			—			—			405
Total Purchase Services		323			194			394			323			354			4,039
Total Payroll Related		102,590			103,396			112,020			105,823			97,614			1,319,575
Total Payroll Related % Total Revenue		35	%		37	%		39	%		36	%		34	%		36	%
56505 Food		18,410			16,403			19,086			16,048			15,340			218,533
57005 Housekeeping		1,403			921			1,733			1,451			1,135			13,940
57505 Kitchen Supplies		4,477			2,511			2,627			2,353			2,032			26,456
58005 Assisted Living Supplies		155			82			82			89			375			1,950
59005 Laundry & Linen/Uniforms		104			—			—			222			—			429
59010 Laun/Lin/Unif Kitchen		274			302			268			323			393			3,657
59015 Laund/Lin/Unif Housekeeping		506			401			282			298			322			7,260
59505 Activities-Asst Lving		1,093			1,797			981			1,500			1,753			14,551
59510 Banquet Expense		500			500			500			500			679			6,179
59555 NMS-Foodservices		—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—
Total Variable Expense		26,923			22,916			25,558			22,783			22,029			292,954
60005 Office Supplies		449			1,282			844			966			2,374			21,172
61005 Repairs and Maint-Building		—			—			—			—			—			—
61010 Repairs-Phone System		—			—			—			—			—			—
61015 Repairs-Electrical		—			—			—			—			164			730
61020 Repairs-Plumbing		736			0			—			101			—			1,732
61025 Repairs-Fire Systems		1,055			—			—			—			—			2,185
61030 Repairs-HVAC		1,934			212			627			1,352			29			9,161
61035 Repairs-Gen. Supplies		1,035			393			2,240			439			260			10,647
61040 Repairs-Equipment		—			1,137			—			80			498			10,495
61045 Repairs-Other Interior		166			562			50			429			(2,922	)		(1,420	)
61055 Repairs-Other Exterior		—			979			90			435			750			2,263
61100 Loss on Early Retierment Asset		—			—			—			—			—			—
Total Repair & Maintenance		4,927			3,284			3,007			2,837			(1,220	)		35,794
61505 Contracts-Elevator		557			557			557			557			802			6,929
61510 Contracts-Floor Maint		—			550			583			853			853			10,084
61515 Contracts- Alarm/Fire		158			1,206			390			158			158			6,238
61520 Contracts-HVAC		336			30			336			336			336			3,809
61525 Contracts-Pest Control		350			188			355			355			179			3,665
61535 Contracts-Other		146			44			44			269			509			2,017
Total Service Contracts		1,547			2,575			2,263			2,527			2,836			32,742
62005 Land Maintenance		2,055			2,100			1,750			2,685			1,878			20,031
Total Land Maintenance		2,055			2,100			1,750			2,685			1,878			20,031
62505 Rental/Lease-Cable		2,912			2,912			2,912			2,912			2,912			34,832
62510 Rental/Lease-Security		—			—			—			—			—			500
62525 Rental/Lease-Furniture		—			—			—			—			—			—
62535 Rental/Lease-Equipment		371			346			443			358			218			3,269
62540 Rental/Lease-Auto		1,631			1,631			1,634			1,628			1,628			16,924
62555 Rental/Lease-Other		—			465			—			—			49			514
Total Rental and Leases		4,915			5,355			4,989			4,898			4,807			56,039
63010 Utilities-Electricity		18,156			17,834			15,048			8,442			9,577			164,150
63015 Utilities-Water		2,867			655			3,855			1,305			1,531			21,949
63020 Utilities-Gas		2,464			2,212			2,485			3,267			4,590			39,388
63025 Utilities-Telephone		689			645			653			663			1,286			8,887
63030 Utilities-Trash		876			891			891			891			891			9,777
Total Utilities		25,050			22,236			22,932			14,567			17,875			244,150
63505 Marketing and Advertising		333			624			324			2,314			112			9,454
63510 Printed Materials		—			76			59			231			484			5,895
63515 Special Events		1,320			3,511			759			415			415			9,962
63520 Yellow Pages		98			1,968			230			1,548			542			8,546
63525 Newspaper and Magazine		359			359			373			565			373			7,374
63530 Advertising		—			—			—			—			—			580
64005 Referral Fees-Residents		2,380			1,000			—			1,050			—			19,955
Total Marketing and Advertising		4,491			7,539			1,746			6,123			1,926			61,767
60510 Delivery		—			—			—			—			—			—
64505 Computers/Peripherals/Software		—			—			162			418			—			580
65005 Gas		282			252			177			309			251			2,964
65010 Auto Service And Repair		1,299			656			—			273			—			2,361
65015 Other Automobile		—			—			—			—			—			—
65505 Travel & Lodging		256			—			851			397			1,103			9,136
66005 Mileage		48			84			157			107			80			801
66505 Meals & Entertainment		76			—			49			25			44			532
67005 License and Fingerprints		276			154			154			484			418			5,649
68005 Dues and Subscriptions		79			145			79			631			33			2,175

PII - ITEM A-5

Database:	Polapsvr
Cube:	Financial Data
Page:	Year	2002
	Version	AA
	Community	Montego Heights
	Department	Total Department
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL			AUG
68505 Seminars and Training		158			20			124			253			100			195			—			206
69005 Employee Recruiting		33			719			1,193			4,400			126			910			1,528			1,239
69505 Other		—			9			670			282			—			195			(178	)		941
69605 Discounts Lost		—			—			—			90			37			—			—			—
69610 Discounts Taken		(5	)		(97	)		(12	)		—			(37	)		—			—			—
69525 Sales & Use Tax Due		—			—			—			—			—			—			—			—
Total Misc. Expenses		1,240			1,717			3,203			8,274			3,950			2,361			4,357			4,702
Total Operating Expense		171,489			165,232			200,880			187,664			174,928			182,087			194,984			177,648
Gross Margin		128,715			142,274			111,053			133,979			133,815			125,746			126,108			118,655
Gross Margin Percent		43	%		46	%		36	%		42	%		43	%		41	%		39	%		40	%
69705 Casualty Loss		—			—			—			—			—			—			—			—
69805 Bad Debt Expense		(5	)		3,411			1,200			(3,004	)		—			5,875			—			—
70005 Corporate Allocation		—			—			—			—			—			—			—			—
72305 Property Taxes		9,315			9,315			9,315			9,315			9,315			9,315			9,547			9,547
72405 Insurance-Liability & Hazard		4,632			4,632			4,634			7,781			7,781			7,781			7,781			58,019
Total Other Fees		13,941			17,357			15,148			14,092			17,096			22,970			17,328			67,567
72505 Accounting		91			891			891			891			1,211			1,316			940			891
73005 Legal		2,843			(2,298	)		5,226			21,538			13,258			8,551			1,381			(44,523	)
73510 Donations & Contributions		—			—			—			—			—			—			—			—
74005 Consulting Fees		—			—			—			—			—			—			—			—
74015 Professional Fees - Other		—			—			—			37			—			—			—			—
75005 Property Management Fees		15,070			15,310			15,602			16,112			15,407			15,392			16,055			14,815
75105 Partnership Admin Fees		3,662			3,642			896			1,716			1,963			852			2,533			1,292
75510 Other Penalties/Fin. Fee		—			—			—			—			225			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			800			—			—			—			—
75525 Collection Fees		—			—			—			—			—			—			—			—
Total Professional Fees		21,666			17,545			22,615			41,094			32,064			26,111			20,909			(27,525	)
EBITDAR		93,108			107,373			73,290			78,793			84,656			76,665			87,871			78,613
EBITDAR Percent		31	%		35	%		23	%		24	%		27	%		25	%		27	%		27	%
77005 Operating Lease		—			—			—			—			—			—			—			—
77010 Add’l Lease		—			—			—			—			—			—			—			—
Total Leases		—			—			—			—			—			—			—			—
80005 Interest Income		(712	)		(690	)		(654	)		(309	)		(303	)		(342	)		(297	)		(331	)
80505 Other Non-Operating Income		—			—			(1,013	)		(73,000	)		—			73,000			—			—
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—			—			—
Total Non-Operating Income/Expense		(712	)		(690	)		(1,668	)		(73,309)			(303	)		72,658			(297	)		(331	)
83005 Interest Expense		51,918			51,918			51,846			51,846			51,700			51,772			51,747			51,722
83025 Int Exp MIP		—			3,208			3,208			3,208			3,208			3,208			3,208			3,208
Total Interest Expense		51,918			55,126			55,054			55,053			54,908			54,980			54,955			54,929
EBTDA		41,902			52,937			19,904			97,049			30,051			(50,972	)		33,213			24, 015
EBTDA Percent		14	%		17	%		6	%		30	%		10	%		-17	%		10	%		8	%
77505 Depreciation		27,684			28,263			28,301			28,424			28,228			28,248			28,317			28,316
78005 Amortization		389			389			389			389			389			389			389			389
78015 Amortization - Start Up		—			—			—			—			—			—			—			—
Total Depreciation & Amortization		28,073			28,652			28,690			28,813			28,617			28,637			28,706			28,705
Net Income (Loss)		13,830			24,285			(8,787	)		68,236			1,435			(79,609	)		4,507			(4,690	)

[Additional columns below]

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

	SEP			OCT			NOV			DEC			DEC YTD
68505 Seminars and Training		—			285			—			—			1,340
69005 Employee Recruiting		1,013			1,018			1,583			1,337			15,099
69505 Other		60			9			54			36			2,078
69605 Discounts Lost		—			—			—			—			127
69610 Discounts Taken		—			—			—			—			(152	)
69525 Sales & Use Tax Due		—			—			—			—			—
Total Misc. Expenses		2,363			2,942			4,281			3,302			42,691
Total Operating Expense		173,044			178,050			167,491			153,419			2,126,915
Gross Margin		107,056			110,169			130,355			132,387			1,500,312
Gross Margin Percent		38	%		38	%		44	%		46	%		41	%
69705 Casualty Loss		—			—			—			—			—
69805 Bad Debt Expense		—			—			—			—			7,477
70005 Corporate Allocation		—			—			—			—			—
72305 Property Taxes		9,547			10,523			5,611			15,434			116,097
72405 Insurance-Liability & Hazard		7,370			9,373			9,454			6,594			135,831
Total Other Fees		16,917			19,895			15,065			22,029			259,405
72505 Accounting		1,211			1,911			2,048			(2,171	)		10,121
73005 Legal		2,546			1,768			866			567			11,723
73510 Donations & Contributions		—			—			—			—			—
74005 Consulting Fees		—			250			—			—			250
74015 Professional Fees - Other		510			(510	)		—			—			37
75005 Property Management Fees		14,005			13,804			15,500			14,290			181,361
75105 Partnership Admin Fees		471			632			3,009			3,087			23,754
75510 Other Penalties/Fin. Fee		—			—			—			—			225
75515 Licenses & Fees Legal		—			—			—			—			—
75505 Bank Charges		—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			800
75525 Collection Fees		—			—			—			—			—
Total Professional Fees		18,743			17,854			21,422			15,774			228,272
EBITDAR		71,396			72,420			93,867			94,584			1,012,635
EBITDAR Percent		25	%		25	%		32	%		33	%		28	%
77005 Operating Lease		—			—			—			—			—
77010 Add’l Lease		—			—			—			—			—
Total Leases		—			—			—			—			—
80005 Interest Income		(347	)		(299	)		(334	)		(339	)		(4,958	)
80505 Other Non-Operating Income		—			—			(214	)		—			(1,228	)
87010 Extraordinary Items -Net Tax		—			—			—			—			—
Total Non-Operating Income/Expense		(347	)		(299	)		(549	)		(339	)		(6,186	)
83005 Interest Expense		51,696			51,671			51,722			51,543			621,101
83025 Int Exp MIP		3,208			3,208			3,208			3,208			35,285
Total Interest Expense		54,904			54,879			54,929			54,751			656,385
EBTDA		16,839			17,839			39,487			40,172			362,436
EBTDA Percent		6	%		6	%		13	%		14	%		10	%
77505 Depreciation		28,371			28,716			28,523			28,682			340,072
78005 Amortization		389			389			389			389			4,669
78015 Amortization - Start Up		—			—			—			—			—
Total Depreciation & Amortization		28,760			29,106			28,912			29,071			344,741
Net Income (Loss)		(11,920	)		(11,266	)		10,574			11,101			17,695

PII - ITEM A-5

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2001
	Version	AA
	Community	Montego Heights
	Department	Total Department
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
40005 Revenue-Rental		280,072			258,516			251,847			263,397			257,824			264,416			262,535
40010 Revenue-Rent Refunds/Proration		(833	)		—			—			—			—			(1,010	)		—
Total Rental Revenue		279,238			258,516			251,847			263,397			257,824			263,406			262,535
40110 Revenue-AL Level 1		9,348			9,847			7,863			7,025			7,543			6,885			7,263
40115 Revenue-AL Level 2		6,603			7,100			7,475			9,550			9,251			5,090			5,919
40120 Revenue-AL Level 3		9,747			3,344			4,075			3,500			3,960			4,525			6,562
40125 Revenue-AL Level 4		4,675			5,650			4,928			4,675			4,815			5,700			6,195
40130 Revenue-AL Level 5		7,846			7,645			8,930			9,404			8,279			8,830			9,325
40135 Revenue-AL Level 6		3,565			4,125			4,125			5,525			4,947			8,465			10,335
40140 Revenue-AL Level 7		2,750			816			1,375			1,090			315			4,534			1,400
40170 Revenue-Alzh Lev 1		—			—			—			—			—			—			—
Total AL Services Revenue		44,534			38,527			38,771			40,768			39,110			44,029			46,999
40515 Revenue-Other		3,818			1,815			1,442			946			2,324			639			1,419
40525 Revenue-Processing/App Fees		3,000			1,200			5,100			2,400			1,600			5,400			2,906
Total Other Revenue		6,818			3,015			6,542			3,346			3,924			6,039			4,325
40575 Rev-Process Fee Concessions		—			—			—			—			—			—			—
40015 Rev-Rent Concessions		(6,497	)		(2,063	)		(119	)		(1,055	)		—			—			—
40215 Rev-A/L Concessions		—			—			—			—			—			—			—
Total Concessions		(6,497	)		(2,063	)		(119	)		(1,055	)		—			—			—
Total Revenue		324,093			297,995			297,040			306,456			300,858			313,474			313,859
50005 Payroll Expense-Regular		72,551			74,663			79,714			66,711			78,883			70,781			79,208
50405 Payroll Expense-Overtime		4,045			4,070			4,164			6,562			5,521			6,781			4,481
50705 Payroll Expense-Doubletime		196			491			612			662			390			47			703
51005 Bonuses		2,188			2,588			4,476			2,950			3,013			2,938			(1,945	)
51505 Vacation, Sick, Holiday		8,827			6,910			6,216			19,328			(7,659	)		7,977			4,129
51805 Employee Recognition		—			134			533			105			—			—			100
52005 Payroll Taxes		10,354			9,383			8,999			8,432			8,162			5,288			7,447
52505 401K/401A		96			106			90			100			192			240			211
52805 Group Insurance		4,749			5,241			5,947			5,984			6,361			1,346			5,303
53005 Worker’s Comp Insurance		5,800			6,190			5,352			4,799			5,434			5,986			5,594
Total Payroll Expenses		108,807			109,775			116,102			115,633			100,296			101,384			105,231
53305 Outside Service - Medical		—			57			—			—			—			105			—
53505 Temporary Services		6,900			—			—			672			436			—			—
53510 Temporary Services - AL		—			—			—			—			—			—			—
54005 Payroll Service		219			220			224			268			224			228			228
55005 Outside Service Other		65			2,651			32			125			368			33			217
Total Purchase Services		7,183			2,928			255			1,065			1,027			365			445
Total Payroll Related		115,989			112,703			116,357			116,697			101,323			101,749			105,676
Total Payroll Related % Total Revenue		36	%		38	%		39	%		38	%		34	%		32	%		34	%
56505 Food		21,190			14,647			23,538			15,811			23,847			20,938			19,663
57005 Housekeeping		1,196			592			439			423			2,308			79			2,379
57505 Kitchen Supplies		4,141			3,798			905			1,053			632			1,390			1,179
58005 Assisted Living Supplies		126			—			410			85			233			258			98
59005 Laundry & Linen/Uniforms		242			1,210			1,356			1,998			1,335			1,262			790
59010 Laun/Lin/Unif Kitchen		—			—			—			—			—			—			—
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—			—
59505 Activities-Asst Lving		1,090			1,449			1,540			1,876			1,357			1,709			1,357
59510 Banquet Expense		1,667			500			792			500			500			500			500
59555 NMS-Foodservices		—			—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—			—
Total Variable Expense		29,652			22,196			28,980			21,745			30,210			26,136			25,967
60005 Office Supplies		1,656			3,391			3,741			1,815			3,746			2,173			813
61005 Repairs and Maint - Building		—			—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—			—
61015 Repairs - Electrical		—			334			—			670			991			161			361
61020 Repairs - Plumbing		—			285			209			—			692			—			—
61025 Repairs - Fire Systems		89			108			—			—			—			—			695
61030 Repairs - HVAC		9			577			4,075			1,067			864			634			275
61035 Repairs - Gen. Supplies		402			1,566			1,205			1,125			3,352			2,112			2,124
61040 Repairs - Equipment		1,101			—			589			519			731			128			—
61045 Repairs - Other Interior		400			—			172			439			428			—			—
61055 Repairs - Other Exterior		226			449			305			—			629			—			(114	)
61100 Loss on Early Retirement Asset		—			—			—			—			—			—			—
Total Repair & Maintenance		2,227			3,319			6,555			3,819			7,688			3,034			3,341
61505 Contracts - Elevator		557			557			557			887			557			557			557
61510 Contracts - Floor Maint		411			411			1,100			853			853			853			1,253
61515 Contracts - Alarm/Fire		—			945			161			—			731			—			(232	)
61520 Contracts-HVAC		—			—			—			—			1,145			300			1,292
61525 Contracts - Pest Control		227			1,335			327			327			427			227			327
61535 Contracts - Other		—			370			—			—			216			—			—
Total Service Contracts		1,195			3,617			2,146			2,067			3,929			1,936			3,197
62005 Land Maintenance		1,350			1,350			1,350			1,350			1,916			2,700			1,289
Total Land Maintenance		1,350			1,350			1,350			1,350			1,916			2,700			1,289
62505 Rental/Lease - Cable		2,531			2,531			2,531			2,531			2,531			2,531			2,531
62510 Rental/Lease - Security		—			—			—			—			—			—			—
62525 Rental/Lease - Furniture		—			—			—			—			—			—			—
62535 Rental/Lease - Equipment		983			1,179			942			1,212			1,409			738			1,374
62540 Rental/Lease - Auto		1,257			1,257			1,149			1,149			1,149			1,149			1,149
62555 Rental/Lease - Other		—			—			—			178			108			—			—
Total Rental and Leases		4,771			4,968			4,622			5,070			5,198			4,418			5,055
63010 Utilities - Electricity		8,575			7,584			8,733			7,692			11,798			16,562			15,939
63015 Utilities - Water		1,518			1,604			595			981			2,848			2,536			2,690
63020 Utilities - Gas		11,457			9,076			8,247			6,846			3,303			3,190			3,300
63025 Utilities - Telephone		738			833			653			891			683			533			606
63030 Utilities - Trash		770			770			818			770			464			826			939
Total Utilities		23,058			19,867			19,046			17,179			19,096			23,647			23,474
63505 Marketing and Advertising		1,720			1,362			536			1,515			379			304			572
63510 Printed Materials		335			—			48			—			21			507			363
63515 Special Events		359			736			1,403			85			277			1,129			207
63520 Yellow Pages		632			2,662			632			632			632			632			632
63525 Newspaper and Magazine		85			1,725			165			407			294			347			127
63530 Advertising		—			—			—			180			95			504			—
64005 Referral Fees - Residents		(180	)		—			1,095			2,238			1,775			—			1,588
Total Marketing and Advertising		2,950			6,484			3,879			5,057			3,472			3,423			3,489
60510 Delivery		—			—			—			—			—			—			—
64505 Computers/Peripherals/Software		—			—			—			155			—			—			—
65005 Gas		—			668			219			325			112			316			374
65010 Auto Service And Repair		—			547			—			508			770			—			—
65015 Other Automobile		—			—			—			—			672			—			—
65505 Travel & Lodging		—			448			171			262			195			—			—
66005 Mileage		—			—			—			552			64			22			—
66505 Meals & Entertainment		—			69			48			72			40			40			—
67005 License and Fingerprints		139			279			139			1,268			1,682			795			(44	)
68005 Dues and Subscriptions		70			—			37			582			211			210			50

[Additional columns below]

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

	AUG			SEP			OCT			NOV			DEC			DEC YTD
40005 Revenue-Rental		273,428			274,083			253,830			252,691			257,346			3,149,985
40010 Revenue-Rent Refunds/Proration		(1,659	)		(4,373	)		—			(1,219	)		(1,274	)		(10,367	)
Total Rental Revenue		271,769			269,711			253,830			251,472			256,072			3,139,617
40110 Revenue-AL Level 1		5,869			6,779			6,087			6,175			2,947			83,629
40115 Revenue-AL Level 2		5,525			6,381			4,691			4,477			2,382			74,443
40120 Revenue-AL Level 3		6,447			3,175			4,496			5,574			5,575			60,980
40125 Revenue-AL Level 4		10,009			9,925			7,800			6,634			9,201			80,207
40130 Revenue-AL Level 5		3,398			7,205			5,975			5,132			(1,377	)		80,591
40135 Revenue-AL Level 6		8,665			13,067			11,545			12,665			9,600			96,629
40140 Revenue-AL Level 7		(3,197	)		3,514			5,227			4,190			3,928			25,942
40170 Revenue-Alzh Lev1		—			—			—			1,440			(1,440	)		—
Total AL Services Revenue		36,716			50,045			45,821			46,287			30,816			502,421
40515 Revenue-Other		65			1,130			1,203			913			937			16,650
40525 Revenue-Processing/App Fees		1,000			6,595			3,600			1,000			1,000			34,801
Total Other Revenue		1,065			7,725			4,803			1,913			1,937			51,451
40575 Rev-Process Fee Concessions		—			—			—			—			—			—
40015 Rev-Rent Concessions		—			—			—			—			—			(9,734	)
40215 Rev-A/L Concessions		—			—			—			—			—			—
Total Concessions		—			—			—			—			—			(9,734	)
Total Revenue		309,550			327,481			304,454			299,672			288,824			3,683,756
50005 Payroll Expense-Regular		82,292			75,409			78,206			79,331			79,615			917,364
50405 Payroll Expense-Overtime		3,093			3,670			3,277			3,223			3,449			52,335
50705 Payroll Expense-Doubletime		79			119			102			29			344			3,773
51005 Bonuses		(1,495	)		(2,245	)		(2,295	)		(2,845	)		(2,495	)		4,834
51505 Vacation, Sick, Holiday		7,009			4,261			6,102			5,919			5,284			74,302
51805 Employee Recognition		200			100			75			100			—			1,346
52005 Payroll Taxes		6,422			6,706			6,897			5,409			7,308			90,806
52505 401K/401A		229			230			134			363			215			2,204
52805 Group Insurance		7,607			8,648			3,664			4,911			4,589			64,351
53005 Worker’s Comp Insurance		5,945			7,004			6,291			6,291			6,854			71,539
Total Payroll Expenses		111,380			103,901			102,453			102,732			105,163			1,282,856
53305 Outside Service - Medical		—			—			—			—			35			197
53505 Temporary Services		—			—			—			—			2			8,010
53510 Temporary Services - AL		—			—			—			—			—			—
54005 Payroll Service		228			228			235			217			258			2,775
55005 Outside Service Other		(22	)		35			27			—			—			3,529
Total Purchase Services		206			263			262			217			295			14,511
Total Payroll Related		111,586			104,163			102,715			102,949			105,458			1,297,366
Total Payroll Related % Total Revenue		36	%		32	%		34	%		34	%		37	%		35	%
56505 Food		19,667			20,035			19,096			18,678			18,207			235,317
57005 Housekeeping		1,164			1,331			1,457			767			1,039			13,175
57505 Kitchen Supplies		2,259			2,007			3,579			2,471			4,855			28,269
58005 Assisted Living Supplies		160			607			156			220			145			2,496
59005 Laundry & Linen/Uniforms		1,360			906			306			1,366			1,254			13,385
59010 Laun/Lin/Unif Kitchen		—			—			—			—			—			—
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—
59505 Activities-Asst Lving		1,443			1,909			2,148			851			1,834			18,562
59510 Banquet Expense		500			500			500			536			3,369			10,364
59555 NMS-Foodservices		—			—			—			—			—			—
59560 NMS-Housekeeping		—			—			—			—			—			—
Total Variable Expense		26,553			27,296			27,242			24,888			30,703			321,568
60005 Office Supplies		1,359			1,150			496			2,785			2,305			25,429
61005 Repairs and Maint - Building		—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—
61015 Repairs -Electrical		—			—			—			—			—			2,517
61020 Repairs - Plumbing		300			—			483			—			1,015			2,983
61025 Repairs - Fire Systems		—			—			—			360			1,331			2,582
61030 Repairs - HVAC		290			1,543			574			2,422			5,218			17,547
61035 Repairs - Gen. Supplies		1,210			995			3,307			939			6,860			25,196
61040 Repairs - Equipment		—			431			738			501			150			4,888
61045 Repairs - Other Interior		—			—			200			—			—			1,640
61055 Repairs - Other Exterior		—			225			—			918			—			2,639
61100 Loss on Early Retirement Asset		—			—			—			—			—			—
Total Repair & Maintenance		1,800			3,194			5,301			5,140			14,573			59,990
61505 Contracts - Elevator		557			557			557			557			557			7,014
61510 Contracts - Floor Maint		1,093			1,063			1,253			853			1,253			11,246
61515 Contracts - Alarm/Fire		478			(58	)		232			1,627			—			3,884
61520 Contracts-HVAC		893			305			305			522			305			5,066
61525 Contracts - Pest Control		254			327			(32	)		486			311			4,543
61535 Contracts - Other		—			—			422			170			—			1,178
Total Service Contracts		3,275			2,193			2,737			4,215			2,426			32,931
62005 Land Maintenance		1,350			1,830			1,350			1,350			1,670			18,855
Total Land Maintenance		1,350			1,830			1,350			1,350			1,670			18,855
62505 Rental/Lease - Cable		2,531			2,531			2,531			2,531			3,024			30,869
62510 Rental/Lease - Security		—			—			—			—			—			—
62525 Rental/Lease - Furniture		—			—			—			—			—			—
62535 Rental/Lease - Equipment		972			1,222			1,413			986			645			13,073
62540 Rental/Lease - Auto		1,149			1,041			1,041			1,041			1,041			13,575
62555 Rental/Lease - Other		—			—			—			—			—			286
Total Rental and Leases		4,652			4,794			4,985			4,558			4,710			57,803
63010 Utilities - Electricity		17,358			18,065			16,469			8,982			7,953			145,710
63015 Utilities - Water		2,533			2,733			2,678			2,391			1,649			24,754
63020 Utilities - Gas		3,288			2,467			2,028			2,272			4,330			59,803
63025 Utilities - Telephone		753			802			745			609			878			8,722
63030 Utilities - Trash		770			920			939			820			777			9,583
Total Utilities		24,701			24,986			22,859			15,074			15,586			248,573
63505 Marketing and Advertising		1,456			1,603			605			286			866			11,203
63510 Printed Materials		686			346			196			216			608			3,326
63515 Special Events		1,495			908			502			522			2,017			9,640
63520 Yellow Pages		632			632			632			(5,104	)		261			3,507
63525 Newspaper and Magazine		200			—			64			818			4,157			8,386
63530 Advertising		—			—			63			32			27			900
64005 Referral Fees - Residents		2,148			2,020			—			1,000			1,600			13,283
Total Marketing and Advertising		6,615			5,509			2,062			(2,231	)		9,536			50,246
60510 Delivery		—			—			—			—			—			—
64505 Computers/Peripherals/Software		216			—			—			—			—			371
65005 Gas		400			295			418			377			259			3,763
65010 Auto Service And Repair		—			—			—			416			111			2,352
65015 Other Automobile		—			—			—			—			—			672
65505 Travel & Lodging		—			—			237			33			817			2,162
66005 Mileage		19			110			—			—			—			767
66505 Meals & Entertainment		—			250			—			—			—			520
67005 License and Fingerprints		581			638			387			971			387			7,223
68005 Dues and Subscriptions		36			211			12			12			430			1,861

PII - ITEM A-5

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2001
	Version	AA
	Community	Montego Heights
	Department	Total Department
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
68505 Seminars and Training		—			83			530			1,059			154			98			157
69005 Employee Recruiting		142			(140	)		2,293			5,393			2,082			1,371			108
69505 Other		654			200			995			2,847			1,095			61			125
69605 Discounts Lost		—			—			—			—			—			839			—
69610 Discounts Taken		(442	)		(527	)		(204	)		(234	)		(213	)		(154	)		(64	)
69525 Sales & Use Tax Due		—			—			—			—			—			—			—
Total Misc. Expenses		563			1,627			4,228			12,789			6,863			3,599			706
Total Operating Expense		183,412			179,522			190,903			187,588			183,441			172,815			173,006
Gross Margin		140,681			118,473			106,137			118,867			117,417			140,658			140,853
Gross Margin Percent		43	%		40	%		36	%		39	%		39	%		45	%		45	%
69705 Casualty Loss		—			—			—			—			—			—			—
69805 Bad Debt Expense		5,716			8,983			(4,684	)		5,216			(6,803	)		2,201			811
70005 Corporate Allocation		—			—			—			—			—			—			—
72305 Property Taxes		9,499			8,789			9,145			9,145			9,146			9,146			9,145
72405 Insurance-Liability & Hazard		2,569			2,569			2,569			4,632			4,632			4,087			4,379
Total Other Fees		20,926			17,198			7,030			18,992			6,974			15,434			14,335
72505 Accounting		596			320			458			458			486			486			549
73005 Legal		5,728			(4,861	)		1,083			426			471			5,419			1,151
73510 Donations & Contributions		—			—			—			—			—			—			—
74005 Consulting Fees		—			—			157			—			—			—			—
74015 Professional Fees - Other		—			—			—			—			—			—			28
75005 Property Management Fees		15,043			16,062			14,852			15,323			15,043			15,674			15,462
75105 Partnership Admin Fees		10,357			(1,923	)		2,181			2,877			3,868			(1,511	)		—
75510 Other Penalties/Fin. Fee		—			—			—			—			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—			—
75525 Collection Fees		—			—			—			—			—			—			—
Total Professional Fees		31,724			9,598			18,731			19,084			19,868			20,067			17,190
EBITDAR		88,031			91,677			80,376			80,792			90,575			105,157			109,329
EBITDAR Percent		27	%		31	%		27	%		26	%		30	%		34	%		35	%
77005 Operating Lease		—			—			—			—			—			—			—
77010 Add’l Lease		—			—			—			—			—			—			—
Total Leases		—			—			—			—			—			—			—
80005 Interest Income		—			(247	)		—			(1,654	)		(760	)		(829	)		(843	)
80505 Other Non-Operating Income		—			—			—			—			—			—			—
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—			—
Total Non-Operating Income/Expense		—			(247	)		—			(1,654	)		(760	)		(829	)		(843	)
83005 Interest Expense		52,149			52,404			52,117			52,113			52,081			52,058			52,035
83025 Int Exp MIP		—			6,285			3,142			3,142			4,660			4,660			4,660
Total Interest Expense		52,149			58,688			55,260			55,255			56,742			56,719			56,696
EBTDA		35,882			33,235			25,116			27,191			34,593			49,266			53,476
EBTDA Percent		11	%		11	%		8	%		9	%		11	%		16	%		17	%
77505 Depreciation		28,122			28,184			28,257			28,252			28,318			28,360			28,349
78005 Amortization		420			428			246			387			359			361			391
78015 Amortization - Start Up		—			—			—			—			—			—			—
Total Depreciation & Amortization		28,542			28,611			28,502			28,639			28,677			28,721			28,740
Net Income (Loss)		7,340			4,624			(3,386	)		(1,449	)		5,916			20,546			24,736

[Additional columns below]

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

	AUG			SEP			OCT			NOV			DEC			DEC YTD
68505 Seminars and Training		—			417			223			—			1,125			3,847
69005 Employee Recruiting		3,834			713			958			2,969			1,277			21,000
69505 Other		57			4,706			282			—			102			11,122
69605 Discounts Lost		—			69			—			—			3			912
69610 Discounts Taken		(2	)		2			(3	)		—			—			(1,842	)
69525 Sales & Use Tax Due		—			—			—			—			—			—
Total Misc. Expenses		5,142			7,410			2,514			4,778			4,511			54,730
Total Operating Expense		187,033			182,525			172,261			163,506			191,479			2,167,491
Gross Margin		122,517			144,956			132,193			136,166			97,346			1,516,265
Gross Margin Percent		40	%		44	%		43	%		45	%		34	%		41	%
69705 Casualty Loss		—			—			—			—			—			—
69805 Bad Debt Expense		2,155			(4,043	)		1,864			—			—			11,416
70005 Corporate Allocation		—			—			—			—			—			—
72305 Property Taxes		9,145			9,145			9,145			9,145			10,163			110,756
72405 Insurance-Liability & Hazard		4,885			4,632			4,767			4,632			4,632			48,983
Total Other Fees		16,184			9,734			15,776			13,777			14,794			171,154
72505 Accounting		549			549			1,049			3,249			2,984			11,735
73005 Legal		8,085			8,279			1,743			378			371,269			399,172
73510 Donations & Contributions		—			—			—			—			—			—
74005 Consulting Fees		—			250			—			—			—			407
74015 Professional Fees - Other		—			—			—			—			—			28
75005 Property Management Fees		15,709			16,374			15,223			14,984			14,441			184,188
75105 Partnership Admin Fees		6,254			3,591			3,580			3,841			(6,614	)		26,499
75510 Other Penalties/Fin. Fee		—			—			—			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—
75525 Collection Fees		—			—			—			—			—			—
Total Professional Fees		30,598			29,043			21,595			22,452			382,081			622,029
EBITDAR		75,735			106,179			94,822			99,938			(299,529	)		723,081
EBITDAR Percent		24	%		32	%		31	%		33	%		-104	%		20	%
77005 Operating Lease		—			—			—			—			—			—
77010 Add’l Lease		—			—			—			—			—			—
Total Leases		—			—			—			—			—			—
80005 Interest Income		(789	)		(843	)		(679	)		(803	)		(770	)		(8,217	)
80505 Other Non-Operating Income		—			(15	)		—			—			—			(15	)
87010 Extraordinary Items -Net Tax		—			—			—			—			—			—
Total Non-Operating Income/Expense		(789	)		(858	)		(679	)		(803	)		(770	)		(8,232	)
83005 Interest Expense		52,012			51,989			51,965			51,942			51,918			624,784
83025 Int Exp MIP		4,660			4,660			4,660			4,660			—			45,192
Total Interest Expense		56,673			56,649			56,626			56,602			57,918			669,976
EBTDA		19,852			50,388			38,876			44,139			(350,677	)		61,337
EBTDA Percent		6	%		15	%		13	%		15	%		-121	%		2	%
77505 Depreciation		28,317			29,056			28,379			28,447			28,508			340,550
78005 Amortization		380			384			384			384			389			4,513
78015 Amortization - Start Up		—			—			—			—			—			—
Total Depreciation & Amortization		28,697			29,441			28,763			28,831			28,897			345,062
Net Income (Loss)		(8,845	)		20,947			10,113			15,308			(379,575	)		(283,725	)

PII - ITEM A-5

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2000
	Version	AA
	Community	MONTEGO HEIGHTS LODGE
	Department	Total Department
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
40005 Revenue-Rental		262,715			261,256			270,139			258,772			256,161			247,303			266,027
40010 Revenue-Rent Refunds/Proration		(774	)		(618	)		(1,413	)		(1,985	)		—			—			—
Total Rental Revenue		261,941			260,639			268,725			256,787			256,161			247,303			266,027
40110 Revenue-AL Level 1		10,125			3,295			10,115			12,253			10,900			29,688			(8,509	)
40115 Revenue-AL Level 2		7,110			7,217			7,815			11,395			8,977			(575	)		14,768
40120 Revenue-AL Level 3		7,632			9,278			7,646			4,102			7,093			8,151			7,491
40125 Revenue-AL Level 4		6,200			11,775			6,035			2,930			2,910			—			5,390
40130 Revenue-AL Level 5		3,525			2,360			4,726			4,700			3,525			6,825			(8,000	)
40135 Revenue-AL Level 6		2,750			5,500			1,375			1,375			1,375			—			4,910
40140 Revenue-AL Level 7		3,340			590			3,340			3,515			590			—			—
40170 Revenue-Alzh Lev1		—			—			—			—			—			—			—
Total AL Services Revenue		40,682			40,014			41,051			40,270			35,370			44,089			16,050
40515 Revenue-Other		2,317			1,821			1,460			1,556			1,470			—			2,283
40525 Revenue-Processing/App Fees		15,950			3,430			1,800			4,200			1,800			—			500
Total Other Revenue		18,267			5,251			3,260			5,756			3,270			—			2,783
40575 Rev-Process Fee Concessions		—			—			—			—			—			—			—
40015 Rev-Rent Concessions		(3,200	)		(3,232	)		(7,430	)		(5,573	)		—			—			—
40215 Rev-A/L Concessions		—			—			—			—			—			—			—
Total Concessions		(3,200	)		(3,232	)		(7,430	)		(5,573	)		—			—			—
Total Revenue		317,690			302,672			305,606			297,240			294,800			291,392			284,860
50005 Payroll Expense-Regular		74,310			76,532			83,860			72,654			76,372			57,716			70,912
50405 Payroll Expense-Overtime		7,520			6,757			4,031			4,834			4,978			4,802			8,676
50705 Payroll Expense-Doubletime		822			672			230			275			365			546			554
51005 Bonuses		1,500			1,800			5,059			759			1,200			2,000			1,700
51505 Vacation, Sick, Holiday		8,802			6,877			4,540			2,966			(72	)		3,879			4,579
51805 Employee Recognition		—			—			—			—			—			—			—
52005 Payroll Taxes		10,631			9,829			9,838			8,523			8,602			5,762			7,907
52505 401K/401A		192			216			136			135			119			223			183
52805 Group Insurance		3,478			4,101			6,502			4,340			5,049			4,517			4,075
53005 Worker’s Comp Insurance		2,729			2,729			3,384			6,008			5,772			5,179			5,572
Total Payroll Expenses		109,985			109,513			117,580			100,494			102,384			84,623			104,158
53305 Outside Service - Medical		1,610			295			685			285			—			—			—
53505 Temporary Services		3,201			2,238			827			295			3,903			5,845			5,845
53510 Temporary Services - AL		149			—			—			—			—			—			—
54005 Payroll Service		—			366			187			227			213			216			206
55005 Outside Service Other		25			14			3			—			—			—			—
Total Purchase Services		4,984			2,913			1,702			806			4,116			6,062			6,051
Total Payroll Related		114,969			112,426			119,281			101,300			106,501			90,685			110,209
Total Payroll Related % Total Revenue		36	%		37	%		39	%		34	%		36	%		31	%		39	%
56505 Food		25,191			18,910			25,633			17,828			21,591			20,992			21,553
57005 Housekeeping		910			2,714			1,655			971			2,204			1,847			1,448
57505 Kitchen Supplies		2,738			1,502			2,212			1,076			1,773			1,814			1,875
58005 Assisted living Supplies		229			504			590			59			5			110			162
59005 Laundry & Linen/Uniforms		4,507			1,335			1,862			1,600			866			676			618
59010 Laun/Lin/Unif Kitchen		—			—			—			—			—			—			—
59015 Laund/Lin/Unif Housekeeping		—			—			—			—			—			—			—
59505 Activities-Asst Lving		1,287			717			858			1,252			(70	)		(56	)		2,330
59510 Banquet Expense		221			500			500			—			—			—			—
59555 NMS-Foodservices		—			—			—			—			4,646			(1,903	)		2,571
59560 NMS-Housekeeping		—			—			—			—			4,201			1,316			2,289
Total Variable Expense		35,082			26,181			33,309			22,785			35,215			24,797			32,845
60005 Office Supplies		883			2,943			2,002			314			1,806			1,077			3,342
61005 Repairs and Maint - Building		—			—			—			—			—			—			—
61010 Repairs - Phone System		—			—			—			—			—			—			—
61015 Repairs - Electrical		35			160			179			139			65			—			—
61020 Repairs - Plumbing		707			459			161			441			285			—			172
61025 Repairs - Fire Systems		—			—			—			232			—			—			—
61030 Repairs - HVAC		622			369			1,134			94			—			—			—
61035 Repairs - Gen. Supplies		162			1,081			(41	)		307			1,127			1,132			961
61040 Repairs - Equipment		480			372			313			28			—			—			—
61045 Repairs - Other Interior		556			522			737			303			67			—			—
61055 Repairs - Other Exterior		—			—			599			—			433			—			—
61100 Loss on Early Retirement Asset		—			—			—			—			—			—			—
Total Repair & Maintenance		2,562			2,962			3,082			1,544			1,977			1,132			1,133
61505 Contracts - Elevator		557			855			557			1,256			667			557			557
61510 Contracts - Floor Maint		411			411			411			411			411			411			—
61515 Contracts - Alarm/Fire		509			—			945			945			(856	)		—			—
61520 Contracts-HVAC		—			—			—			—			—			881			—
61525 Contracts - Pest Control		227			227			227			227			227			2,000			227
61535 Contracts - Other		257			218			690			461			62			499			86
Total Service Contracts		1,961			1,711			2,830			3,300			510			4,348			871
62005 Land Maintenance		1,350			1,656			1,483			1,945			3,903			355			210
Total Land Maintenance		1,350			1,656			1,483			1,945			3,903			355			210
62505 Rental/Lease - Cable		2,531			2,531			2,531			2,531			2,531			2,531			2,531
62510 Rental/Lease - Security		—			—			—			—			—			978			—
62525 Rental/Lease - Furniture		—			—			—			—			—			—			—
62535 Rental/Lease - Equipment		499			573			583			1,432			874			758			142
62540 Rental/Lease - Auto		—			—			—			—			—			—			—
62555 Rental/Lease - Other		—			—			—			—			—			—			—
Total Rental and Leases		3,030			3,105			3,115			3,963			3,405			4,267			2,673
63010 Utilities - Electricity		8,560			7,308			8,804			8,388			11,607			13,404			11,839
63015 Utilities - Water		651			988			1,425			2,940			1,126			1,523			1,978
63020 Utilities - Gas		3,575			3,951			3,622			2,926			(2,800	)		2,815			3,154
63025 Utilities - Telephone		700			597			602			637			584			607			649
63030 Utilities -Trash		770			770			812			812			770			—			1,582
Total Utilities		14,255			13,614			15,265			15,703			11,286			18,350			19,201
63505 Marketing and Advertising		3,922			3,408			966			1,421			530			722			6,651
63510 Printed Materials		—			27			—			308			1,154			—			205
63515 Special Events		255			1,391			352			931			1,608			701			431
63520 Yellow Pages		—			—			—			—			—			—			—
63525 Newspaper and Magazine		—			—			—			—			—			—			—
63530 Advertising		—			—			—			—			—			—			—
64005 Referral Fees - Residents		—			1,206			898			2,200			—			—			—
Total Marketing and Advertising		4,177			6,033			2,215			4,860			3,292			1,423			7,287
60510 Delivery		—			—			—			—			—			—			—
64505 Computers/Peripherals/Software		—			—			—			—			—			—			—
65005 Gas		645			137			—			35			—			—			—
65010 Auto Service And Repair		458			166			(166	)		680			687			—			—
65015 Other Automobile		84			—			—			—			—			—			—
65505 Travel & Lodging		212			6			51			—			—			—			—
66005 Mileage		67			7			—			39			85			—			42
66505 Meals & Entertainment		—			—			—			—			66			—			—
67005 License and Fingerprints		453			377			320			603			437			306			2,514
68005 Dues and Subscriptions		175			—			520			—			—			443			292

[Additional columns below]

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

	AUG			SEP		OCT			NOV			DEC			DEC YTD
40005 Revenue-Rental		267,851			288,951		275,526			220,162			253,878			3,128,740
40010 Revenue-Rent Refunds/Proration		—			650		—			(1,198	)		(1,738	)		(7,076	)
Total Rental Revenue		267,851			289,601		275,526			218,964			252,140			3,121,664
40110 Revenue-AL Level 1		12,011			9,567		10,637			3,664			6,947			110,692
40115 Revenue-AL Level 2		8,663			9,975		9,775			9,483			5,080			99,684
40120 Revenue-AL Level 3		5,294			5,425		7,175			3,875			5,341			78,501
40125 Revenue-AL Level 4		3,325			4,075		3,500			1,550			6,425			54,115
40130 Revenue-AL Level 5		2,605			6,650		5,475			4,500			3,160			40,051
40135 Revenue-AL Level 6		3,350			1,375		1,375			2,880			2,770			29,035
40140 Revenue-AL Level 7		—			2,750		2,750			2,750			2,750			22,375
40170 Revenue-Alzh Lev1		—			—		—			—			—			—
Total AL Services Revenue		35,247			39,817		40,687			28,704			32,473			434,453
40515 Revenue-Other		1,751			991		3,849			1,015			2,376			20,888
40525 Revenue-Processing/App Fees		—			—		—			—			—			27,680
Total Other Revenue		1,751			991		3,849			1,015			2,376			48,568
40575 Rev-Process Fee Concessions		—			—		—			—			—			—
40015 Rev-Rent Concessions		(1,810	)		—		(1,095	)		(2,172	)		—			(24,512	)
40215 Rev-A/L Concessions		—			—		—			—			—			—
Total Concessions		(1,810	)		—		(1,095	)		(2,172	)		—			(24,512	)
Total Revenue		303,039			330,409		318,966			246,510			286,988			3,580,173
50005 Payroll Expense-Regular		87,050			75,187		77,420			78,235			79,078			909,326
50405 Payroll Expense-Overtime		6,270			4,237		3,823			3,551			3,856			63,334
50705 Payroll Expense-Doubletime		545			210		227			473			262			5,181
51005 Bonuses		1,100			1,700		718			1,700			1,500			20,736
51505 Vacation, Sick, Holiday		6,192			10,712		5,334			7,181			5,173			66,163
51805 Employee Recognition		—			—		—			—			—			—
52005 Payroll Taxes		7,498			6,982		7,486			7,496			7,520			98,073
52505 401K/401A		173			156		169			154			350			2,206
52805 Group Insurance		1,023			4,095		3,680			4,011			4,868			49,741
53005 Worker’s Comp Insurance		6,692			5,891		5,758			6,327			6,067			62,110
Total Payroll Expenses		116,543			109,170		104,615			109,127			108,676			1,276,868
53305 Outside Service - Medical		—			—		—			—			—			2,875
53505 Temporary Services		—			24,232		—			—			—			46,385
53510 Temporary Services - AL		—			—		—			—			—			149
54005 Payroll Service		212			237		229			226			227			2,547
55005 Outside Service Other		122			2,258		—			—			33			2,456
Total Purchase Services		335			26,727		229			226			260			54,410

Total Payroll Related	116,878		135,897		104,844		109,353		108,936		1,331,279
Total Payroll Related % Total Revenue	39	%	41	%	33	%	44	%	38	%	37	%
56505 Food	17,585		15,832		18,811		17,729		44,760		266,416
57005 Housekeeping	1,292		1,318		1,306		1,155		1,608		18,427
57505 Kitchen Supplies	1,272		1,258		1,401		1,317		1,048		19,288
58005 Assisted Living Supplies	74		(2	)	87		9		336		2,164
59005 Laundry & Linen/Uniforms	516		1,571		410		1,482		2,966		18,407
59010 Laun/Lin/Unif Kitchen	—		—		—		—		—		—
59015 Laund/Lin/Unif Housekeeping	—		—		—		—		—		—
59505 Activities-Asst Lving	912		1,595		1,527		787		1,509		12,648
59510 Banquet Expense	500		500		904		96		1,760		4,981
59555 NMS-Foodservices	—		—		—		(7,814	)	—		(2,500	)
59560 NMS-Housekeeping	—		—		—		1,864		—		9,670
Total Variable Expense	22,152		22,072		24,445		16,626		53,988		349,498
60005 Office Supplies	1,841		2,363		2,832		1,662		3,583		24,647
61005 Repairs and Maint - Building	—		—		—		—		—		—
61010 Repairs - Phone System	—		—		—		—		—		—
61015 Repairs - Electrical	222		473		—		552		363		2,188
61020 Repairs - Plumbing	803		—		1,634		612		517		5,790
61025 Repairs - Fire Systems	128		—		—		—		—		360
61030 Repairs - HVAC	113		—		1,036		—		1,436		4,804
61035 Repairs - Gen. Supplies	535		1,201		1,111		940		1,091		9,605
61040 Repairs - Equipment	65		25		—		—		717		2,000
61045 Repairs - Other Interior	56		532		602		—		265		3,640
61055 Repairs - Other Exterior	—		—		522		226		—		1,780
61100 Loss on Early Retirement Asset	—		—		—		—		—		—
Total Repair & Maintenance	1,921		2,230		4,905		2,331		4,388		30,167
61505 Contracts - Elevator	741		557		557		557		557		7,976
61510 Contracts - Floor Maint	75		(486	)	411		411		411		3,285
61515 Contracts - Alarm/Fire	1,177		—		420		232		—		3,372
61520 Contracts-HVAC	881		—		—		881		—		2,642
61525 Contracts - Pest Control	(227	)	454		227		454		227		4,497
61535 Contracts - Other	—		—		356		249		—		2,879
Total Service Contracts	2,647		525		1,971		2,783		1,195		24,651
62005 Land Maintenance	1,140		1,488		1,350		1,539		271		16,690
Total Land Maintenance	1,140		1,488		1,350		1,539		271		16,690
62505 Rental/Lease - Cable	2,531		2,531		2,531		2,531		2,531		30,376
62510 Rental/Lease - Security	(53	)	—		—		—		—		925
62525 Rental/Lease - Furniture	—		—		—		—		—		—
62535 Rental/Lease - Equipment	1,035		938		988		1,144		1,014		9,981
62540 Rental/Lease - Auto	—		1,041		1,041		1,041		1,257		4,381
62555 Rental/Lease - Other	—		—		—		—		—		—
Total Rental and Leases	3,513		4,511		4,561		4,716		4,803		45,662
63010 Utilities - Electricity	13,962		11,671		10,480		7,523		7,622		121,168
63015 Utilities - Water	3,427		2,062		2,501		1,368		1,823		21,810
63020 Utilities - Gas	3,177		2,884		3,575		5,149		7,086		39,114
63025 Utilities - Telephone	514		471		2,249		743		958		9,310
63030 Utilities -Trash	770		1,076		812		306		1,540		10,020
Total Utilities	21,850		18,164		19,616		15,089		19,029		201,423
63505 Marketing and Advertising	4,103		413		711		434		2,565		25,846
63510 Printed Materials	275		216		582		—		214		2,981
63515 Special Events	440		244		369		1,133		754		8,608
63520 Yellow Pages	—		—		—		—		3,499		3,499
63525 Newspaper and Magazine	—		578		147		32		109		865
63530 Advertising	—		—		—		—		—		—
64005 Referral Fees - Residents	—		4,950		2,634		—		4,058		15,945
Total Marketing and Advertising	4,817		6,400		4,442		1,598		11,199		57,745
60510 Delivery	—		—		—		—		—		—
64505 Computers/Peripherals/Software	—		—		—		—		—		—
65005 Gas	—		268		—		—		—		1,084
65010 Auto Service And Repair	—		—		96		298		—		2,220
65015 Other Automobile	—		—		—		—		—		84
65505 Travel & Lodging	384		192		—		—		—		845
66005 Mileage	—		—		122		—		—		362
66505 Meals & Entertainment	—		—		—		—		—		66
67005 License and Fingerprints	1,659		666		2,079		975		5,374		15,762
68005 Dues and Subscriptions	—		398		222		—		772		2,823

PII - ITEM A-5

Database:	POLAPSVR
Cube:	Financial Data
Page:	Year	2000
	Version	AA
	Community	MONTEGO HEIGHTS LODGE
	Department	Total Departments
	Month	Along Columns
	GLAccount	Along Rows

OLAPTable

	JAN			FEB			MAR			APR			MAY			JUN			JUL
68505 Seminars and Training		(140	)		908			73			—			—			30			—
69005 Employee Recruiting		572			198			973			482			894			248			—
69505 Other		182			152			513			521			(51	)		44			10
69605 Discounts Lost		—			—			—			—			—			—			—
69610 Discounts Taken		(69	)		(40	)		(68	)		(67	)		(22	)		—			—
69525 Sales & Use Tax Due		—			—			—			—			—			—			—
Total Misc. Expenses		2,639			1,911			2,216			2,292			2,098			1,072			2,859
Total Operating Expense		180,908			172,542			184,798			158,006			169,994			147,506			180,631
Gross Margin		136,782			130,130			120,808			139,233			124,806			143,886			104,229
Gross Margin Percent		43	%		43	%		40	%		47	%		42	%		49	%		37	%
69705 Casualty Loss		—			—			—			—			—			—			—
69805 Bad Debt Expense		2,315			5,055			831			446			333			(8,978	)		4,893
70005 Corporate Allocation		—			—			—			—			—			—			—
72305 Property Taxes		8,948			7,903			7,756			7,756			11,949			8,948			8,948
72405 Insurance-Liability & Hazard		1,933			1,933			1,929			2,554			2,554			2,569			2,569
72410 Mortgage Insurance Premium		—			—			—			—			—			—			—
Total Other Fees		13,196			14,891			10,515			10,755			14,836			2,539			16,410
72505 Accounting		417			417			417			417			417			346			346
73005 Legal		877			568			164			1,600			584			784			1,306
73510 Donations & Contributions		—			—			—			—			—			—			—
74005 Consulting Fees		—			—			—			—			—			—			—
74015 Professional Fees - Other		—			—			—			—			—			—			—
75005 Property Management Fees		15,147			14,917			16,234			14,862			14,740			13,170			15,643
75105 Partnership Admin Fees		4,842			4,740			3,822			5,649			3,767			5,921			9,770
75510 Other Penalties/Fin. Fee		—			—			—			—			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			250			—
75520 Franchise Tax Filing Fee		—			—			—			—			—			—			—
75525 Collection Fees		—			—			—			—			—			—			—
Total Professional Fees		21,283			20,641			20,637			22,527			19,508			20,471			27,064
EBITDAR		102,303			94,599			89,655			105,951			90,463			120,876			60,755
EBITDAR Percent		32	%		31	%		29	%		36	%		31	%		41	%		21	%
77005 Operating Lease		—			—			—			—			—			—			—
77010 Add’l Lease		—			—			—			—			—			—			—
Total Leases		—			—			—			—			—			—			—
80005 Interest Income		—			—			—			—			—			(14,206	)		(3,834	)
80505 Other Non-Operating Income		—			—			—			—			—			—			—
87010 Extraordinary Items-		—			—			—			—			—			—			—
Total Non-Operating Income/Expense		—			—			—			—			—			(14,206	)		(3,834	)
83005 Interest Expense		55,357			55,306			55,256			55,205			55,153			55,102			4,912
83025 Int Exp MIP		—			—			—			—			—			—			—
Total Interest Expense		55,357			55,306			55,256			55,205			55,153			55,102			4,912
EBTDA		46,947			39,292			34,400			50,746			35,303			79,980			59,676
EBTDA Percent		15	%		13	%		11	%		17	%		12	%		27	%		21	%
77505 Depreciation		27,768			27,865			27,926			27,919			27,919			27,918			27,990
78005 Amortization		12,460			12,213			12,454			11,971			12,213			12,213			12,213
78015 Amortization - Start Up		—			—			—			—			—			—			—
Total Depreciation & Amortization		40,228			40,077			40,380			39,890			40,131			40,131			40,203
Net Income (Loss)		6,718			(785	)		(5,980	)		10,856			(4,822	)		39,850			19,473

[Additional columns below]

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

	AUG			SEP			OCT			NOV			DEC			DEC YTD
68505 Seminars and Training		106			202			298			135			610			2,221
69005 Employee Recruiting		—			641			—			—			832			4,839
69505 Other		16			—			—			233			84			1,706
69605 Discounts Lost		—			—			—			—			—			—
69610 Discounts Taken		—			—			(121	)		(103	)		(22	)		(511	)
69525 Sales & Use Tax Due		—			—			—			—			—			—
Total Misc. Expenses		2,165			2,366			2,696			1,538			7,650			31,502
Total Operating Expense		178,924			196,017			171,661			157,236			215,040			2,113,264
Gross Margin		124,115			134,392			147,305			89,274			71,948			1,466,909
Gross Margin Percent		41	%		41	%		46	%		36	%		25	%		41	%
69705 Casualty Loss		—			—			—			—			—			—
69805 Bad Debt Expense		—			9			15,620			(19,811	)		(667	)		44
70005 Corporate Allocation		—			—			—			—			—			—
72305 Property Taxes		8,948			8,948			8,948			8,948			10,128			108,129
72405 Insurance-Liability & Hazard		2,569			2,569			2,569			2,569			2,569			28,886
72410 Mortgage Insurance Premium		—			—			—			—			4,254			4,254
Total Other Fees		11,517			11,526			27,137			(8,294	)		16,284			141,313
72505 Accounting		346			472			346			346			1,664			5,949
73005 Legal		1,051			5,593			410			348			353			13,636
73510 Donations & Contributions		—			—			—			—			—			—
74005 Consulting Fees		—			—			—			—			116			116
74015 Professional Fees - Other		—			—			—			—			—			—
75005 Property Management Fees		15,152			16,520			15,947			17,342			9,335			179,009
75105 Partnership Admin Fees		4,368			4,479			2,667			14,711			(11,056	)		53,679
75510 Other Penalties/Fin. Fee		—			—			—			—			—			—
75515 Licenses & Fees Legal		—			—			—			—			—			—
75505 Bank Charges		—			—			—			—			—			250
75520 Franchise Tax Filing Fee		—			—			—			—			—			—
75525 Collection Fees		—			—			—			—			—			—
Total Professional Fees		20,916			27,064			19,369			32,747			411			252,638
EBITDAR		91,681			95,802			100,799			64,821			55,254			1,072,958
EBITDAR Percent		30	%		29	%		32	%		26	%		19	%		30	%
77005 Operating Lease		—			—			—			—			—			—
77010 Add’l Lease		—			—			—			—			—			—
Total Leases		—			—			—			—			—			—
80005 Interest Income		(1,793	)		(276	)		(139	)		(77	)		(77	)		(20,402	)
80505 Other Non-Operating Income		—			—			—			—			—			—
87010 Extraordinary Items-		—			—			—			—			80,761			80,761
Total Non-Operating Income/Expense		(1,793	)		(276	)		(139	)		(77	)		80,684			60,359
83005 Interest Expense		54,997			54,944			54,890			54,837			54,299			610,258
83025 Int Exp MIP		—			—			—			—			—			—
Total Interest Expense		54,997			54,944			54,890			54,837			54,299			610,258
EBTDA		38,477			41,134			46,048			10,061			(79,729	)		402,341
EBTDA Percent		13	%		12	%		14	%		4	%		-28	%		11	%
77505 Depreciation		27,815			27,916			28,128			28,121			27,495			334,779
78005 Amortization		12,213			12,213			12,213			12,213			4,745			139,331
78015 Amortization - Start Up		—			—			—			—			—			—
Total Depreciation & Amortization		40,028			40,129			40,340			40,334			32,239			474,110
Net Income (Loss)		(1,551	)		1,005			5,707			(30,273	)		(111,968	)		(71,769	)

ADDENDA

ADDENDUM F: Comparable Land Sale Data Sheets

Land Comparable 1

	4756 Clayton Road
	Concord, CA 94521
593-C4	County: Contra Costa
Zoning:   PD	Parcels and/or Legal:
	133-080-039

POTENTIAL LAND USES

     Potential Land Uses:

Apartment:	Yes	Industrial:	No	Utilities Available:
Free Standing Retail:	No	Office:	No	all to site
Golf:	No	Shopping Center:	No
Health Care:	No	Single Family:	No
Hospitality:	No	Special Purpose:	No

TRANSACTION INFORMATION

Sale Status:	Recorded Sale
Financing:	Cash To Seller
Sale Date:	7/2002

Sale Price

Reported:			4,400,000
Cash Equivalent:			4,400,000
			0
Adjusted:			4,400,000
	$ Per SqFt:	$	20.91

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		210,438.00			4.83
Net Usable Area:		210,438.00			4.83
Percent Usable:		100.00	%
Ground Leased:		No

VERIFICATION

Recording Reference: 239093
Grantor: Master Links Investment Corp.

Grantee: Oakmont SL of concord

Verification Contact:
   Public records

REMARKS

At the time of sale the site was improved with a heavily depreciated minature golf course. Reportedly, the buyer is planning on replacing these improvements with a 146-unit apartment complex.

Land Comparable 2

Property Name: Hotel Site	2611 Contra Costa Blvd
	Pleasant Hill, CA 94523 - 4220
592 - C/6	County: Contra Costa
Zoning: PUD, Pleasant Hill	Parcels and/or Legal:
	APN: 149-110-085,086 Legal: Por lots 13 thru 19
	Walnut Creek Acres Unit 1 bk 25 pgs 848 & 849

POTENTIAL LAND USES

     Potential Land Uses:

Apartment:	No	Industrial:	No	Utilities Available:
		Office:	No	All Available to the Site
Golf:	No
Health Care:	No	Single Family:	No

TRANSACTION INFORMATION

Sale Status:	Recorded Sale
Financing:	Cash To Seller
Sale Date:	9/2001

Sale Price

Reported:			2,200,000
Cash Equivalent:			2,200,000
			0
Adjusted:			2,200,000
	$ Per SqFt:	$	17.49

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		125,801.00			2.89
Net Usable Area:		125,801.00			2.89
Percent Usable:		100.00	%

VERIFICATION

Recording Reference: 288121
Grantor: Pleasant Hill Redevelopment Agency

Grantee: Pleasant Hill Lodging Partner (LP)

Verification Contact:

    Seller: Diane Kearns (925) 671-5215
    Buyer: Roy Baker (316) 681-5100

REMARKS

The subject property was purchased to construct a 132-room all suites hotel. This hotel is under construction at this time.

Land Comparable 3

		4640 Pacheco Boulevard
		Martinez, CA 94553
n/a		County: Contra Costa
Zoning:	PD	Parcels and/or Legal:
		161-262-023-5

POTENTIAL LAND USES

Potential Land Uses:
Apartment:	Yes		Utilities Available:
			None Available
		Proposed Use
		120 Unit Apartment
		Complex

TRANSACTION INFORMATION

Sale Status:	Recorded Sale
Financing:	Cash To Seller
Sale Date:	3/1999

Sale Price

Reported:			3,500,000
Cash Equivalent:			3,500,000
Capital Costs:			100,000
Adjusted:			3,600,000
	$ Per SqFt:	$	8.42

SITE ATTRIBUTES

	SqFt			Acres
Total Land Area:		427,759.00			9.82
Net Usable Area:		427,759.00			9.82
Percent Usable:		100.00	%

VERIFICATION

Recording Reference: 111016
Grantor: Muirterco, Inc.

Grantee: Nhpahp Development II LP

Verification Contact:
   Appraiser         ------ ( ) -

REMARKS

     Vacant site located along the south side of Pacheco Boulevard in Martinez. Site has rolling topography. No utilities were available to the site. A cost of $100,000 has been estimated to bring utilities to the property. The transaction had an extended escrow and did not close until 2000. Site was originally proposed for a 120 unit multi-family complex.

Land Comparable 4

	100 Chilpancingo Parkway
Property Subtype: Vacant building site
	Pleasant Hill, CA
	County: Contra Costa
Zoning: PUD	Parcels and/or Legal:
	153-030-077-9

POTENTIAL LAND USES

Potential Land Uses:
Apartment:	Yes		Utilities Available:
			All Public
		Proposed Use
		Apartments

TRANSACTION INFORMATION

Sale Status:	Recorded Sale
Financing:	Cash To Seller
Sale Date:	7/1998

Sale Price

Reported:		1,574,000
Cash Equivalent:		1,574,000
		0
Adjusted:		1,574,000
$ Per SqFt:	$	9.00

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		174,936.00			4.02
Net Usable Area:		174,936.00			4.02
Percent Usable:		100.00	%
Ground Leased:		No

VERIFICATION

Recording Reference: 181882, 181883
Grantor: Diamond Property, County of Contra Costa

Grantee: Bridge Housing Corp.

Verification Contact:
   Buyer

REMARKS

Transaction is an assemblage of two parcels located Chilpancingo Parkway. One of the two sites acquired was improved with a vacant restaurant building. The buyer planned to demolish the restaurant and use both sites for construction of a 71-unit, low income housing complex. Construction on the project is projected for the Spring of 2000. We estimated demolition costs on the 12,677 square foot restaurant building at $2.00 per square foot.

Land Comparable 5

		Northwest corner of Crow Canyon Road and
		San Ramon, CA 94587
		County: Contra Costa
Zoning:	R-M, Multi-Family	Parcels and/or Legal:
		208-510-001

POTENTIAL LAND USES

Potential Land Uses:
Apartment:	Yes		Utilities Available:
			All available
		Proposed Use     Townhomes

TRANSACTION INFORMATION

Sale Status:	Recorded Sale
Financing:	Cash To Seller
Sale Date:	4/1998

Sale Price

Reported:		4,600,000
Cash Equivalent:		4,600,000
Capital Costs:		180,000
Adjusted:		4,780,000
$ Per SqFt:	$	10.97

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		435,600.00			10.00
Net Usable Area:		435,600.00			10.00
Percent Usable:		100.00	%

VERIFICATION

Recording Reference: 080683
Grantor: John Muir/Mt. Diablo Health

Grantee: Braddock & Logan

Verification Contact:
   Public Records —

REMARKS

This is an assemblage purchase of two sites. One site was improved with a 60,000 SF medical office building which the buyer was responsible for demolition. The estimated cost of demolition was $3.00/SF or $180,000. Site was purchased for construction of an 85-unit townhome project.

ADDENDA

ADDENDUM G: Comparable Improved Sale Data Sheets

Improved Comparable 1

Property Name: Carmel Village

Property Type: Senior Housing

Property Subtype: Assisted Living 17077 San Mateo Street


Fountain Valley, CA 92708
County: Orange

IMPROVEMENTS

Class:	B
Est. Gross Building Area:	117,666
Est. Net Building Area:	117,666
Year Built:	1986
Quality:	Good
Condition:	Average
Buildings:	3
Stories:	3
Fire Sprinklers:	Yes

TRANSACTION INFO

Sale Status:	Recorded Sale
Interest:	Fee Simple
Sale Date:	01/15/2003

Sale Price

Reported Price:		$	23,125,000
Cash Equivalent:		$	23,125,000
Adj. Sale Price:		$	23,125,000
	$ Per SqFt:	$	196.53
	$ Per Unit:	$	122,354
	Cap Rate:		11.14	%
	EGIM:		4.24

OCCUPANCY

Occupancy at Sale:	97.00	%
Seniors

FINANCIAL ANALYSIS

	Amount		Percent
Potential Gross Income:	$	5,450,000
Effective Gross	$	5,450,000
Operating Expenses:	$	2,875,000		0.53	%
Net Operating Income:	$	2,575,000

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		139,828			3.21
Net Usable Area:		139,828			3.21
Percent Usable:		100	%
Ground Leased:		No

SENIOR HOUSING INFO

Number of AL Units:	94
Number of IL Units:	95
Number of Cottage Units:	0
Number of ALZ Units:	0
Total Number of Units:	189
Average Unit Size:	623
No. of Licensed Beds:	200
Subsidized:	No

VERIFICATION

Grantor: Carmel Village Retirement Residence, Inc.
Grantee: 625 Management Company LLC
Verification Contact:
   Michelle Butts, 714.962.6667

REMARKS

This facility is licensed for 200 beds, but is operated at 189 units. Approximately one-half of the units are for independent living with the other half for assisted living. Assisted living residents pay from $350 to $1,400 per month in additional care fees. It was reported that over 70 percent of the residents are paying first level charges ($350 per month). It was reported that several of the buyer’s parties were stockholders of the selling entity, however, this was reported to be an arm’s length sale.

Improved Comparable 2

Property Name: Emerald Hills

Property Type: Senior Housing

Property Subtype: Assisted Living 11550 Education Street


Auburn, CA
County: Placer

IMPROVEMENTS

Class:	B
Est. Gross Building Area:	61,677
Est. Net Building Area:	61,677
Exterior Walls:	Wood siding
Year Built:	1999
Quality:	Average
Condition:	Average
Buildings:	1
Stories:	3

TRANSACTION INFO

Sale Status:	Recorded Sale
Interest:	Fee Simple
Financing:	Cash To Seller
Sale Date:	09/06/2002

Sale Price

Reported Price:		$	8,800,000
Cash Equivalent:		$	8,800,000
Adj. Sale Price:		$	8,800,000
	$ Per SqFt:	$	142.68
	$ Per Unit:	$	98,876
	$ Per Eff Bed:	$	94,624
	Cap Rate:		11.00	%
	EGIM:		4.00

OCCUPANCY

Occupancy at Sale:	100.00	%
Seniors

FINANCIAL ANALYSIS

	Amount		Percent
Potential Gross Income:	$	2,475,000
Effective Gross	$	2,475,000
Operating Expenses:	$	1,490,000		0.60	%
Net Operating Income:	$	985,000

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		108,900			2.50
Net Usable Area:		108,900			2.50
Percent Usable:		100	%
Ground Leased:		No

SENIOR HOUSING INFO

Number of AL Units:		53
Number of IL Units:		20
Number of Cottage Units:		0
Number of ALZ Units:		16
Total Number of Units:		89
Average Unit Size:		693
No. of Licensed Beds:		97
No. of Effective Beds:		93
Subsidized:		No
Amenities:
	Common areas, dining room

VERIFICATION

Grantor: ALCO IV, LLC
Grantee: Healthcare Property Investors, Inc.
Verification Contact:
   Seller

REMARKS

This property is located 60 miles east of Sacramento in Auburn. Facility offers studio alcove units (346 - 568 SF), one-bedroom units (483 SF) and two-bedroom units (728 SF). This was a sale lease-back transaction where the buyer will lease the facility to Emeritus for 15 years with a 10-year option. Emeritus has managed the facility since it was completed. The lease rate is based on 11.50 percent of the purchase price with 3.0 percent annual escalations. Expense amount shown includes a 5.0 percent management fee and reserves allowance.

Improved Comparable 3

Property Name: Mapleridge of Laguna

Property Type: Senior Housing

Property Subtype: Assisted Living 6727 Laguna Park Drive


Elk Grove, CA
County: Sacramento

IMPROVEMENTS

Class:	B
Est. Gross Building Area:	50,476
Est. Net Building Area:	50,476
Exterior Walls:	Wood siding
Year Built:	1999
Quality:	Good
Condition:	Good
Buildings:	1
Stories:	2
Fire Sprinklers:	Yes

TRANSACTION INFO

Sale Status:	Recorded Sale
Interest:	Fee Simple
Financing:	Cash To Seller
Sale Date:	01/24/2002

Sale Price

Reported Price:		$	8,055,600
Cash Equivalent:		$	8,055,600
Adj. Sale Price:		$	8,055,600
	$ Per SqFt:	$	159.59
	$ Per Unit:	$	95,900
	Cap Rate:		10.55	%
	EGIM:		3.16

OCCUPANCY

Occupancy at Sale:	76.00	%
Seniors

FINANCIAL ANALYSIS

	Amount		Percent
Potential Gross Income:	$	2,550,000
Effective Gross	$	2,550,000
Operating Expenses:	$	1,700,000		0.67	%
Net Operating Income:	$	850,000

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		186,437			4.28
Net Usable Area:		186,437			4.28
Percent Usable:		100	%
Ground Leased:		No

SENIOR HOUSING INFO

Number of AL Units:	84
Number of IL Units:	0
Number of Cottage Units:	0
Number of ALZ Units:	0
Total Number of Units:	84
Average Unit Size:	601
Subsidized:	No

VERIFICATION

Grantor: Marriott Senior Living Services
Grantee: CNL Retirement Properties
Verification Contact:
    Buyer, CNL

REMARKS

This is a newer assisted living facility located in the south part of the Sacramento MSA in Elk Grove. Property was part of a five-facility joint venture transaction between CNL and Marriott. Marriott was to continue operating the property. Facility was in lease-up at time of sale. Income and expense data based on stabilized operating conditions.

Improved Comparable 4

Property Name: Woodmark at Summit

Property Type: Senior Housing

Property Subtype: Assisted Living 5165 Summit Ridge Court


Reno NV 89523
County: Washoe

Parcels and/or Legal:
66563

IMPROVEMENTS

Class:	B
Est. Gross Building Area:	77,445
Est. Net Building Area:	77,445
Exterior Walls:	Stucco
Year Built:	1998
Quality:	Good
Condition:	Good
Buildings:	1
Stories:	3
Fire Sprinklers:	Yes

TRANSACTION INFO

Sale Status:	Recorded Sale
Interest:	Fee Simple
Financing:	Cash To Seller
Sale Date:	02/21/2002

Sale Price

Reported Price:		$	9,500,000
Cash Equivalent:		$	8,500,000
Capital Costs:		$	1,000,000
Adj. Sale Price:		$	9,500,000
	$ Per SqFt:	$	122.67
	$ Per Unit:	$	103,261
	Cap Rate		12.63	%
	EGIM:		3.00

OCCUPANCY

Occupancy at Sale:	60.00	%
Seniors

FINANCIAL ANALYSIS

	Amount		Percent
Potential Gross Income:	$	3,300,000
Effective Gross	$	3,300,000
Operating Expenses:	$	2,100,000		0.64	%
Net Operating Income:	$	1,200,000

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		182,299			4.19
Net Usable Area:		182,299			4.19
Percent Usable:		100	%
Ground Leased:		No

SENIOR HOUSING INFO

Number of AL Units:	92
Number of IL Units:	0
Number of Cottage Units:	0
Number of ALZ Units:	0
Total Number of Units:	92
Average Unit Size:	842
Subsidized:	No

VERIFICATION

Recording Reference: 11662-0240
Grantor: Woodmark At Summit Ridge LLC
Grantee: Emeritus
Verification Contact:
   Buyer

REMARKS

Sale is an assisted living facility located in the northwest part of Reno, Nevada. The improvements are of good quality construction. Original developer was unable to attain stablized operation. Buyer is an experienced operator.

Improved Comparable 5

Property Name: Manor at Lakeside

Property Type: Senior Housing

Property Subtype: Independent Living 855 Brinkby Avenue


Reno NV 89509
County: Washoe

Parcels and/or Legal:
019-380-09

IMPROVEMENTS

Est. Gross Building Area:	56,411
Est. Net Building Area:	56,411
Exterior Walls:	Wood siding
Year Built:	1981
Quality:	Average
Condition:	Average
Buildings:	1
Stories:	3
Fire Sprinklers:	Yes

TRANSACTION INFO

Sale Status:	Recorded Sale
Interest:	Fee Simple
Financing:	Cash To Seller
Sale Date:	08/15/2001

Sale Price

Reported Price:		$	3,200,000
Cash Equivalent:		$	3,200,000
Adj. Sale Price:		$	3,200,000
	$ Per SqFt:	$	56.73
	$ Per Unit:	$	35,165
	$ Per Eff Bed:	$	35,165
	Cap Rate:		11.56	%
	EGIM:		2.67

OCCUPANCY

Occupancy at Sale:	90.00	%
Seniors

FINANCIAL ANALYSIS

	Amount		Percent
Effective Gross	$	1,200,000
Operating Expenses:	$	830,000		0.69	%
Net Operating Income:	$	370,000

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		57,064			1.31
Net Usable Area:		57,064			1.31
Percent Usable:		100	%
Ground Leased:		No

SENIOR HOUSING INFO

Number of AL Units:	0
Number of IL Units:	91
Number of Cottage Units:	0
Number of ALZ Units:	0
Total Number of Units:	91
Average Unit Size:	620
No. of Effective Beds:	91
Subsidized:	No

VERIFICATION

Recording Reference: 2596536
Grantor: WMFMT Real Estate LP (Archon)
Grantee: Quilted Care Reno LLC
Verification Contact:
   Seller’s broker

REMARKS

Sale of a independent living facility located in Reno. Improvements are of average quality construction. Income and expense information based on buyer’s proforma.

Improved Comparable 6

Property Name: Atria Redding

Property Type: Senior Housing

Property Subtype: Assisted Living 101 Quartz Hill Road


Redding, CA 96003
County: Shasta

Parcels and/or Legal:
112-090-18-00

IMPROVEMENTS

Est. Gross Building Area:	44,328
Est. Net Building Area:	44,328
Year Built:	1997
Quality:	Poor
Condition:	Good
Stories:	2

TRANSACTION INFO

Sale Status:	Recorded Sale
Interest:	Fee Simple
Financing:	Cash To Seller
Sale Date:	07/01/2001

Sale Price

Reported Price:		$	5,000,000
Cash Equivalent:		$	5,000,000
Adj. Sale Price:		$	5,000,000
	$ Per SqFt:	$	112.80
	$ Per Unit:	$	83,333
	Cap Rate:		12.50	%
	EGIM:		3.00

OCCUPANCY

Occupancy at Sale: 95.00 %

FINANCIAL ANALYSIS

	Amount		Percent
Potential Gross Income:	$	1,950,000
Effective Gross	$	1,950,000
Operating Expenses:	$	1,325,000		0.68	%
Net Operating Income:	$	625,000

SITE ATTRIBUTES

	Sq Ft			Acres
Total Land Area:		133,294			3.06
Net Usable Area:		133,294			3.06
Percent Usable:		100	%

SENIOR HOUSING INFO

Number of AL Units:	60
Total Number of Units:	60
Average Unit Size:	739

VERIFICATION

Recording Reference: N/A
Grantor: Atria Communities
Grantee: AMI Senior Living

REMARKS

This is the sale of a smaller assisted living facility located in northern California in Redding. The improvements are of above average quality construction. There are a total of 60 living units, consisting of 36 studio units, 20 one-bedroom units and four two-bedroom units. The property was not actively marketed and was purchased by a local senior housing provider. The income and expense data based on actuals at time of sale. The seller was motivated to sell and the price paid is considered below actual market value.

ADDENDA

ADDENDUM H: 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.